Ever Wonder What Really Happens After You Can’t Pay Your Bills?

If you have not yet had the pleasure of money being forcibly collected from you, then you may wonder just what happens if you don’t pay a debt.  Of course, your creditors are probably going to threaten you with garnishments, lawsuits, and other scary tactics.  Debt collectors can be even worse.  And some folks fear that if you don’t pay a debt, you can have your paycheck garnished at any moment.  That isn’t true.  But I’m here to tell you that for most consumer debts, the collection process is a long journey that may or may not end in money actually being jerked from your paycheck.  The most important thing to know is this: you can’t get garnished unless someone has a judgment against you.  And it takes months to get a judgment.

The process starts when you first default on a debt obligation.  Default usually means that you failed to make a payment when it came due.  If you get a credit card bill asking for a $150 minimum payment due by June 1st, and you don’t pay it, then on June 2nd, you are one day delinquent, and you are in default.  Under most contracts, once you have defaulted, then you can be sued.  But that usually doesn’t happen.

Most creditors charge off accounts when they are 90 days delinquent.  “Charging off” doesn’t mean that you don’t owe the debt; it just means that the bank no longer considers your debt to be good for its face value.  Most credit card companies begin collection efforts at this time.  They’ll send letters, make phone calls, and potentially refer your account to a collection agency or sell your account to a third party junk debt buyer.

Once a creditor has given up on getting paid by you voluntarily (this can take anywhere from 60 days to 2 or 3 years), they will either sell the account to a debt buyer, who will begin the collection process anew, or they will hire a collection law firm to sue you.

Once they sue you, they have to serve you with a written copy of the lawsuit.  If they know where to find you, this takes a week or so at the best.  Once you receive the lawsuit, you have a certain, limited amount of time to answer the complaint.  In Alabama, you have 14 days to answer a lawsuit in District Court or Small Claims Court.  You have 30 days to answer a complaint in Circuit Court.  You have 21 days to answer a complaint in federal court.  If you’ve been sued for more than $10,000, then you must be sued in either Circuit or Federal Court.  If you don’t answer, or if you answer admitting that you owe the money, then a judgment is entered against you.

Once you answer the lawsuit, the case gets set for the trial docket.  In District or Small Claims, this usually means you’ll be at trial in 2 to 4 months.  In Circuit Court, trial will typically be 6 to 9 months from the date of your answer.

They cannot garnish you until they have a judgment.  So even if you lose at trial, just by fighting the lawsuit, you can buy a lot of time.  Time to raise settlement funds, or file bankruptcy, or get a new job that can help you pay things off.  Or just a bit of breathing room.

Once they have a judgment against you, they still cannot enforce it against you for 30 days.

After the 30 day stay has passed, they can seek and obtain a writ of garnishment from the court.  This requires them to state the employer or bank that they want to garnish.  Once they get the garnishment issued by the court, they have to serve it on your employer or bank.  A bank account can be zapped immediately for the funds that are in it.  Your employer, however, obviously cannot withhold wages until they’ve been earned.

So to add all this up, it works something like this: a really fast and lucky creditor may move as quickly as the legal system allows towards garnishment, and their garnishment timeline will look something like this:

District/Small Claims if You Don’t Answer:

Default -> Immediate Suit -> Answer Period (14 to 30 days) -> Default Judgment Motion (~30 days)-> Stay (30 days) -> Garnishment.

Total Time Between Missed Payment and Garnishment: 74 days.

On the other end of the spectrum, a circuit court lawsuit where you don’t roll over like a dead dog will go more like this:

If You Fight:

Default -> Informal Collection Efforts After Charge Off (2 to 24 months) -> Lawsuit -> Answer Period (30 days) -> Waiting for Trial (6-9 months) -> Enforcement Stay (30 days) -> Garnishment

Total Time Between Missed Payment and Garnishment: 10 months to 3 years.

So to make a long story short, and to oversimplify an often complex judicial process, the length of time that it takes to get garnished after you quit paying someone will be at least 2 1/2 months, and could be as long as 3 years (or never!).

Of course, better still is to not get garnished at all, by either beating the lawsuit, working out a settlement, or filing bankruptcy.