Probably the most common question I hear is: “Should I answer the complaint?” More often than not, the answer is NO. Don’t waste your time or money. Know this though: the law presumes that if you don’t answer the complaint, you agree with what the lawsuit states. You might consider answering if you have a defense; or you want to buy time to consider your options. Buying time, however, will actually cost you money since there is a fee associated with filing an answer.
If you do nothing – which is usually my advice – and do not file an answer, the plaintiff (the entity that brought the suit) can ask the court for entry of a judgment in the amount stated in the complaint. If the plaintiff gets this, it is termed a DEFAULT JUDGMENT.
Once a judgment is entered, whether it be from default or not, the plaintiff can obtain a lien on your assets and can use the services of the sheriff to levy on your bank accounts and garnish your wages. If all of your assets and income are exempt, you are what’s commonly termed “judgment-proof”. And so long as you expect that situation to continue well into the future, you may be able to ignore the suit altogether.
It takes weeks or even months from service of the lawsuit until the creditor actually has a judgment on which he can execute. Furthermore, there is no need to file bankruptcy prior to a judgment being entered against you. In general, a debt represented by a judgment is just as dischargeable as the same debt prior to entry of judgment.
There are some minor exceptions with this, but for the most part, the bankruptcy will eliminate the judgment whether it was entered before or after your filing. Some of the exceptions would be if a judgment lien had been attached to assets of yours by the creditor. For instance, if the creditor used the judgment to file and obtain a lien against your home. The other major exception is if the complaint alleged fraud or other grounds that would make a debt nondischargeable in bankruptcy.