When you borrow money from someone, be it a bank, a credit union or an individual, you have a legal obligation to repay that money. But suppose that after borrowing the money something happens in your life, such as a reduction of income, that makes it impossible to repay that debt. What can that creditor legally do to you?

For starters, the creditor has the right to report that delinquency on your credit report. This will cause damage to your credit score. This is also an effective collection technique, because such delinquency will often show up when you are attempting to obtain credit, and in order to obtain such credit you may be forced to pay it off or “settle up” with the creditor.

Creditors also have the legal right to call you and write you nasty letters. They can even call you at work. Some might call this harassment but there are very few restriction on a creditor’s right to collect its own debt. Now if the creditor has turned the debt over to a third party debt collector, then that debt collector is subject to certain restrictions in how it may go about collecting that debt. These restrictions are set forth in a federal law called the Fair Debt Collection Practices Act. But once again, keep in mind that this law only protects you from defined “Debt Collectors”, which does not include the creditor or its employee attempting to collect its own debt.

If the above mentioned tactics don’t succeed, the creditor then has the right to file a lawsuit against you in state court. When this happens, you will be served with a Summons and will be given 20 days to file what is called an Answer to the lawsuit asserting any defenses you might have. Failure to do so in the time allowed will result in a Judgment being entered against you for the amount for which you were sued. Most people think that if they are sued, there will be a court date scheduled before any Judgment is entered against them. Not true. Only in Small Claims Court is a hearing or trial scheduled. In all other courts, no hearing or trail will be scheduled unless the defendant files a written Answer to the Complaint asserting defenses.

Once the creditor has a Judgment again you, it may seek to collect that Judgment through various means. One of those methods is by garnishing your wages. Most states, including Kentucky and Indiana allow a creditor to garnish up to 25% of your wages. This is done by sending an order from the court that granted the Judgment to your employer, who is then legally required to withhold the required amount from your paycheck and send it to the creditor.

Another remedy that creditors who hold judgments against you in Kentucky and Indiana have is the ability to “attach” your bank account. What this means is that the creditor can take all the money out of your bank account. Obviously, this can produce devastating results, especially if you have written checks on that account and the money is taken before those checks have cleared, causing them to bounce.

So if you have received a Summons and Complaint from a court, it is imperative that you speak with an attorney immediately. A Kentucky or Indiana bankruptcy attorney will be able to stop that action dead in its tracks by filing a bankruptcy petition.

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