What To Do If You Default In A Debt Law Suit

Default Judgment
A default judgment is what happens if you fail to “answer” the lawsuit against you on time. The debt collector asks the judge to enter a “default” judgment against you, and this means you have lost the case. If you do not take action to reverse it, the company will start to garnish your wages or take your bank accounts if they can find them.

But all is not lost–you can get the judge to take back the default and force the company to work for its judgment.

First Thirty Days
For the first thirty days, a default judgment is called an “interlocutory” judgment, which means that it is not considered “final.” It is actually fairly easy and almost automatic to reverse a default judgment less than thirty days old. In most jurisdictions, all you have to do is tell the court you did not intend to default on the case as a means of somehow abusing the system. Almost any reasonable excuse will work: car failure, misunderstanding of court time or place, inability to obtain a lawyer, etc. I do not suggest that you attempt to deceive the court, simply that the courts are pretty lenient about things for the first thirty days after a judgment is entered.

After Thirty Days
After thirty days it becomes somewhat more difficult to get rid of a default, but it is still very possible, and you should certainly try it.

Some Background
Let’s take a step back to understand why. First a definition: the word “default” has two meanings relevant to debt cases. When you fail to make a payment due on a loan, this is known as a “default.” This is not the kind of default I discuss in this article. Rather, the “default” I intend to discuss here is what occurs when you fail to make a defense of a suit on time. This kind of default is not “favored” in the law because it is not a judgment based on the real facts (merits) of the case. Rather, it is made based on a “procedural” mistake. That means that courts are more willing to undo a default than any other kind of judgment. Keep that in mind.

Every jurisdiction has “Rules of Civil Procedure” which outline what you must do to undo a default. Undoing a default is called “setting it aside,” and the name of your motion is “Defendant’s Motion to Set Aside Default Judgment.” In every jurisdiction of which I am aware, for the first thirty days all you must do is allege that you didn’t intend to game the system by defaulting and state that you wish to make a defense. Because the courts do not like judgments based purely on procedural mistakes, they will routinely set aside the default.

After thirty days, the default is harder to set aside. In that case, in most jurisdictions at least, you must actually provide a “good cause” for your failure to answer on time or seek to set aside the default within thirty days, and you must allege facts constituting a defense to the matter brought.

“Good cause” is a pretty vague term in the law as it is in real life. I have frequently had clients who called the lawyer for the debt collector after receiving the petition and were told that (1) they “didn’t need to worry” about the suit, (2) the lawyer for the debt collector would postpone action on the suit, or (3) the parties would settle the claim, or something like that. This unfortunately seems to be a fairly common thing for the debt collectors to do, and in my experience it has always served as “good cause” to set aside the judgment later. Similarly, if the client was waiting for a lawyer to contact them about representing them or there was some other legitimate basis for delay, the courts have often accepted it as good cause. Remember, the courts do not favor defaults and are supposed to stretch a little to allow you to undo one. At the same time, the courts try not to allow dirty tricks or manipulations, and simply bringing an end to litigation (finality) is also a value in itself. So do not think that the courts will not look carefully at this part of the equation.

A “defense” must also be alleged. And that means that you must claim for some reason that you do not owe the money the debt collector claims you owe. That could be because you have already paid it, or they’ve agreed to take the amount you’ve paid as a “satisfaction” of the debt, or that you never owed the money in the first place. In some courts you can claim that the plaintiff has exaggerated what you supposedly owe and is not entitled to all they have alleged, but in some jurisdictions this is not enough.

What To Do
So how do you know what to say and what will work? Actually, it’s not hard.

Your courthouse (or any law school) will have a legal library. You must go to this library and find a copy of the “annotated rules” of your jurisdiction. Your jurisdiction is the court in which you are being sued. If it’s a county or city court, this will mean finding your state’s annotated rules of civil procedure. When you get the annotated rules, look up the rule on defaults, which will normally contain the rules for undoing defaults. “Annotations” are notes of what courts have ruled on cases involving the rule in question, so if you find the annotated rule on default judgments, you will find many cases involving “good cause” and “facts constituting a defense.” You look at the ones the court has accepted and state your facts in the same way.

It also makes sense to “cite” the case to your judge, and this means telling your judge the name of the case like yours where the court set aside the default. An example of a cite is: Smith v. Jones, 123 Cal.3d 458, 462 (Cal. 3d Dist. 2008). That means that the case was Smith against Jones, and the court decision was reported in Volume 123 of the third set of California Reporters starting at page 458, and the specific analysis or rule of the court came on page 462. And that the date the case was decided was in 2008.

A Warning
One final warning. You must bring your “Motion to Set Aside” within a “reasonable time,” whatever that means. It can mean a lot of different things, but one thing it certainly does mean is that you should not waste a lot of time about it. This term too will likely be discussed in the Annotated Rules. A year after the default will almost always be too late, but anything before that is probably worth taking a shot at. But remember that you are not going to be permitted to “sit” on your rights without taking action. So do it quickly and do not waste time. Remember that if you leave a default in place, the debt collector will try to take your money. There probably aren’t many things you can do to earn more money per hour than you will save by reversing a default judgment, so it is almost certainly worth trying.


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