Consumer Debt Liabilty
Some of the most unsettling threats presented by creditors and bill collectors include, "We are taking legal action" or "We are going to garnish your wages." These phrases bring to mind thoughts of legal hassles and added costs; however, the threat, in some instances, is less serious than it may seem, for a number of reasons.
First, As a debt recovery option, taking legal action can be expensive and time consuming for the creditor's in-house legal department, or its third party legal associates. As a rule of thumb, if you owe more than two thousand dollars, it increases the likelihood the creditor will take legal action, and if you owe less than two thousand dollars, it decreases the likelihood the credit will take legal action. Also, a creditor or bill collector may be motivated to take legal action if the debtor earns a good income or possesses considerable assets.
Second, the debtor has the right to contest the debt in court, with or without a lawyer present. During the court proceedings, the debtor can provide reasons for defaulting on the debt, such as loss of income, increased expenses or other budget constraints.
Third, if the debtor appears in court to contest the debt and loses, the creditor is usually only able to obtain a judgment, giving it the right to try to seize the debtor's property, wages and other assets. If the debtor can provide proof of limited income and no assets, the judgment conditions may be lessened to prevent the debtor from having to undergo financial hardship.
Fourth, the debtor might very well be totally be judgment-proof. Certain laws protect a stated amount of individual or family property from seizure. In addition, the amount of wage garnishment that can be seized by the creditor is strictly limited by federal law.
Note: A debtor worried about being sued should research the preceding factors to determine potential legal liability regarding outstanding debts. Also, if a debtor is summons to court, and does not appear at the hearing, a judgment could be rendered against her or him, which could lead to wage garnishment, lien on property or a hold on access to bank account funds; therefore, even if you are intimidated by the legal process, be prepared to present yourself in court by preparing a budget and written explanation of why you had to default on the debt, and remember, there is no debtor's prison.