A default judgment can be entered against you whenever a party who has sued you in a lawsuit requests that the court enter judgment in that party’s favor because you failed to file an Answer to the Summons and Complaint served on you or you neglected to appear in court. In most lawsuits, you have 30 days to serve and file a response to the Complaint. This occurs frequently in collection cases where the defendant debtor has no defense to his/her failure to pay an obligation such as a credit card debt or simply ignores the suit.
A judgment can adversely affect your credit score so you will want to get it removed from your record at your earliest opportunity. The creditor can also begin collection activities such as subpoenaing you for a debtor’s deposition where you have to disclose your assets including bank accounts, employment information, stocks, and other personal and real property and their value. Other collection activities such as wage garnishment and bank liens can cause considerable embarrassment and freeze your accounts if not deplete them.
In California, there are a number of things you can do, however, if a default judgment has been entered against you.
- Call the creditor to make arrangements for payment. If you owe the debt and have no known defenses, contact the creditor regarding monthly payments or perhaps negotiate a lump sum payment for less than the judgment amount. You should get an agreement with the creditor to issue a Satisfaction of Judgment to be sent to the credit agencies once the debt has been satisfied.
- Motion to set aside the judgment. If you act quickly, you should have time to file a motion before the court to set aside the default judgment on the basis of several factors:
- Surprise, inadvertence, mistake or excusable neglect. This does not mean that you were too lazy to respond or simply forgot about it. Acceptable excuses include being incapacitated at the time, being given the wrong information by a court clerk, or you filed it a few days late. If you had an attorney who failed to file a response, you can use that excuse as well under “excusable neglect.” If relying on these grounds, you have 6 months to file the motion from the date of judgment.
- Lack of actual notice. A motion for relief from the judgment must be filed within 2 years of the date of judgment if alleging lack of knowledge of the lawsuit. You have to demonstrate that the service of process on you of the Summons and Complaint was invalid because you were never served or it was not done within the rules for adequate service.
- The judgment is void. A judgment is void if service of process was not sufficient or done fraudulently, or if the default was entered too soon. In some cases, the statute of limitations may apply as an affirmative defense that can cause the court to dismiss the lawsuit, though judgments often are good for 10 years. Also, the court may not have had personal jurisdiction over you or it lacked subject matter jurisdiction (filed in the wrong court). There is no set time to file your motion to set the judgment aside though you should have it filed quickly. The standard used by the court is that it must be filed within a reasonable time after judgement is entered depending on the case at hand.
- Lack of standing or fraud. In many cases, the creditor may not have had standing to bring the suit. For instance, many debts are sold to companies at a discount who then attempt to collect it for an amount that exceeds what it paid for it. If you can show that the alleged creditor was not the original creditor and has no evidence that you owed you to them so that they suffered no damages. If the judgment was obtained based on fabricated signatures or documents, then your motion for relief should allege it was void and is a fraud on the court.
- File bankruptcy. If the judgment amount is for a considerable sum and many of your assets are subject to seizure, consult a bankruptcy attorney about filing for Chapter 7 or 13 bankruptcy protection. You do have to qualify for bankruptcy, though the majority of debtors do, but you do need to review this option with your attorney to see if the debt can be discharged and how a bankruptcy will affect your other assets and credit. If the creditor is now a secured one, your option may be Chapter 13. Discuss this with your bankruptcy attorney.
Your best course of action once you receive the Notice of Default Judgment in the mail, or are otherwise informed of it, is to immediately contact an attorney to discuss the options presented here.