According to Pew Research, litigation by credit card companies and debt collectors against delinquent borrowers (debtors) has reached volume of 25% of civil cases filed in California. Indeed, in the most populous counties of California there were over 2 million such lawsuits between 2009 and 2020. (Raba, One-Sided Litigation: Lessons from Civil Docket Data in California Debt Collection Lawsuits (U. of Chicago Law School, 2023).
The largest 5 creditor lenders or debt collectors filed 533,307 such lawsuits from 2009 to 2020, and cases likely have increased as a result of the Pandemic, inflation, and economic stagnation since 2020.
Not only are such lawsuits of burden on the courts, but they have direct impact upon the debtors lives. Consumer credit suffers. The debtor’s ability to pay other bills or get other loans suffers or disappears. Unsurprisingly, most debtors cannot afford to hire attorneys and file a response to the creditor’s lawsuit. Statewide, debtors filed responses to only 14% of such lawsuits.
Other factors leading to a debtor’s lack of response to a lawsuit are that many of the debts may be several years old; debtors may have forgotten about them; debtors may have moved away from the prior billing address (and thus not received the lawsuit); or the debtor may have changed last name based on marriage (the lawsuit may be against “Mary Smith,” who now married and known as “Mary Jone,” and “Mary Jones” was not served with the lawsuit).
For those who did not respond to such lawsuits, over The end result is that over 130,000 default judgments were taken against debtors. This means that there is a final judgment, which then begins to accrue interest, generally at 10% per year. For example, a judgment that may have started at under $10,000 in 2010, by 2025 could be well over $30,000.
Those defaults, and judgments after trial, can lead to wage garnishments, freezing of bank account, or repossession of cars, and indirectly could lead to eviction or foreclosure on a home (such as where the individual cannot qualify for a loan or re-finance). The impact can be devastating.
The moral of the story is that debtors who are delinquent and credit cards need to carefully monitor their credit, and can reasonably assume that if the debt is over a few years old, there is a collection agency out there trying to get that money. On the other hand, if a debtor can find a lawyer, he or she can attempt to fight the matter, because there are fortunately occasional fraudulent proof of service, which can cause a default to be withdrawn; mistaken calculation of debt; or valid statute of limitations defenses.
Having a lawyer also greatly aids the debtor in negotiating a settlement. Once there is a default and default judgment, the creditor will likely be much less inclined to negotiate.
Keeping up with your credit, opening your mail, and investigating any strange or suspicious claims of delinquent loans, are three effective ways that debtors can protect themselves. And having a lawyer definitely helps.
THIS POST DOES NOT CONSTITUTE LEGAL ADVICE, AND DOES NOT CREATE AN ATTORNEY-CLIENT RELATIONSHIP.
PLEASE CONSULT YOUR OWN ATTORNEY!!
