A plaintiff alleging a cause of action for an unpaid debt initiates it by filing a lawsuit in the form of a complaint in a civil court. Before any relief may be awarded, the plaintiff must serve and provide the defendant notice of the case filing and an opportunity to be heard.
Banks, credit card companies, and other creditors usually operate by their distinct timelines whereby they attempt to collect a past-due debt internally for some period before they ultimately sell it to another party or assign it to a third-party collection agent.
Anyone with a delinquent unsecured debt such as a credit card will usually receive a written payment reminder when the debt is 30 days past due. Late payments may start having an adverse effect on a credit score as soon as they are reported, but there is typically a 29 days’ grace period. At 60 days, the creditor’s notice will contain a greater sense of urgency. Once 60 days pass, the impact on a credit score becomes more significant and long-lasting.
At 90 days past due, a creditor may declare an account uncollectible, known as a “charge-off.” Credit card lenders may send the account to a third-party debt collector. A 90-day delinquency is considered to be a major derogatory in both the FICO and VantageScore credit-scoring systems. At 120 days past due, if it has not already, the creditor will declare the account as a “charge-off, which will significantly affect a credit score.
At this time, depending on whether the debt is sold or simply transferred to a third party for collection, further collection efforts may ensue. Since the collection of the debt is bound by the statute of limitations, at some point, the creditor will decide to initiate a lawsuit.
If you have several unpaid or just a few indisputable debts but with substantial balances, defending a lawsuit will be costly and difficult to win, especially if you have no defenses to excuse the debt’s nonpayment. Ultimately, a judgment may be obtained and wages or a bank account may be garnished, resulting in further financial challenges and burdens to overcome.
If you have been served with a lawsuit for an unpaid debt, it is not too late. Filing a bankruptcy case will still have the effect of stopping it in its tracks. Filing bankruptcy triggers the automatic stay which acts as a barrier to the collection efforts of creditors. Even after a lawsuit has been filed.
Individuals considering bankruptcy as a debt relief solution often assume that bankruptcy will not provide the necessary help in a timely enough fashion to be truly effective and worthwhile. This could not be farther from the truth and is a myth of bankruptcy. It is important to consult with an experienced Utah bankruptcy attorney, such as one of the many qualified attorneys at the Morrison Law Group who can explain the process and timeline of both Chapter 7 and Chapter 13 bankruptcy cases. Call 801.456.9933 today to schedule a FREE consultation. We have locations in Ogden, Logan, Sandy, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.
