I’ve Been Sued. Now What?
I’ve been sued by Capital One Bank to recover $26,977 that I owe them.
What does that mean?
It means that they sent me a certified letter demanding payment of my debt to them in full in 30 days. I received that letter and signed for it.
I sent them a small amount of money, and received another certified letter demanding payment of my debt in full in 30 days. I signed for that one, too. I, of course, couldn’t pay anywhere near that much in 30 days.
So,their legal department filed a petition with the Clerk of Court asking for a judgement in their favor for the payment of the money I owe them. The judgement would be granted if I do nothing to answer the charges. I was served these papers on May 28, 2007. I am not answering the charges and accepting the judgement.
At first, this scared the heck out of me, so I called them to find out what this means. I’ve also talked with a dear friend who is knowledgeable about this previously when I needed to collect a debt a client owed me and refused to pay. Here’s what I found out:
The judge will grant their petition and they will hold a judgement against me. I get another ding on my credit report (no surprise there). My credit is already trashed with all the debt I have in collections. It also means I probably can’t get any credit for anything until this is cleared from my credit report. I can’t buy another house if I move, I can’t get a car loan, etc. It’s still not as bad as bankruptcy because when the debt is paid, the judgement goes away for good.
Once they have a judgement, it means they could next sue me for a Writ of Garnishment. If that is granted they could garnish my wages for around 25% of my pay. But since I don’t have any W2 jobs, they probably can’t get any money from me. I don’t know what the implications are if you’re self-employed like I am. Theoretically, they could take 25% of my business’s gross or net ordinary income. I don’t pay myself and claim it as an expense on my income statement. I take tax-free owner’s draws. I have to pay self-employment taxes of 15.3% on net ordinary income (income statement), but the owner’s equity is a balance sheet item. Owner’s contributions and draws are tax-free.
So, all this means for now is I keep paying the pro rata plan payments to my creditors and extra money when I can get it. I’m paying the pro rata payments based on what I know I will have each month to pay creditors. I pay down the smallest debt with any extra money I can get my hands on. That way, when my snowball rolls over once, I’ll have fewer creditors and each remaining creditor will get a bigger payment. I’ve asked around on the MyTMMO discussion boards, and that’s the answer I’ve gotten, so that’s what I’m doing.
I hope I’m doing whatever I’m doing fairly to all. I want to get out of debt, but I also want to be fair to all my creditors as I’m paying them off.
We’ll see how this unfolds. I’ll post when I know more.
