Many of my clients come to me after they’ve been sued by a debt collector for a past-due credit card bill. Other times, the threat of “being taken to court” spurs the call. The client is often worried about being sent to jail. After all, the sheriff hand-delivered the summons and complaint. Next time he shows up, it will be to handcuff me and take me to the Big House!
The first thing I do in such cases is to reassure the client that you can’t be locked up for failing to pay a debt. Debtors’ prisons have been gone for over 150 years. You may have a judgment entered against you, you may have your wages garnisheed, but you won’t be thrown in the slammer.
So what happens if you get sued for a money judgment or in small claims? The process will be different in other states, but here is how it works in Wisconsin:
- The creditor will have you served with a summons and complaint. You will probably be personally served by a sheriff’s deputy. You will have about three weeks to answer the complaint.
- If you have a defense to the lawsuit (“I don’t owe the money because…”), you will file your answer and the judge will schedule a hearing. You aren’t required to answer. In fact, I usually recommend that clients ignore the summons and complaint. In most cases, the clients admit they owe the money; they just can’t pay it. If you ignore it and don’t file an answer, the creditor will file a motion and obtain a default judgment. You won’t have to appear in court at all.
- Once the creditor gets its judgment, it will try to collect on the judgment. This will usually involve garnishment of wages, bank accounts, or other non-exempt personal property. If the creditor sends you an Order for Financial Disclosure, you MUST complete it and return it. You won’t have to send any money, but failing to comply with this court order may land you in jail for contempt of court.
It’s possible that you don’t have any non-exempt wages or property for creditors to take. A bankruptcy attorney can explain exemptions and the concept of being uncollectible.
If you’ve been sued and a creditor is threatening to garnishee your wages, speak to an attorney soon. A bankruptcy filing can prevent the judgment and the resulting wage garnishment. If the judgment has already been entered, the bankruptcy filing can wipe it out and immediately stop any garnishments. A small claims or money judgment is no different from any other general unsecured debt and it is typically dischargeable.
No matter what the debt collector tells you on the phone, you cannot be jailed for defaulting on a debt. The person telling you differently is either a scammer trying to rip you off or an unethical debt collector lying to scare some money out of you.