Broke, sued for debt and harassed by collectors
Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com.
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Dear Opening Credits,
I have a judgment
against me in the state of Arkansas posted over two years ago. The law office
who sued me is now calling all hours into the night. I am a single, unemployed
parent and have nothing to offer them at this time and I am sure this is why I
cannot get a job now. What can I do? -- Amy
You mean to tell me that
an employee who is paid to get you to cough up the cash that you legitimately
owe is not respecting the fact that you're a financially struggling mother? I'm
I apologize for the
snarky response. The situation you're in is stressful and awful. But of
course someone from the firm is
reaching out to say, "Yo, Amy, remember us? We want our money, so send it
immediately." The manner in which they're contacting you may or may not be
correct, but this is what happens when you get sued for a debt and lose the
To review, the business
you originally borrowed from or used as a service -- such as a bank, doctor or
landlord -- did not receive payment from you. The reason you were unable to pay
is irrelevant (to them, not to you). After months of waiting, asking and then
demanding, they wearied of the process. They either sold the delinquent account
to a collection agency who sued you for the debt, or the creditor decided to
take that action themselves. Whoever it was, when they did, they won. You may
not have even gone to court. Many defendants lose in court by default because
they do not attend the proceedings.
More, I'm sure that if
you look at the paperwork that has been sent -- or your credit report, as it is
surely being listed -- the balance is considerably higher today than what it
was before the lawsuit. Court costs and other fees have been added, causing the
debt to swell.
The entity that sued you
is the judgment creditor, and it employees have the right to call and try to claim
what's rightfully theirs. The number of years they may have to do this depends
on the state. In Arkansas, judgments remain
valid for 10 years. During this time, the judgment creditor can attempt to
collect using a variety of methods, including wage garnishment. If you were
employed, this would be an issue for you and might be if you do return to work.
According to your state's law, such collectors can claim up to 25 percent of
your paycheck per pay period. You may relax if you're only receiving child
support, unemployment benefits or government aid, as these funds are exempt
What do you do now? Well, you can pay the creditor if you have the
money, either in full or in installments. As you don't seem to have the means,
though, be aware that there isn't much the judgment creditor can do at this
moment. They can wait it out for another few years until you start to earn
again (the judgment can be renewed for another decade, but they may not be able
to implement a wage garnishment). During this time, know that they may call but
you are not required to pick up the phone and speak with them. Before you start
to ignore them, explain that you would send them the money if you had it but
you don't. Calling many times a day (and before 8 a.m. and 9 p.m.) will get
them nowhere. In fact, they shouldn't because the Fair Debt Collection Practices Act has defined that action as harassment.
Another option to consider is Chapter 7 bankruptcy
. If you qualify to file, you may be able to get a discharge of that
and other unsecured debts. Your credit is already damaged because of the missed
payments, charged-off account and lawsuit, but the bankruptcy notation would
remain on your credit reports for 10 years.
As for all this harming your chance of
getting a job, you may be right. It could be affecting your opportunities, but
not without your knowledge, as employers have to obtain your permission first to
pull your credit report. Some employers do check credit reports and are free to
make a determination about you based on what they see. Don't let that stop you
from pushing ahead, though! Many employers are empathetic and will listen to a
valid explanation. If you're a great candidate, they'll want you on their team.
See related: When debt collectors make your life miserable, How to handle unethical debt collectors
Erica Sandberg is a nationally renowned personal finance authority. She’s host of several financial web shows, and a frequent guest for media outlets such as Fox, Forbes, Nightly Business Report and NPR. Erica previously was affiliated with Consumer Credit Counseling Service and was KRON-TV’s on-air credit expert. Her book, "Expecting Money: The Essential Financial Plan for New and Growing Families," was published in 2008 by Kaplan Press.
Send your question to Erica.
Published: August 22, 2012