Debtor & Creditor
Q: A judgment previously entered against me over ten years ago has been vacated for improper service. Can the plaintiff's lawyers start the case all over?
Mitchell’s Answer: The statute of limitations to commence an action for breach of contract (which includes the majority of debt collection cases) is 6 years from the default or last payment/acknowledgment of the debt. If the judgment was entered against you more than ten years ago and you haven’t made any payments over the past six years, then the statute of limitations to recommence the action has expired and the case may not be started over.
Q: My employer was served with an income execution for a judgment that was entered more than six years ago. Isn’t it too late for the creditor’s lawyer to collect?
Mitchell’s Answer: No. The judgment may be enforced for 20 years against your employment income. Unless you can prove that you were not properly served with the Summons and Complaint at the commencement of the action, you will not even be able to from raise any defenses. If you were not properly served, then you should contact a lawyer about filing an Order to Show Cause to vacate the Judgment.
Q: I received a 1099c “cancellation of debt” notice. Does that mean I am no longer responsible to pay?
Mitchell’s Answer: No. You remain liable. The creditor notified the IRS that until you pay, the unpaid balance of the debt will be considered "phantom income" and you will be assessed a tax, unless you are exempt. If you pay at a later date you will receive a tax credit for that portion you paid.
Q: A credit card company has sued me for over $20,000. I know that I owe the money, but I can’t afford the $1000 per month they are demanding. What can I do?
Mitchell’s Answer: The best way to get a creditor to agree to reduce its demand is by providing proof of financial hardship. If your bank account contains less than the amount exempt from restraint, the maximum amount the creditor could recover by wage garnishment is 10% of your income, assuming you earn more than the minimum wage. If you can prove to the creditor that you earn less than $10,000 per month and any funds available on deposit are exempt, then they should concede that they cannot legally enforce the judgment at $1000 per month, for the time being. You must realize, however, that by doing so you are exposing your financial situation which may be used against you at a later date.
Q: I am being sued for a hospital bill that my insurance did not pay. Do I owe the money?
Mitchell’s Answer: Yes. You do have to pay. If a judgment is entered against you then interest and costs will be added. If you had a contract with the insurance company and they were obligated to pay, but didn’t, you should bring a Third Party action against them.
Q: My income is being garnished by my employer, but I noticed they have an old address on the execution papers. Can I file a request to vacate the default judgment?
Mitchell’s Answer: You may have a basis to have the Judgment vacated if the Summons and Complaint were served upon you at an address where you were not residing. However, if you have been paying for some time, that could be used against you as an acknowledgement of the debt. If you are able to have an Order to Show Cause signed to have a hearing you may wish to negotiate a settlement, as it is likely the action will be recommenced against you at your current address.
Q: I was served with a summons by a collections lawyer. It's not for that large a balance. How can I save some money?
Mitchell’s Answer: My suggestion would be that you either offer a reduced lump sum amount or request a payment plan arrangement by calling the lawyer named on the Summons.
Q: My leased car was stolen, do I have to pay greater than the market value covered by my insurance company?
Mitchell’s Answer: You could be liable for the balance if you do not have a gap insurance policy.
Q: I loaned my friend money. She sent me a text saying she is sorry and then disappeared. How can I collect?
Mitchell’s Answer: You will need to locate the debtor. Experienced collection attorneys have software and internet programs that assist in locating the debtor. The next problem is locating assets of the debtor. Knowledgeable collections attorneys have programs that may offer guidance. It would be prudent to hire a debt collection lawyer to assist you.
Q: Is a joint account holder liable for any bills upon the death of the other?
Mitchell’s Answer: A joint account holder of an asset is NOT presumed to be liable on an individual debt belonging solely to the co-owner of the joint account. The creditor, however, may bring a turnover proceeding if the money was owed by the decedent and it can be established that the funds in the account originated from the deceased prior to death.
Q: I was sued but I don’t want to pay legal fees. Can I just pay the creditor directly?
Mitchell’s Answer: It is not a good idea. The creditor hired the lawyer and has already agreed to payment of their legal fee. If you don’t pay the lawyer it’s possible the payment will not be properly credited.