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. Basically, a Warrant in Debt means someone, a person or a company, has filed a lawsuit and is claiming you owe them money. This type of lawsuit is used in many situations, including lawsuits for credit card debts, personal loans, contracts, car accident damages, and more more. A warrant in debt is not an arrest warrant or an order to immediately pay money. A common use of the warrant in debt is a credit card company or bank suing an individual who has defaulted on the debt approximately 12 months ago. But, a credit card company could file a warrant in debt much sooner than 12 months; we occasionally see a warrant in debt filed 6 to 8 months after the first missed loan or credit card payment.
A warrant in debt is filed by an individual or company as a way to use the court system to collect a debt or money owed. The party filing the lawsuit is called the Plaintiff and the party being sued is called the Defendant. 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).
A judgment is also not an order to pay the debt, but that the creditor can use the legal process to try to collect the debt. The best way to think of a judgment as a court order/court determination that the money is legally owed to the Plaintiff and now the Plaintiff can use the court system to collect. Prior to a judgment most creditors, other than specific creditors like the government, can only only try to collect using activity like sending collection notices, requesting payment, and/or reporting debts to the credit bureaus.
Warrant in Debt Form. This is what a Creditor fills out to sue someone for a Debt under $25,000.00 in Virginia.
The Process of a Warrant in Debt
In Virginia, the plaintiff fills out a template form for the Warrant in debt. This document contains all the basics of why the Plaintiff alleges that the Defendant owes money. That document is then taken to the General District Court in the county that the case will be heard. 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.
General District Court is where the Plaintiff files the warrant in debt and it is the court where a judge decides the case. This is the lowest court in each county in Virginia (there is also a lower subsect of General District Court called Small Claims Court, but there is a $5,000.00 limit and attorneys are not permitted in that court). The judges in General District Court only can hear cases related to a debt or breach of contract with a principal balance owed of up to $25,000.00 (this means that the Warrant in Debt must claim that the Defendant owes $25,000.00 or less, excluding interest, costs, and attorney fees). General District Court also has jurisdiction to hear Personal Injury cases that have up to $50,000.00 in damages. If the amount in dispute is over these limits, a lawsuit must be filed in the county Circuit Court to proceed with a civil lawsuit.
Not appearing at the court
On most there is a box checked by the Plaintiff on the Warrant in Debt that states you only must show up if you dispute the debt. This means there is no legal requirement to appear. As a result, you do not have to show up at the hearing, but the court can consider a nonappearance as an admission that information on the lawsuit is correct and that the debt is valid. 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.
Settlement
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 all of the allegations in the Bill of Particulars and also lays out any other defense you may have, including statute of limitations or mistake of fact.
At Trial
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. The common person to do this someone from the business that is the custodian of records that can testify to how the records are kept and how the debt occurred. Plaintiff may also need to provide evidence of damages in case of a car accident or evidence of legal fees when a contract allows the winning party to collect them. This evidence can be in the form of testimony from a person or physical documents. All the elements alleged in the Warrant in debt must be proven, including the identity of the person who owes the money, the identity of the creditor and how the balance is calculated.
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.
One of the most common arguments against a warrant in debt is the statute of limitation (SOL). 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. This needs to be raised as part of your written pleadings (usually called the Grounds of Defense). 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. Unfortunately the chances of a debtor/defendant winning a credit card lawsuit are very low; plaintiff/creditor attorneys know what documents a judge needs to see and are usually very prepared. This is one of the reason we often recommend dealing with the debt from a warrant in debt before the trial.
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.
Garnishments
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. There is also a minimum disposable income necessary before a garnishment can take place; however this income level is very low. For example, if you are paid weekly, you are not subject to garnishment if you have $440.00 or less in disposable income each paycheck. Similarly, if you earn $880.00 or less in disposable income every two weeks, you are not subject to garnishment.
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, VA Disability, child support payments, emergency relief funds, etc. 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.
Preventing the garnishment
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?
Individuals are often motivated to file bankruptcy after receiving a warrant in debt or a garnishment. Often, you can still file bankruptcy on most debts even after a judgment is obtained. The law limits which judgments may be discharged in bankruptcy, 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 creditor obtains a judgment is that a judgment may become a lien on your real estate. Creditors can put a judgment in the land records and the judgment then can attach to real property in that county. Liens typically will not go away with bankruptcy; however, it may depending on the equity in your home and what exemptions apply to your situation. If the judgment resulting from the warrant in debt was perfected by the creditors as a lien against your real property within the prior 90 days, the judgment may be avoided during the bankruptcy as a preference, but that option depends on many factors. There are certain other exceptions where a lien cannot attach to a property, such as 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. A judgment from a warrant in debt also is valid for at least 10 years in Virginia; the judgment can be renewed in Virginia for up to 40 years. So it is possible for a debt to still be valid decades after it has fallen off your credit report or many years after the creditor even filed the warrant in debt.
Note: If you file bankruptcy before the court enters a judgment, the Automatic Stay stops the process of the judgment being obtained/entered. Basically it “stays” (or stops) the process that the Warrant in Debt started. The Automatic Stay typically immediately occurs as soon as a debtor files bankruptcy, as long as a bankruptcy court has not be dismissed a prior bankruptcy case for the same debtor within the prior 12 months. If the there has been no Warrant in Debt filed, bankruptcy may prevent it being filed in the future.
Attorney Ashley F. Morgan, a Virginia licensed attorney that focuses on debt and bankruptcy issues, regularly helps clients deal with debts and Warrant in Debts. She helps clients settle or negotiate debts, along with defending against certain lawsuits, and discharging debts through bankruptcy.