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Collection law suits in California

By Cathy Moran

lawsuit

A prospective bankruptcy client often arrives in my office because a creditor is hot on their heels.

A collection lawsuit has been filed and they’re panicked.

Almost invariably, the client has leapt to two incorrect assumptions: one is that the world as they know it is coming to an end; and two, they don’t have to do anything until the date set for the case management conference, months down the road.

Judgments take time

The filing of a lawsuit is a step toward a judgment in favor of the creditor. A judgment is a determination that the debtor owes the amount of the debt and usually the creditor’s expenses to get the judgment.

A judgment entitles the judgment creditor to enlist the coercive power of the state to collect that judgment by levy, lien or garnishment.

All about California judgments

A judgment in California does not automatically constitute a lien on the debtor’s assets, as it does in some states.

In California a creditor with a judgment must take an additional step to create a judgment lien. A judgment lien on real estate is created when an abstract of judgment, issued by the court after entry of judgment, is recorded in the records of the county recorder.

A judgment lien on personal property is created by filing a notice of judgment with the Secretary of State.

A judgment lien allows a creditor to execute on that lien through the courts. In that process, even outside of bankruptcy, the judgment debtor may claim an exemption in certain kinds of property. The California state exemptions are set out in Bankruptcy in Brief.

In short, getting a judgment is just a step toward actually taking something from the judgment debtor. All these steps take time and cost the creditor something.

Time to consider your options

The filing of a suit may be a good indicator that the client needs to do something proactive about their financial situation but it is not an emergency.

About that second assumption, that you don’t need to act before the court date, you must read this.

More

California judgments are dischargeable in bankruptcy

Avoiding liens in bankruptcy

Do you need to file bankruptcy

What’s the difference between a good bankruptcy lawyer and a great one?

 

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Filed Under: Strictly California

About Cathy Moran

I'm a veteran bankruptcy lawyer and consumer advocate in California's Silicon Valley. I write, teach, and speak in the hopes of expanding understanding of how bankruptcy can make life better in a family's future.

Trackbacks

  1. Fake Cops Collect Fake Debts says:
    April 15, 2012 at 10:38 pm

    […] between individuals and business entities are civil matters.  An unpaid debt can be enforced through the civil courts, where the lender sues the borrower. The government is not a party to the suit;  government merely […]

About The Soapbox

You've arrived at the Bankruptcy Soapbox, a resource of bankruptcy information and consumer law.

Soapbox is a companion site to Bankruptcy in Brief, where I try to be largely explanatory and even handed (Note I said "try").

Here, I allow myself to tell stories and express strong opinions on how I think law should work for the consumer and small businesses when it comes to debt.

Moran Law Group
Bankruptcy specialists for individuals and small businesses in the San Francisco Bay Area

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