Can a Debt Collector Sue You?

Debt Collector Sue You

In Maryland, debt collectors can sue you and have several methods to collect on debts, including garnishments, attachments, seizures and levies. A bankruptcy, whether filed under Chapter 7, Chapter 11, or Chapter 13 will stop all of these various collection activities.

Can a Debt Collector Sue You – The Collections Process

The collections process generally follows similar actions for both consumer and commercial debt, with slight differences. The creditor or debt collector will first initiate calls and letters to attempt to work out settlement of the debt. If these methods are not successful, the debt may be sold a few times and each debt collector will similarly call and send letters. If that process has not yielded a result for the creditor or debt collector, it will typically retain a law firm that focuses on collecting debts. The law firm will send a “demand letter” demanding payment of the debt or they will file a lawsuit. If the law firm is unable to work out a settlement, it will initiate a lawsuit to collect on the debt. Many times, there is no little or no defense to a debt collection lawsuit because there is no dispute over the amount owed on the debt or other valid defense. If there is a valid defense to the lawsuit, it must be raised in the lawsuit and Maryland law provides strict timelines to respond to a lawsuit.

Can a Debt Collector Sue You – What Is A Judgment?

There are many ways a creditor can obtain judgment, such as an Affidavit Judgment, Default Judgment, Consent Judgment, or a judgment entered after trial. If there is no defense to the lawsuit or if the case goes to trial and the creditor wins the lawsuit, the lawsuit becomes a judgment, which in Maryland generally accrues post-judgment interest at 10%. This post-judgment interest can accrue to a high amount over a few years.

Can a Debt Collector Sue You – Collecting On A Judgment

Once a creditor has obtained a judgment, the now judgment creditor then has to collect on that judgment against the judgment debtor through various means.

Judgment Lien

One collection method often used is to obtain a lien on any real property the judgment debtor may own. This lien means that if the homeowner wished to refinance or sell the home, the judgment lien must be paid. A judgment lien also reduces the amount of equity a property has. For example, if a home is worth $250,000 with a $200,000 mortgage, there is $50,000 of equity in the home. However, if a $50,000 judgment becomes a lien on the home, the home would now have no equity. The judgment creditor can also execute on the lien against the real property. A judgment lien makes the question of can a debt collector sue you an important one to understand.

Wage Garnishment

Another often used method to collect on a judgment is through a wage garnishment. The creditor files a request with the court to issue a writ of garnishment which is issued by the clerk of the court. A copy of the writ of garnishment must be mailed to the judgment debtor and is also served on the garnishee – the employer. The employer files an answer indicating if the judgment debtor is an employee of the garnishee and the rate of pay and the existence of any other wage garnishments. Once the garnishment is in place, the employer must generally withhold 25% of disposable income and remit that amount to the judgment creditor. A wage garnishment can have a significant impact on the judgment debtor’s ability to meet their financial obligations.

Bank Account Garnishment

A debt collector can you sue and after that, a judgment creditor can issue a writ of garnishment to a financial institution such as a bank to seize funds that are in a bank account owned by the judgment debtor. similar to a writ of garnishment, the judgment creditor files a request with the court to issue the writ or garnishment which is issued by the clerk of the court. The writ of garnishment is served upon the financial institution and then a copy is mailed to the judgment debtor. The financial institution files an answer admitting or denying if the judgment debtor has an account with it. Once that happens, the bank typically freezes the bank account and after a period of time transfers the funds in the bank account to the judgment creditor.

Writ of Execution – Levy

A judgment creditor also has the power to levy against real or personal property. The judgment creditor requests that the clerk of court issue a writ of execution which directs the sheriff to levy on property of the judgment debtor. The judgment creditor can direct the sheriff to 1) leave the levied property where it is found, 2) exclude others from access to it or use of the property, or 3) to remove the property from the premises. For real property, the sheriff enters the description of the property upon a schedule and posts a copy of the writ and the schedule in a prominent place on the property. To levy against personal property such as a car or other valuable assets, the sheriff has a few options. The sheriff must obtain an actual view of the property and enter a description of the property upon a schedule. The sheriff can then either 1) remove the property from the premises, or 2) affix a copy of the writ and schedule to the property, or 3) post a copy of the writ and schedule in a prominent place in the immediate vicinity of the property and affixing to each item of property a label denoting that the property has been levied upon by the sheriff, or 4) post a copy of the writ and schedule in a prominent place in the immediate vicinity of the property without affixing a label to each item of property if affixing a label to each item of property is possible but not practical.

Sale of Property Under Levy

Once property has been levied by the sheriff, the judgment creditor can request that the property be sold by the sheriff. The sheriff must give proper notice of the sale and conducts the sale by selling the property to the highest bidder. A sheriff’s sale is quicker and simpler than a typical Maryland foreclosure on a home.

Oral Examination and Written Interrogatories

The judgment creditor can also use several methods to identify any property owned by the judgment debtor from which to collect. The judgment creditor can serve written interrogatories, depositions and requests for production of documents. It can also order the judgment debtor to appear in front of a judge to answer questions about the judgment debtor’s financial affairs.

Creditors have many avenues to collect upon a debt once a judgment is obtained. Steiner Law Group can assist with stopping these collection activities through bankruptcy or other non-bankruptcy solutions.

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About Eric Steiner, Esquire

Mr. Steiner graduated from the University of Michigan Law School in 2006. Since then, he has focused his practice on bankruptcy, real estate, commercial and consumer collections, including representing the third largest lender in the greater Baltimore area.