Where to begin? A few years ago, when I was in college, I made a mistake that many people make at that point in their lives -- I took on too many credit cards and didn't manage my credit responsibly. Trying to be responsible, I took out a personal loan to pay off my credit cards. The monthly payment was fairly manageable and things were going well until I had the unexpected cost of paying tuition for a quarter. My parents had always helped me with the expense and I received Financial Aid, but this quarter was different. I couldn't let my parents know that I'd already taken out a loan to fix my quickly declining credit, so I took out another loan at a different bank. I struggled to make the monthly payments to both banks, but continued to rack up those credit cards and soon I couldn't make payments to anything. To make a long story short, this is where I made the biggest error. I couldn't afford to pay rent, utilities, and other expenses, plus my mounting credit card bills, so I just stopped paying. Like a coward, I hide my head in the sand, hoping that my debt problems would just magically disappear. Fast forward to four years later and I have my first post-college, salary paying job, and am making some decent money, but it doesn't undue all of the previous damage and my old debts have come back to haunt me. I received a complaint and summons for a collection agency, which took on one of my loan accounts. The total principle amount I owe is $1,600. However, with attorney's fees, service fees (for serving me with the complaint, on a Sunday, which means they probably pay the messenger time and a half... great), etc. that amount has quickly skyrocketed to $3,000. This is the first time I've been served with a lawsuit and I'm at a loss of what I should do. I spoke with a volunteer attorney at a local legal clinic, who recommended I try to speak with the plaintiff's lawyer, in hopes that he might want to get rid of this lawsuit as much as I do. Yes, he gets paid for taking on this account, but there is a small possibility that he doesn't want to go to court for what is pennies in comparison to other delinquent accounts out there. I attempted to call him, but his secretary claimed that he wasn't in the office and didn't have voice mail. She directed me to the plaintiff, the collection agency, and I spoke with a customer service representative there. I explained that I'd received the summons and I wanted to work with them to make this lawsuit go away. I can't afford to pay $3,000 in a lump sum, but I'd be willing to make monthly payments. According to my income, they want me to make payments of $500/month, which is ridiculous. I said I can't afford to pay that, with all of the other overdue bills I have, rent, etc. I can't afford to pay for a lawyer, and I've been told that even if I did get a lawyer, all it would do is prolong the legal process and I'd have to pay my own attorney's fees without even having a real defense. The plaintiff has done their homework and none of the paperwork seems out of order. What it comes down to is I need to get rid of this lawsuit and take responsibility for my actions. I don't want them to start garnishing my wages, where they could potentially take up to $500 per month from me (which was the same figure that the customer service rep gave me, so that's probably where she got that from.) I can't borrow money from anyone to pay 40% of the amount due and then make a payment plan. I can't afford my own attorney. So, I need advice. Someone suggested to me that I file a Chapter 13 Bankruptcy, which I'm hesitant to do because it'll stay on my credit report for so many years. However, I realize that my credit is pretty much shot at this point and I'm running out of options. There's also consumer credit counseling, but those agencies charge monthly fees and they won't deal with this lawsuit for me; they can't represent me in court and this complaint is beyond their means by now. How do I deal with this lawsuit? What's the best plan of action for me? And how do I deal with my other creditors to prevent any upcoming lawsuits? Any advice would be greatly appreciated.
When was the suit served on you? How long do you have to answer the complaint? What state are you in? Is the collection agent/attorney suing in the name of the original creditor or is the suit in the name of subsequent owner/junk debt buyer? What is your basis for saying garnishment up to $500 per month? When did the loan go into default (month/year)? Chapter 13 is an option, but advisable only if you select it after careful consideration of all of your options. The issue of cleaning up your credit must, for the short term, take second place to dealing with the law suit. Answers to the above questions will allow people here to provide you with better informed answers. It is always best to answer a suit than it is to take a default judgment. In the meantime spend some time reading through some of the threads on the board; they will provide you with some perspective.
When was the suit served on you? I was served on Sunday, December 9, 2007. How long do you have to answer the complaint? I have 20 days to answer the complaint -- so until December 29th, which is a Saturday. Since it's not a business day, does that mean it extends to Monday, the 31st? Do you know? What state are you in? I am in Washington. Is the collection agent/attorney suing in the name of the original creditor or is the suit in the name of subsequent owner/junk debt buyer? The plaintiff suing me is the collection agency, who was "assigned" the account from the credit union. What is your basis for saying garnishment up to $500 per month? I spoke with a debt attorney last night and she said that garnishment could be as much as 25% of my wages, which comes to about $500/month. When did the loan go into default? The last payment I made was in March 2007. I am not sure when it went into default. The complaint was signed in October 2007, filed in November 2007, and I was served in December 2007.
In many states it is based on a percentage of wages after taxes and an allowance (low, set by state) for living expenses. That may help some if it comes to that. Hopefully you can do something to keep this from happening, but it is something to check just in case. Just because they get a judgment doesn't mean they will garnish. They may try to work out a payment plan with you. They may even settle before the trial.
So, Hedwig, what should I do as far as the complaint? Since I don't have a defense, should I just not answer it? What if I wrote a letter to the defense attorney and said that I received the complaint, that I'm financially unable to pay the lump sum, but that I'd like to work out a payment plan? Or do you think it would be a lost cause to even try something like that?
You will need to check your court's rules. Sometimes they have these online at the court's site, or you may need to go to the courthouse where the suit was filed. Online statutes here http://apps.leg.wa.gov/rcw/ say 75% of DISPOSABLE earnings are exempt, which would leave 25% of your net pay as garnishable. In March 2007, was the loan current?
This sounds awfully high, if the account was current in March. How much are the attorney's fees? I do believe they have to be reasonable...
You have to show up, or they will get a default judgment. Based on what jlynn just said, you can say that yes, you owe some money, but you don't believe the amount is correct. Make them show the calculations. Look up your state's laws on interest to see how much they can charge and take it from there.
The principle amount I owed was a little over $1,600 but with the added interest (which accrued after the credit union gave the account to the collection agency) is $819, plus $450 for attorney's fees, and according to the collection agency representative, any applicable service fees (as in when the messenger served me with the lawsuit on a Sunday afternoon and was probably requiring time and a half for making the trip on a non-business day.) I just want to make sure that I'm understanding what you're suggesting, Hedwig, since this is all so confusing to me. Are you saying that I should not respond to the complaint and wait until they give me a court date? Then I should go to court and tell the judge that I don't have the money to pay this balance up front, but I'd work out a payment plan? Trying to read those RCW statutes is all Greek to me. I've attempted to look at the RCW statutes for interest and fees calcuated, but there is no clear-cut answer as far as I can tell. All it says is that they can charge a "reasonable" amount, but what is "reasonable"?
You need to answer the complaint. Answer would address the elements of their claims and, in general, state that you have insufficient information and leave the plaintiff to their proof. You would also include any affirmative defenses and counter claims that you might have. This forms the first of a series of place holders that will indicate that you will be opposing the claim. Without the answer, they can get a summary judgment against you.
Answer Oracle, thanks for your response. I don't know the first thing about filing an official Answer to the complaint. Can you please give me some advice as to how I might go about this? What is the format? In the Answer, is this where I state that I don't understand where all the charges came from? If I oppose the claim, wouldn't I need a lawyer? I can't afford one.
Look for sample answers to complaints on this site and others. Yes you would be stating that you don't understand the charges, but phrased in terms of not having sufficient information to evaluate, you deny and leave the plaintiff to his proof. Needing a lawyer? You can proceed pro se if you wish (the do-it-yourself method) or get an attorney to represent you. If you do go pro se, you will need to do a lot of reading and sorting through the statutes and procedures so that you don't end up hurting yourself. Either way, be wary of the 20-day clock for filing an answer. If your interest is in negotiating a settlement, the answer gives you more time to negotiate. If you allow the default judgment, the negotiation then is on how you pay, not on how much. Better to negotiate the whole package rather than just a part.
Update: I answered the complaint and filed the answer with a pro se notice of appearance and certificate of service on Friday, December 28th. I mailed copies of these documents via certified mail (return receipt requested) to opposing counsel on the same day, Friday, the 28th. I received the complaint on Sunday, December 9th, and had 20 days to respond, which could mean Saturday, the 29th or Monday, the 31st. Either way, the mail carrier attempted to deliver the documents to opposing counsel and "left a notice" -- probably meaning no one was there to receive it. They will make another attempted delivery and if they are unable to deliver the documents, they will be returned to me. So, what does this mean? I responded to their complaint, attempted to deliver it within the 20 days (yes, it was cutting it close, I know, but I did try) and they weren't available to receive them. Can they say that I didn't respond and get a judgment against me?
This total sounds like they are running both a "late fee" and an "over the limit fee" monthly, combined with an interest rate of 29%+. The numbers do add up, but it is exhorbitant.
