People in debt have a lot of stress: the phone calls, the letters, the cost of living going up but never going down. They live in a state of fear. Debt collectors know this and use it to their advantage all the time. Their other biggest weapon is ignorance (what you do not know about how the collection process works and what your rights are).
The good news, however, is that knowledge of your legal rights and what you can do to rebuild your financial life, is the biggest key to reducing your fear and stress.
Debt collectors are at you constantly with threats of imminent imprisonment, wage attachment, bank levy, and seizure of personal property. The biggest thing to bear in mind here is that if a collection agency (as opposed to a law firm) is telling you this, it is a lie! They are just playing on your ignorance of the law and your fear.
There is no such thing as debtors prison; you cannot go to jail for failure to pay the debt collector. As for the rest, in New Jersey, things like wage executions and bank levies do not happen until suit has been brought against you, and a judgment has been entered.
Here's How a Lawsuit Works
First, the collection agency has to throw in the towell on trying to collect it themselves and refer the claim to a lawyer for suit. This is something they are reluctant to do, because it means that they get less of a fee (they have to share it with the law firm). However, if they do not do this, all of those nasty consequences with which they are threatening you will not happen.
This can take up to 30 days to happen (send out the claim, law firm receives and reviews, then opens a file). If the law firm then sends out a demand letter prior to suit, that can mean up to 30 days more.
Second, the lawyer files a lawsuit against you. Contrary to what many people may believe, if you are sued, you will know it (unless you throw out your mail without opening it or never answer the door).
Once you receive it (a document called a "summons and complaint"), you have 35 days in which to file an answer with the court and copy the creditor's attorney. At this point, you should consult with a lawyer, as you may have defenses to this lawsuit that would either void the debt if successful or reduce the amount significantly.
Third, if you do not file an answer within that time, the lawyer will enter a judgment against you. It is this judgment that allows for the levies and such and, if the proper paperwork is filed, can also act as a lien against your home, requiring payment if you go to refinance or sell it.
The process of entering that judgment, depending on the speed and efficiency of the law firm and the court clerk's office, can take another 30 days or so.
What Happens Once They Get a Judgment Against Me?
Well, that depends on how much the creditor knows about your assets. Do they know where you work? Do they know where your bank accounts are?
As to the latter, if you sent checks for payment in the last few months, then they do. As to the former, if the debt collectors have called you at work, or you put your current job on a loan or credit card application, then they know that as well.
If they do not, they will then send you an information subpoena to find out. You must answer this within 14 days or be held in contempt of court. You can go to jail for not answering that, but complying keeps you out of a cell.
If you provide this information, and it includes a bank account and/or a job, then the bank levy or wage execution will go through, but that can take up to another 30 days or so.
As you can see, all the threats of imminent doom made by debt collectors are a lot of hot air. Do not allow them to play on your fears in order to get your money.
So What Do I Do?
Want more information on how to fight back with your creditors and not fall victim to their fear tactics? Then download my free book, The Biggest Secrets Your Creditors Don't Want You to Know. Become empowered and protect your rights!
If you live in southern New Jersey and want a lawyer to represent you against your creditors, call my office at 856-432-4113 or contact me through this site to schedule an appointment to come in. I have represented creditors for many years and am familiar with the collection industry and how it ticks. Put my experience to work for you!
If your debt situation goes beyond one or two creditors, however, and you are wondering whether you need a solution to a bigger problem, then download my free book, Am I In Too Deep? A Guide to Knowing When You Need to File Bankruptcy in New Jersey to find out if bankruptcy might be the solution.