I was served papers today for a judgment for an outstanding unsecured debt. What happens next, and what can I do, since I do not have the money to file bankruptcy? What can the company take from me if the judgment is in their favor?
Once a judgment has been entered against a person, the party who obtained the judgment - the "judgment creditor" - will takes steps to enforce its judgment agains you, the "judgment debtor". The judgment creditor may attempt to record the judgment in any county in which real property you own is situated for the purpose of creating a lien against that property. The judgment creditor will also want to learn about your assets and prevent your from transferring them.
To learn about your assets, it may utilize public records, but may also serve you with a subpoena to have you testify at a deposition, produce documents and information or to complete a questionnaire concerning your assets. If will also likely serve you with a restraining notice, which prohibits you from transfer your assests.
Note, certain assets are exempt from restrainer. Those exceptions are a matter of state law, so I cannot speak to MI exceptions or the implications in your case.
Once the judgment creditor learns of assets it will attempt to restrain them, then begin proceedings to have those assets turned over. For example, if the judgment creditor learned you had a bank account, it would serve an information subpoena and restrainining notice on the bank where you have your account, which would result in a freeze on the account.
A judgment creditor may also attempt to garnish your wages. State law will control how much of your wages can be set aside to pay the judgment. A judgment creditor may also seek to have the law enforcement official in your city, town or county, e.g. a sheriff or marshal, seize and sell your property for the purpose of satisfying the judgment. Again, what assets may be exempt from collection to satisfy a judgment are subject to state law.
Note a failure to comply with a duly served subpoena may result in a judgment creditor moving before a court to hold you in contempt. Should a court hold you in contempt, you may be subject to civil and criminal penalties.
If you truly have no assets that can be collected, there may be no downside in cooperating with the judgment creditor's enforcement efforts.
In view of the foregoing, it would be prudent to consult with counsel. You may want to contact your local bar association to see if pro bono counsel is available. Further, depending on your circumstances, your local bar association may have pro bono bankruptcy counsel available.
The foregoing is provided for informational purposes only and is not intended to constitute legal advise. A consultation with qualifed counsel admitted in your state and given insight into all of your facts and circumstances is recommended.
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The first thing you want to do is to file your response to the complaint with the court. Whatever you do, you do not want to admit to owing the debt if you do not want a judgment entered against you. If it is the original creditor, then it might be the case that you'd be likely to lose if you insisted on bringing the case to trial. If you don't respond, however, you will definitely have a judgment entered against you.
If a judgment is entered the creditor can: garnish your wages, garnish your state tax refund, put a lien against your house and other property, and garnish your bank account.
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