Do I Have to Pay a Judgment If My Debt Was Forgiven?

A reader, Susan, reached out to us to find out if she had any chance of getting a judgment for a medical collections overturned. She said she never received a bill, and the original creditor, a doctor’s billing company, didn’t have a record of it either. But it was on her credit report. And so she disputed it with all three credit reporting agencies. (So far, so good.) But here’s what happened next:

(The) collection agency then serves me with a summons. Within the summons was a date and time for Supreme Court hearing for January 2016. In very small writing on front page it said 30 days to respond. My husband was also named as a defendant but was not served. The collection agency was awarded a default judgement as [sic] now has a lien against my home. I have since spoken with the doctor who told me that he does not handle billing and that he would contact original billing company and have the debt dismissed as professional courtesy. Original creditor called me to tell me debt has been dismissed by the doctor and they will contact collection company to cease all collection activity. Collection company says it’s too late — they already have a judgment against me. Do I have a case to vacate judgment and defend myself?

We checked with Michael Bovee, a Credit.com contributor and founder of the Consumer Recovery Network. He suggested that perhaps the January 2016 date confused Susan, but said that date was likely “calendar management” that can be disregarded by the court if the person who is served fails to formally respond to the summons within the specified timeframe (In Susan’s case, 30 days). “Sometimes words in the law don’t always mean what we think they mean,” he said. And, unfortunately, thinking that no court would act before January 2016 may have been a costly mistake.

Here’s what may have happened. The doctor’s office’s billing company assigned or sold the debt, and the collector that got it won a default judgment due to the consumer’s lack of response to the summons. The doctor’s office may want to have the debt dismissed and all collection activity stopped, but it doesn’t own the debt anymore. The debt collection agency does, and, given they secured a judgment, it’s easy to understand why they aren’t eager to give up on their collections efforts.

Dealing With the Judgment

So what are Susan’s options at this point? “I would file a debt collection complaint with the CFPB and see how this gets addressed from there,” Bovee said. “It is unusual to have an account recalled that has been litigated and a judgment entered, but it is not without precedent.”

Adam Fullman, a debt collection defense attorney in California, said the confusion over dates in a summons is common, but it’s not typically a reason to set aside a judgment. “Lay people assume that the most important thing to [do] is to wait for a hearing and show up, not realizing that they will lose the case long before any hearing if they do not file a timely, formal response with the court,” Fullman said in an email. State laws may vary, he said, but “if this was in California, a motion to vacate default judgment would have very low chances of success.”

Consumers are often taken by surprise when they receive a judgment as notices can be confusing or may get lost in the mail. One way to know whether a judgment has been filed against you is to regularly monitor your credit. You can pull your free annual credit reports at AnnualCreditReport.com and get your credit scores for free each month on Credit.com.