I’VE BEEN SERVED WITH A LAWSUIT, WHAT SHOULD I DO?

In Arizona, you have 20 days to file an Answer to the Complaint in the Court where the lawsuit was filed.  Consult with an attorney who is knowledgeable in Consumer Rights Litigation and Bankruptcy as early as possible to give yourself time to plan ahead.  Maricopa County Justice Court Flowchart.

• A lawsuit is commenced when the creditor files a Complaint with the Court
• The debtor can admit or deny the allegations in the Complaint by filing an Answer with the Court.
• If no Answer is filed or if the allegations are admitted, the judge will issue a judgment which is an Order establishing the creditor’s legal right to collect money from the debtor.
• Collection of a judgment is commenced when the Court issues a writ of Garnishment.
• If the writ of garnishment is served on your employer, the employer must withhold 25% of your net wages from each paycheck which is sent to the creditor.
• If the writ of garnishment is served on your bank, the bank must turn over your money on deposit to the creditor.

So, don’t ignore a lawsuit.

You do not want to allow a creditor to obtain a judgment against you; however, the impact of a judgment can be minimized by filing bankruptcy.  Consult with a knowledgeable attorney as early as possible even before you are served with a lawsuit.

STEP #1, ANSWER THE LAWSUIT:

The Federal Trade Commission insists on the importance of filing an answer to preserve your rights (FTC).  If you fail to file an Answer which denies the allegations and raises legal defenses to the Complaint, the Court will grant the creditor a judgment which will include interest, costs and attorney fees.  Even if you owe the creditor money, you may have a dispute over the amount owed or the amount of its claim for interest, costs or attorney fees.  Filing a properly worded Answer will slow down the process and give you some additional time to prepare for filing bankruptcy or minimizing the exposure to your assets before the creditor obtains a judgment.  Court Forms.

STEP #2, MOVE YOUR BANK ACCOUNT OR STOP DEPOSITS INTO YOUR BANK:

Pre-bankruptcy estate planning is the most valuable benefit from consulting with an attorney before filing bankruptcy.  Once the creditor has a judgment the creditor will attempt to find your assets and execute the judgment.  Perhaps the creditor already knows where you work and where you bank.  Has your creditor called you at work to request payment before a lawsuit is filed?  Have you used a check on your bank account to pay the creditor in the past?  If so, then the creditor knows where to go to get your money.  Move your bank account. If the creditor does not know this information, you may be ordered to appear at a “judgment debtor examination” which is a deposition conducted by the creditor’s attorney to ask you questions under oath about what you own and where you keep your assets, including bank accounts.  After the judgment debtor examination, during which you must testify truthfully, you might think it wise to move your account or stop making deposits into the bank account.  Use a check cashing service to cash your paycheck and use money orders to pay your bills.

A bank cannot turn over to the creditor a bank account which is exempt.  If you receive funds which are exempt, such as Social Security or Worker’s Compensation Benefits, those funds must not be co-mingled with other non-exempt funds.  Keep those funds in a totally separate account which the bank has labeled as your “Social Security Account” or “Worker’s Compensation Account” and the bank will not touch those funds in responding to the writ of garnishment.  However, if these funds are co-mingled with non-exempt funds, the entire amount is non-exempt.