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Receiving a court summons for debt collection can be one of the most stressful events a business can face. According to an analysis conducted by Pew Charitable Trusts, the number of debt collection suits more than doubled nationwide from 1993 to 2013, from less than 1.7 million to about 4 million. This alarming statistic highlights the need to understand the nuances of court summons for debt collection carefully.
Considering that you don't have the required funds to pay off the outstanding debts, hiring an attorney to defend your case isn't an option. In such a tricky situation, the key is to empower yourself to respond by learning about the process.
This article will help businesses like yours navigate the process of responding to a court summons for debt collection, providing the steps you need to take, common defenses available, and more. Let’s get started.
A summons for debt collection is an official legal notification that marks the start of a lawsuit intended to collect overdue debts. It usually occurs when your business owes money to a creditor—like a bank or other loan-issuing financial institution, and they have chosen to sue you to get it back. The summons usually contains the name of the debt collector or creditor, the amount they assert you owe, and directions on how to reply.
You can also get a complaint along with the summons, which lists the specifics of the debt you owe and the legal grounds for the creditor's lawsuit.
Businesses may receive a court summons for a number of reasons, such as a vendor suing for unpaid invoices, a client disputing a service or product, or a contractual obligation being questioned. Whatever the cause, you need to be aware of the consequences of ignoring one immediately. Let's explore them next.
Ignoring a debt summons can have serious repercussions. Hence, it is never a wise decision. Typically, a default judgment in the plaintiff's (debt collector's) favor may result in the following actions and significantly harm your business' financial position:
Understanding the potential implications of ignoring a court summons is the first step to ensuring you follow the right path to respond to one. Now, let's discuss the step-by-step process of responding to a summons.
By reacting appropriately, you can steer clear of default decisions and address the problem before it becomes worse for your business. Let's find out how.
Before answering a court summons, make sure you understand the lawsuit details, such as the amount being sought and the creditor or debt collector bringing the action. Pay attention to the due dates mentioned in the summons, which usually range from 14 days to a month.
Pro Tip: If you do not recognize the debt or think the amount is wrong, ask the creditor or debt collector for a debt validation letter. Remember, you have the right to ask for documentation of the debt under the Fair Debt Collection Practices Act (FDCPA).
In your response, you need to address all of the facts and allegations that the creditor included in the complaint. You should respond in one of the following three ways:
In your answer, you need to tell the court the reason why the plaintiff must not win the case. This is called an affirmative defense. You must list these defenses in your answer, or you may not be allowed to bring them up later.
For example: Consider a creditor sending repeated collection emails at odd hours, unintentionally breaking FDCPA regulations.
Sometimes, a negating defense comes into the picture. It aims to demonstrate that the creditor's facts are false or that they failed to prove a portion of their case against you sufficiently.
If you're not sure which defenses to use or need legal help to face and respond to a court summons, reach out to South East Client Services (SECS). Our expert team is here to help you streamline your responses to worrying court summons.
Next, you need to turn in the documents you just created, along with your defenses and answers, to the court within the time range indicated in the summons. This formally communicates your stance to the creditor and the court.
You can do this electronically in certain courts or by mail in other courts. Finally, be ready to pay the filing fee, which pays for the court's overhead.
Pro Tip: Keep in mind the following to make sure you don’t miss out on the minute yet crucial details.
You will be informed of the hearing's date and venue if the case goes to trial. You have to appear in court to make your case as the defendant.
However, the complexities of a debt collection summons may demand seeking legal help from an attorney, especially if significant sums are at stake. In that case, you’ll have to settle for a trade-off between the potential financial relief due to a judgment in your favor and the attorney fees.
Before rendering a ruling on the day of your court hearing, the judge will weigh the arguments and supporting documentation from both sides. The lawsuit will be dismissed, and you will not be responsible for the debt if the judge rules in your favor. However, if the judge decides in the creditor's favor, you may be required to pay the debt plus any other expenses or fees.
By now, you’re pretty much acquainted with the steps of responding to a court summons for debt collection. However, you may have multiple debts, with different collectors knocking on your door for recovery. What path do you take in that situation? Let’s find out.
Let’s find out the suitable options if your business is ridden with several debts.
Bankruptcy is an effective weapon when it comes to summons for debt. The automatic stay shields you from any debt collection attempts, including litigation, as soon as you file for bankruptcy.
Your qualified debts may be erased in as short as three to four months if you file for Chapter 7. However, filing for Chapter 11 will allow your business to continue to operate under a reorganization plan.
However, there are possible repercussions of filing for bankruptcy, such as:
The bankruptcy will remain on your business’ credit report for up to ten years, which may make it more difficult to obtain favorable interest rates, new credit accounts, or good terms with suppliers in the future.
Bankruptcy filings are open to the public. As a result, your company's reputation and connections with suppliers, investors, and consumers may suffer. It can also produce a stigma that is difficult to get rid of.
Filing for bankruptcy entails numerous legal procedures and documentation. In addition to appearing in court, you will need to compile a substantial amount of financial data. This can be time-consuming, which may translate into less time being spent on core business activities.
Due to these consequences, it is best to speak with a bankruptcy attorney to understand if bankruptcy is the best course of action for you.
If your company is not yet prepared to declare bankruptcy, a nonprofit credit counselor can assist you in exploring bankruptcy alternatives, such as:
Also Read: Best Debt Consolidation Companies
For businesses, handling a court summons for debt collection promptly and properly is essential to minimizing financial risk and avoiding long-term reputation damage. By responding within the required timeframe, raising appropriate defenses, and filing the necessary paperwork, your business can defend itself in court.
However, if you feel overwhelmed with the entire process, do not worry. South East Client Services (SECS) is here to help your business face a court summons for debt with confidence. Our experts can provide a customized approach to review and respond to a summons, avoiding legal complications and keeping the working capital structure intact as much as possible.
Worrying about answering a court summons for debt? Contact SECS today for expert legal guidance.
