Understanding a Warrant in Debt: Virginia’s Lawsuits for Debts
Here in Virginia, a lawsuit for money in General District Court is called a Warrant in Debt. This sounds a lot scarier than it is. It basically means someone, a person or a company, is claiming you owe them money.
The purpose is of the Warrant in Debt is to get a judgment. A judgment, on its most basic level, is a court order that says you owe them money. It is a legal document that gives them power. The reason people want to get a judgment is they can try more aggressive ways to collect, including garnishing wages or bank accounts. Before getting a judgement, most creditors can only call, send letters, report negative information to credit bureaus (certain creditors, such as IRS, state, federal student loans, etc. do not need a judgment to use other means to collect).
The Process of a Warrant in Debt
After a creditor files a Warrant in Debt in the court, you must be given notice. Most often defendants are served with the notice in two ways: personal service or posted service. With personal service, a sheriff or a process server, brings the notice directly to you or an adult resident at your home. The other way (and much more common way) you can be served is via posted service, when the notice is posted/taped to the front of your door. The creditor will also provide a mailed notice. The Warrant in Debt lays out the most basic information about the claim. By law, the Warrant in Debt must have the General District Court where the warrant was filed and you may appear if you dispute the debt, the amount of the original debt owed including the interest rate and any claimed litigation cost and attorneys fees being sought, the type of debt owed, i.e., whether the debt is from a contract, note (i.e. mortgage, car loan, etc.), or unpaid account balance, and the full names of all parties. Additionally, the document will have a “Return Date” on the upper right corner of the document. This is the date and time that the court is setting a hearing about the debt.
If you do not show up at the Return Date, the court will enter a Default Judgment against you. A Default Judgment means no one appeared to defend against the lawsuit, and the court entered a judgment. You have every right to attend, but it is important to understand what factors the court will consider. Often, clients who get a Warrant in Debt want to go to court and explain to the judge that they just cannot afford to pay. The judge may sympathize with the situation, he or she is not there to determine whether you can pay, but to determine whether the debt is valid or not. The judge at the court date will ask if the debtor or defendants owes the money or disputes the debt. If you owe the money, then the court would enter a judgment.
Just because a warrant in debt has been filed, it does not mean you cannot try to settle the debt. You can always try to settle a judgment, but usually it is more difficult after a judgment has been obtained. After the lawsuit is filed, the negotiation often must often take place directly with their lawyer. Lawyers are usually authorized to settle an account within a certain range; however, they may be able to settle the account for a lower number, if you can show a reason, i.e. low income, limited assets, limited likelihood of collection. Creditors settle because they believe they are getting a better deal collecting directly from you than trying to track you down and collect in the future.
A settlement usually will be for a lump sum amount (or a limited payment plan, i.e. 2 to 3 months). If you are looking for a payment plan, you likely will be required to pay most or all of the debt. Sometimes a creditor will agree to payment plan with a Confession of Judgment Note. This is an agreement that allows you to keep a judgment out of the court, but allows the creditor to file the judgment in the court record without involving a court or a trial, if you do not make the required payments. For individuals looking to prevent a judgment against them, it can be beneficial. However, it does mean you are waiving certain rights. If you are offered a Confession of Judgment Note, it is important to understand what rights you are waiving.
Disputing the Debt
If you say you dispute the debt, a judge will set a trial date to allow the plaintiff and defendant a chance to prove their case. Along with trial, the judge can order a Bill of Particulars and a Grounds of Defense. If ordered, the Plaintiff/Creditor will file a Bill of Particulars that details the amount owed, proof/reasoning that the defendant owes the money to the plaintiff, etc. Sometimes this is the same information provided in the original warrant in debt , but often the new document has more details. The Grounds of Defense is filed by the Defendant; it admits or denies the allegations in the Bill of Particulars and also lays out any other defense you may have, including statute of limitations.
At trial, the creditor will present evidence and try to prove the debt is valid; they basically will argue the details provided in the Bill of Particulars. This will include evidence about how much is owed, how the debt belongs to them (if they bought it from another creditor), why they may be entitled to interest or attorneys fees, and more. Often, someone from the creditor may appear authenticate records of the debt.
After the creditor presents its evidence, the court will allow the defendant to present any evidence to show why the debt is not valid or owed. Common defenses are things such as, statute of limitation, previous payments not accounted for, amounts are incorrect, mistaken identity, etc. A statute of limitation defense is an affirmative defense; it usually means that the creditor took too long to bring the case to the court. As a result, it does not matter whether you owe the money or not, but considers whether the last transaction, payment, or similar activity took place too long ago. However, you have to raise this defense yourself; the court will allow the case to go forward even if the debt is old, if you do not object. The statute of limitations that applies to most warrant in debt cases in Virginia is either 3 or 5 years. This usually depends on whether an original signed agreement can be produced or not.
It use to be common that individuals would object to debts purchased by other debt collectors. This does not usually work anymore; debt collectors and their lawyers have gotten good about documenting any transaction and being clear about the accounts being purchased.
The court cannot consider arguments about inability to pay. After both sides present evidence, the court will then make a legal determination. If the creditor provided enough evidence and there were no valid defenses, then the judge will enter a judgment against the Defendant. If one of the defenses was valid or the creditor lacked enough evidence, the judge will dismiss the case.
What Happens After a Judgment?
If you fight the debt and win, then there is nothing else to worry about unless the creditor appeals. If you lose or you allow a judgment to be entered (i.e. by conceding or not showing up), the creditor can attempt to collect. Since a judgment is valid for at least 10 years (can be valid up to 40 years in Virginia), creditors may wait to collect. However, some creditors will immediately start using their rights. Creditors can collect via garnishment of paychecks, garnishment of bank accounts, a lien on property, etc. Some creditors immediately try to collect after a judgment was been obtained and the appeal period has passed, others will wait years. It is not unheard of a creditor to try to collect nine years after a judgment is obtained after no collection activity.
A garnishment in Virginia can be up to 25% of your disposable income. Here in Virginia, disposable income is your after-tax pay. For example, if you are paid $2,000 every two weeks, and from that $450.00 is deducted from your pay in taxes, the creditor could receive $387.50 per paycheck. This is deducted before things like retirement, health insurance, and life insurance are deducted.
A garnishment can also take all the money in your bank account, up to the amount of the judgment. There are certain limitations to this, like social security. But, this can also cause your entire paycheck to be frozen if it is direct deposited into the bank that receives the funds, and it also freezes that account until the garnishment is over.
After a judgment is entered, creditors are often more difficult to deal with since they have many more rights. Also, it is hard to negotiate a better payment plan with a creditor when they know how much they can get in a garnishment. Stopping a garnishment is very difficult in Virginia; usually, the only option is bankruptcy. As a result, many individuals are forced to file bankruptcy after being garnished. This is why we highly recommend settling or negotiating with a creditor before a judgment is entered because you are more likely to succeed.
Warrant in Debt Becoming a Lien on Real Property
A creditor can take a judgment from General District Court and put it into the land records. This serves two purposes: it helps the creditor try to collect and extends the period of collection to at least 20 years. If a judgment is filed in land records, it may attach to any real property owned by the debtor. This means that the judgment attaches to the real property. If a debtor then goes to sell the property in the future, the lien would have to be paid. This can be especially dangerous if the creditor has obtained interest on the judgment because the balance of the judgment would continue to grow.
There are a few exceptions to judgment attaching, such as a judgment against one spouse if a property is owned Tenants by the Entirety by two spouses. But these exceptions are limited.
Filing Bankruptcy After a Judgment?
A warrant in debt or a garnishment is a common motivation to file bankruptcy. Often, you can still file bankruptcy on most debts even after a judgment is obtained. There are some limits to judgments that may be discharged, such as fraud or embezzlement (but this is not common for most warrant in debts). But, we still usually recommend filing bankruptcy before a judgment is obtained because it is easier and can prevent potential complications.
If you wait to file when you are being garnished, you may not be able to get that money back. Depending on the timing and how the garnishment happens, we may be able to return some of the funds, but it becomes more complicated. Additionally, we find it is also more difficult to find money to pay an attorney when you have money coming out of your pay or your bank account frozen. Creditors are good at trying to figure out where you work and where you bank. If you ever made payments to the creditor using a bank account or a check from a bank, they will often try to garnish those locations first.
Bankruptcy and Liens on Real Property
The complication of filing bankruptcy after a judgment is that a judgment may become a lien on your real estate. Creditors can put a judgment in the land records and it can attach to real property in that county. Liens typically will not go away with bankruptcy, it depends on the equity in your home and what exemptions apply to your situation. There are certain other exceptions for assets owned by a married couple with non-joint debts, but this does not always apply.
As a result, you are considering as bankruptcy as a possibility when you get a warrant in debt, its best to set up an appointment immediately. One thing to note is that judgments no longer show up on credit reports. The underlying debt may still be on your credit report as a delinquent account, but the fact there is a judgment will not. This means that if you own no real estate, but need a little more time to get everything together after the judgment, it is not the end of the world. But, we do not recommend waiting too long because a garnishment may happen.
Note: If you file bankruptcy before the judgment is entered, it would stop the process of the judgment being obtained.
Attorney Ashley F. Morgan is a Virginia licensed attorney. She has been helping clients deal with debts and Warrants in Debt for most of her career. She helps clients settle or negotiate debts, along with defending against certain lawsuits, and discharging debts through bankruptcy.