Sequim Litigation: 5 Reasons Default Judgment Is the Real Risk

You have received a “service of process” in Sequim, WA and, as small business owners typically do, you may panic and/or ignore it. You don’t do anything, and therefore don’t mount a viable defense that could successfully prevent a default judgment. Then, the debt becomes a judgment. A “default judgment” is what should concern you. The danger isn’t being sued and then successfully defending yourself. The real threat is if you ignore the lawsuit and a default judgment is entered. That judgment will exist for years. Not paying attention could be much more expensive than paying attention. How to stop default judgment? You must file an answer.

1. The clock is short

You must act in a very short time. You have 20 days from the date you were served to submit your written response to the lawsuit. If you do not file your answer to the lawsuit timely (within 20 days), the creditor can apply for an uncontested Default Judgment. The creditor will ask the judge to grant them a “default judgment” against you for everything they claim you owe, plus court costs that the law allows. If you were served outside the state of Washington, you have 60 days to submit your written answer to the lawsuit. In Sequim, the Clallam County District Court hears civil cases up to $100,000.

2. No one has to warn you

No one will warn you about the consequences for a failure to act. No one will call you. No one will write you another letter unless your creditor wants to. It’s up to you to act and submit your written answer to the lawsuit. If you have never appeared, generally, you will not get a default judgment notice in the mail. If you are already actively involved in the suit and you’ve formally appeared as a Defendant, you will get written notice at least five days before any hearing on a motion seeking a default judgment. To get a default judgment, the creditor must show you failed to appear and answer. An affidavit from them swearing to that gives the clerk grounds to enter your default. Federal law instructs the clerk to enter a judgment on the creditor’s own affidavit without any judge, for any claims of a fixed sum, whether or not they’re “small”. When damages aren’t known, there may be a hearing instead of immediate judgment.

3. Your company cannot answer alone

If you are a corporation, you may not represent yourself in court. By law, a corporation must be represented by a lawyer. A Washington appeals court let stand default judgment against a company that did not get its response to the lawsuit in the file, signed by an attorney, on time. The appeals court reaffirmed that only an attorney can sign the answer.

4. The judgment keeps growing

As time passes, the judgment keeps on growing because interest continues to accrue after judgment. Contract-based judgments can bear interest at the contract rate until paid. For that, the judgment must state that it carries that rate. Otherwise, the judgment carries 12% interest a year or four points over the 26-week Treasury bill rate, whichever is greater. The creditor can enforce a Washington judgment for 10 years, and within those 10 years he can renew it for 10 more. The judgment then becomes a lien against any non-exempt real estate you have, and even real estate you buy in the future, for 10 years. District court judgments require filing with the local county clerk to become a lien against real property.

The creditor can also serve your bank with a writ of garnishment (a court process to seize your funds in your accounts), and the bank is required to hold your funds up to the amount owed as claimed by the creditor. This can tie up funds you may very well be able to use in the short term to make your payroll, keep current on expenses or make equipment payments and loans. The funds are in effect frozen.

5. Undoing it is hard

It’s fairly simple to get a default judgment. There are ways to try to reopen a lawsuit, even if you lose by default. But the process is far from automatic. The federal rule allows setting aside an entry of default “for good cause” (Rule 55(c)), but a final default judgment only under the narrower grounds for relief from a final judgment under Rule 60(b). The rules also allow a default judgment that is not final to be reviewed as needed by the court. Once a final judgment is entered on all claims, relief from a final judgment is narrower and harder to get.

Moving fast doesn’t guarantee a favorable result to the lawsuit. You might not even have a viable answer to the lawsuit. A Washington lawyer can help you file an answer to a lawsuit.

A free contract review costs nothing and takes a day or two. Call (888) 837-7053, or send the agreements to Delancey Street for a straight read on your options.