Expert: Regan Shinski - 12/1/2010

Question
Hi,
Back in the fall of 2009 I took out a payday loan. Two, actually, to travel home for an emergency. I was never able to pay these loans back. Today, over a year later, I get a call for a law office collection agency. They have informed me that the payday loan company has filed suit against me and my social security number. They have informed me that they will garnish my wages, I must appear in court, and may go to prison. When I explained I was unemployed after many years of steady, sustained employment, and collecting unemployment, I was laughed at and they said "well how can you afford to defend yourself young man."
Can I have what little I get to survive through my unemployment confiscated?
Can I be hauled into court? If so, what could the results be?
Can I go to jail, or prison, or have my physical freedom in ANY WAY suspended for this?
HELP!!!!!!!!!!

Answer
Hi Sean:

It's a complicated question.  In general, what would happen is that you would be sued civilly in court.  Most likely you would lose and a judgement would be entered against you.  Once a judgement is in place, the collection techniques vary widely by state but CAN include garnishment of wages, placing liens on property, attacking bank accounts, and even having the sheriff office confiscate certain personal property for sale at auction to satisfy the judgement.  It's important to note that there are exemptions to protect you and not all these collection options are available in all states, so do a google search on collecting a judgement along with your state.  You can also contact the relevant governmental agency in your state to see what collection options are available to judgement holders.  Usually unemployment compensation benefits are exempt but, again, this varies by state and once it is placed into a bank account it may be vulnerable.  Additionally, judgements can stay in place for a LONG time, so when/if you get a job, those wages may become vulnerable.  You will likely have to address this at some point.

The issue of jail or prison is usually not an issue.  It IS a concern if there was any fraud in obtaining the loan.  Lying on the application, deceiving the lender, forging a document, and related actions can be prosecuted.  If it was simply that you lost you job afterwards and could not pay, that is generally not a prosecutable offense.  However, some states have statutes that are more creditor friendly so, again, I suggest you look this up in a google search for your state or call local advocacy or government groups.

Good luck, I hope this helps.  It's too complicated to give specific answers.  

BTW, another option is to fight back through credit repair.  The goal is basically to get the creditor to violate the Fair Debt Collection Practices Act, then use this violation and the penalties that go along with it to offset the debt.  It's not easy and is very complicated, but it can be done.

Regan

www.ficofighter.com