Pedro has overextended his credit and has been unable to keep updated with his payments. He is now trying to avoid his credit collectors. One of his creditors has now hired an attorney who has filed a collection lawsuit against him. A Summons was just served on Pedro giving him 30 days to respond. Pedro wants to know what he should do?
There are 2 things Pedro can do: First, he can seek legal advice and respond with an Answer in the lawsuit. Or, second, he can ignore the summons and go on with his life as if nothing happened
Pedro may seek to choose the first alternative, to find out what his rights and potential liabilities are. He may, for example, seek to dispute the debt or the amount thereof. Or, he may seek to settle his debt with the creditor at more agreeable terms or over an extended period of time. If so, Pedro needs to file an Answer in court and have his defenses raised in the lawsuit where the creditor’s allegations and debtor’s defenses will be litigated.
If Pedro chooses the second alternative and ignore the summons, the attorney for the creditor can seek a default judgment against Pedro after a certain period of time has elapsed. The judgment can then be executed against Pedro’s assets. Thus, a lien may be placed against his real property (if any) or against his bank accounts. Likewise, the creditor may also seek to garnish the wages of the debtor. Thus, it is not always a good idea to just ignore a summons.
There are certain debtors, however, who are “judgment-proofed”. For these debtors, an adverse judgment against them in a lawsuit may not necessarily affect them in any way. For example, a person who has no assets and is currently unemployed with no means of income would be “judgment-proofed”. Thus, even if a creditor were to win the lawsuit and get a judgment against the debtor, it would just be a piece of paper as the debtor has no assets for the creditor to run after or execute the judgment on.
Debtors should, however, be aware that though they are “judgment-proofed” today, does not necessarily mean that they will still be “judgment-proofed” tomorrow. For eventually a debtor may find a job or accumulate assets after a period of time down the road. A year or two or three from now, for example, Pedro may already have a job or may have bought a car or acquired some assets. That judgment that is issued against the debtor now may come back to haunt him later as the creditor may be able to execute the judgment against debtor down the road just when debtor is recovering from his financial troubles. Thus, it is still not a good idea to ignore a summons because a judgment against you now may have long-term consequences that not only affect you today but can adversely affect you years after.
Finally, there may also be a group of debtors who can actually ignore the summons and not care about any judgment that will be issued against them. Any judgment against these debtors will in no way adversely affect them now, or, in the future. I am referring to debtors who are in so deep a financial trouble that they see no way out of their problem other than seeking help through bankruptcy protection. These type of debtors who are planning to file for bankruptcy protection can actually ignore the summons served on them because the moment they file for bankruptcy, the collection efforts against them will be automatically stopped; and, any debts or judgments against them can be discharged in bankruptcy court …….. which means that these debts or judgments can no longer be collected from debtor now and in the future.
(DISCLAIMER: material presented above is intended for informational purposes only. It is not intended as professional advice and should not be construed as such. Rey Tancinco is a partner at Tancinco Law Offices, a professional corporation with offices in San Francisco, Vallejo, and Manila. The law office website is at: tancinco.weareph.com/old. Rey Tancinco can be contacted at (800) 999-9096 or (415) 397-0808 or via email at: attyrey@tancinco.com
