Q: I received a notice about an action against me on a debt. What should I do?
A: You need to respond to the lawsuit; you cannot escape it by doing nothing. If you do not respond to the lawsuit, your creditor can get a default judgment against you. A default judgment allows the creditor to win in court simply because you were not there to defend yourself. If the collector receives a default judgment, it will be able to collect as much money as it asked for in the lawsuit. This could lead to your wages or bank account being garnished, or a lien being put on your property. Please note, however, that you cannot be sent to jail for failing to pay a debt or judgment.
Q: What should I say in my response?
A: Read the papers carefully. If you are being sued by someone other than the original creditor, there are some common issues to be aware of and bring to the court’s attention.
• A debt collector must prove that it actually owns your debt. If someone other than your original creditor sues you, it has to prove that it bought your debt and owns it at the time the legal action is filed against you. Without such proof, it does not have a valid claim against you.
• A debt buyer must produce your original credit agreement in court. The agreement must be the one that you agreed to and signed. If a collector sues you, look at the agreement it produces. If it is not the original agreement, then the debt buyer may not be able to get a judgment that includes fees and interest.
• Your debt may be too old to be collected. In Ohio, for example, debt collectors generally have six years to take action against you on credit card debt. The six years starts to run from the date of your last payment. Sometimes, however, collectors will still try to sue you even after the time to bring action has expired. If the time limit on collection has expired, the collector no longer has a valid claim.
• Someone else may have incurred the debt. You are only liable for your own debts (unless you co-signed on the loan or credit agreement for someone else). If someone forged your name and accumulated debt under your name, you are not liable for that debt.
• Finally, if you have already paid the debt or discharged it in bankruptcy, you should present evidence to support this claim. You do not have to double pay the debt, or, if you have eliminated the debt through bankruptcy, you do not have to pay this debt.
Q: If I don’t win in court, can the creditor take all my money?
A: No, there are only certain assets that a creditor can reach when collecting on a debt with a court order. Under Ohio law, a court order gives the creditor the right to collect money by garnishing your wages or your bank account, putting a lien on your real property or seizing your personal property. Creditors cannot garnish anything without such a court order or a judgment against you.
There are some exemptions to this general principle that creditors can garnish your income. The first $217.50 from each weekly take-home pay cannot be garnished at all. Additionally, Social Security payments, Supplemental Security Income, and veteran’s benefits are typically exempted from garnishment. An important exception to this is that federal agencies collecting debts owed to the United States can seize part of these benefits. State-administered benefits, such as Ohio Works First, are also exempt from garnishment.
You may also be “judgment-proof.” This means that your income is exempt from garnishment and you do not have any assets that can be seized by creditors and sold to pay your debt. For example, if your only income is from Social Security and you do not own a car worth more than $3,450 (the exempted limit for personal property), then your creditors may sue you, but they will not be able to take any of your property or assets to collect your debt.
This “Law You Can Use” column was provided by the Ohio State Bar Association (OSBA). It was prepared by Linda Cook, senior staff attorney for the Ohio Poverty Law Center in Columbus.