If you receive a warrant in debt, the first thing you need to do is to remain calm. While any legal proceeding can be scary, the best course of action is to educate yourself so you understand what the warrant means, and the potential ramifications. You probably have many questions bout a warrant in debt. If so, you're in the right place. Here is everything you need to know about this legal action, how it applies to you, and what you should do about it.
What is a warrant in debt?
According to MCP Legal, a warrant in debt is a legal notification that informs you that you are being sued by a creditor to recover an outstanding debt that they allege you owe. It is an expedited motion for judgment that is a summons to appear in court on the date and time printed on the warrant. While the very word warrant can be frightening, it's an outdated term that could better be said as a notification to appear in court. The warrant is essentially a notification of a lawsuit and it means that someone you owe a debt is suing you to recover the funds.
What should you do if you receive a warrant in debt?
Since legal action is being filed against you, it's in your best interest to follow up on the claim. The course of action that is best depends on your situation. Ignoring the warrant is never recommended. You have several options, and although you are not legally required to take action you should respond in some way, and the sooner, the better.
Hire an attorney
You may hire n attorney to appear in court and represent you. This will release you from any obligation to appear in court personally. If there is any question or doubt about the legitimacy of the action, the attorney may under some circ*mstances be able to dispute the debt. If the plaintiff cannot provide sufficient evidence of legitimacy, the attorney may be able to have the suit dismissed or to establish that payment has been made and discharge your obligation on the amount stated by the plaintiff.
You can appear in court Pro Se
You do not need to have a lawyer to appear in court and defend yourself. You must bring clear evidence in writing that shows you are not obligated to pay the debt, or proof of payment so the judge can consider both sides of the situation. Decisions are made on a clear presentation of the facts and not on hearsay or allegations.
Settle with the plaintiff
If the courts issue a judgment against you, the plaintiff may collect on the obligation in addition to the collection of additional costs such as court and attorney fees and interest charges. You generally have the option to offer the plaintive a smaller lump sum payment to have the claim withdrawn, and possibly clear the debt, avoiding court proceedings.
File for bankruptcy
Filing a bankruptcy petition and presenting evidence to the court will freeze any financial proceedings taken against you by a plaintiff. Your bankruptcy attorney may present this evidence to the court on your behalf.
Disregard the warrant
According to AF Morgan Law, you have the option of ignoring the warrant, but this means that the court will rule in favor of the plaintiff and issue a judgment against you for the amount claimed along with collection costs, interest, and litigation fees. You waive your right to challenge the claim by ignoring the warrant. Garnishment and seizure of your property may ensue unless you file for bankruptcy and provide the court with evidence of your petition.
Can you be arrested for unpaid credit debts?
Debt.com addresses this question and confirms that no, you cannot be jailed because you don't pay a credit card debt or a bill that you owe. The old days of debtor's prison are over. You can, however, be jailed if you fail to pay any court fines that are incurred. You must follow court orders regarding a debt or you may be subject to penalties that include jail time. Failure to pay court fines is a separate issue though, that has nothing to do with failure to pay a credit card or most other kinds of debt.
What if you can't afford to pay a debt?
While the courts may be sympathetic with your situation, there is little that they can do to help you get a legitimate debt discharged. Once the claim is filed, you will need to take one of the actions listed above to try to resolve the situation.
Final thoughts
If you receive a Warrant of Debt, the best thing to do is stay calm and consider your options. While it's stressful to be sued, keeping a calm head and reviewing the facts about the case is your best alternative. If the debt is not legitimate, you must have evidence that proves the claim is unjust, and present it to the judge. You can hire an attorney to do so, or appear in court yourself. If the debt is not justified there is a chance that if you have the right evidence, or if the plaintiff has a weak case, the suit may be dismissed, and you will be discharged from the debt. If the debt is legitimate, try to come to a solution for payment that the plaintiff will accept to save the costs of going to court. If you do owe the debt and there is no way you can resolve the issue, then your best course of action may be to file for bankruptcy protection. Filing the petition for bankruptcy halts all financial actions against you and gives you to reorganize your personal affairs. If you're still not sure which course of action is best for you, it's wise to consult with an experienced attorney to get the answers you're looking for.
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FAQs
What is a warrant in debt? When you owe money to a creditor and you don't pay it back, the creditor can file a claim for that money in civil court. The warrant in debt informs you of the lawsuit making the claim, and it also sets a date on which you have to appear before a judge to answer the claim.
How do warrants work in debt? ›
What is a warrant? Used in both debt and equity financing, a warrant is an agreement in which a startup capital provider has a right to buy company stock in the future at a price established when the warrant is issued or in the next funding round.
What is a warrant in debt case? ›
A warrant in debt is a legal term used in Virginia to describe a lawsuit filed in the General District Court to collect an outstanding debt. Under Virginia law, a creditor can take you to court to collect money that is owed. Creditors do this to collect unpaid debts.
What happens if you go to jail with debt? ›
Can you go to jail for debt? The short answer is no, you cannot go to jail for owing a debt. However, you may have to serve jail time if you are guilty of contempt of court in connection with a debt lawsuit case. Contempt of court is disobeying a court order.
What does "warrant" in detinue mean? ›
A proceeding in detinue to recover personal property unlawfully withheld from the plaintiff may be brought on a warrant or motion for judgment if pretrial seizure is not sought at the time of filing.
How long do financial warrants last? ›
A final difference worth noting is the lifespan of these derivatives. Warrants often have long lifespans, allowing investors to exercise them as many as 5, 10, or even 15 years in the future. But with stock options, investors don't tend to buy out beyond a year because of the time-value of money.
How do warrants settle? ›
Form of settlement in which the issuer of the warrant pays a cash sum to the warrant holder instead of delivering the underlying instrument. If the underlying instrument cannot be physically delivered to the warrant holder (e.g., in the case of index warrants), the contract is settled in cash.
What are warrants as a form of payment? ›
In financial transactions, a warrant is a written order by one person that instructs or authorises another person to pay a specified recipient a specific amount of money or supply goods at a specific date.
Is a warrant a financial asset? ›
Warrants are a type of financial derivative product. They are negotiable options on the financial markets that include the right to buy or sell an (underlying) asset at a strike price and within a specified period.
Is a warrant a bond? ›
A warrant is a specialized type of security that may be issued along with a bond or stock. In some ways, warrants resemble stock options. The warrant entitles the holder the opportunity to purchase a particular number of common stock at a specified price called the strike price.
You cannot be arrested or go to jail simply for being past-due on credit card debt or student loan debt, for instance. If you've failed to pay taxes or child support, however, you may have reason to be concerned.
What happens if you never pay your debt? ›
The other risk you take by ignoring your debt is that your creditor — or a third-party collection agency that has taken over your debt — could sue you for the amount you owe, plus interest and penalties. There's a time limit on when they can do that too, but it varies depending on the state you live in.
Can you be chased for a debt? ›
Legally, debts don't expire, and creditors can continue chasing you for years after you made a credit agreement. This means that if you ignore demands for repayment from your creditors, they could send in the debt collectors to reclaim the debt or take out a county court judgment (CCJ) against you.
Is a warrant considered debt? ›
A classic feature in venture debt deals are warrants. Warrants are a security that gives the holder the right (but not the obligation) to purchase company stock at a specified price within a specific period of time. These are issued by the company.
What does detinue mean in court? ›
Detinue is an action to recover the wrongful detention of goods or possessions.
What does warrant and backing mean? ›
▶ Warrant – logical and persuasive connection between a claim and the evidence. ▶ Backing – the evidence supporting the warrant. ▶ Ground/Evidence – foundation that proves the claim. The claim must be controversial or debatable, or it is not an argument!
How do warrants work in finance? ›
A warrant is a derivative that gives the holder the right but not the obligation to buy an underlying security at a certain price, quantity, and future time. The security represented in the warrant is usually company stock and is delivered by the issuing company.
What are the benefits of buying warrants? ›
Stock warrants offer several advantages, including leverage, lower initial investment, higher potential returns, and diversification. They can provide investors with exposure to a company's stock without investing a significant amount of capital upfront.
What does 5% warrant coverage mean? ›
Warrant coverage is contractual provision where a company issues a warrant to an investor that allows them to purchase shares equal to some % of the amount of capital invested, allowing them to acquire shares at a predetermined price in the future.
What does 10% warrant coverage mean? ›
What Is a 10% Warrant? Warrant coverage is a percentage based on the principal amount of the loan as opposed to the value of the company. For example, a 10% warrant coverage on a $1,000,000 loan equals $100,000 in warrants.
