Options If You Are Sued for a Debt

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Options If You Are Sued for a Debt

Getting sued by a debt collector can be really stressful and scary. But don’t panic! There are things you can do to protect yourself. This article will walk you through your options if you get sued for a debt.

Respond to the Lawsuit

The first thing you should do if you get sued is respond to the lawsuit, either yourself or through a lawyer. You need to do this by the deadline listed on the court papers you receive. Responding is important because it prevents the debt collector from automatically winning the case.

If you don’t respond, the court will likely enter a default judgment against you. This means the debt collector automatically wins and can start garnishing your wages or putting liens on your property. So you definitely don’t want to ignore the lawsuit!

File an Answer

To respond, you’ll need to file an “Answer” with the court. Your Answer allows you to tell your side of the story and explain why you don’t owe the debt, or owe less than what the collector claims. Be sure to include any defenses you have. For example:

  • The debt is too old and past the statute of limitations
  • You already paid the debt
  • The amount claimed is incorrect
  • You were the victim of identity theft

If you need help filing your Answer, contact the court clerk or consider hiring a lawyer. Many legal aid organizations can help with consumer debt cases for free or low cost.

Show Up in Court

In addition to filing an Answer, you’ll need to show up for any court hearings in the case. Be sure to bring any evidence or documents that support your defenses. If you don’t go to the hearings, the debt collector will probably win by default.

Negotiate a Settlement

Another option is trying to settle the debt instead of going to court. Many debt collectors will agree to settle for less than the full amount, which can save you money. You can try calling the collector’s attorney to negotiate a deal.

For example, if you owe $5,000, you may be able to settle for $2,500 or less. Get any settlement offer in writing before paying anything. Be sure the agreement states the collector will dismiss the lawsuit after you pay.

Payment Plans

If you can’t afford to pay a lump sum, ask if the collector will accept payments over time. Many are willing to set up monthly payment plans. Make sure the settlement agreement spells out the terms of the payment plan.

Save on Interest

Settling can also help you avoid high interest if the debt is a credit card or loan. The longer the debt goes unpaid, the more interest gets added on. Settling may stop the interest from accumulating further.

File for Bankruptcy

If you have lots of debt you can’t pay and don’t see any other way out, bankruptcy may be an option. There are two main types:

  • Chapter 7 bankruptcy – Your debts are wiped out entirely, except certain ones like student loans and tax debt.
  • Chapter 13 bankruptcy – You get on a 3-5 year repayment plan to pay back a portion of your debts.

The automatic stay triggered by filing for bankruptcy will stop any collection lawsuits against you. Talk to a bankruptcy attorney to see if you qualify and which chapter is best for your situation.

Pros of Bankruptcy

  • Stops collections lawsuits and harassment
  • Eliminates most unsecured debts like credit cards
  • Allows you to keep certain assets like your home
  • Gives you a fresh start financially

Cons of Bankruptcy

  • Hurts your credit for 7-10 years
  • May not discharge certain debts like student loans
  • Costs money to file and hire an attorney
  • Could lose property the trustee deems non-exempt

Let the Collector Get a Judgment

If you don’t respond to the lawsuit or show up in court, the collector will probably get a default judgment against you. This gives them the legal right to collect using tougher methods like wage garnishment.

But even after a judgment, you may still be able to negotiate a settlement for less than the full amount. Some collectors are willing to settle judgments for a percentage of the total.

You can also look into whether your state allows you to “exempt” part of your wages or property from garnishment. This lets you keep a certain amount even if the collector tries to seize it.

Conclusion

Getting sued for a debt can be overwhelming. But try not to panic. You have options, including negotiating a settlement or filing for bankruptcy. The important thing is to take action – don’t ignore the lawsuit entirely. Consult a consumer rights attorney if you need help responding. With the right strategy, you can protect yourself and avoid having your wages garnished down the road.

Sources:

[1] https://www.lendingtree.com/debt-consolidation/sued-by-a-debt-collector/
[2] https://www.consumerfinance.gov/ask-cfpb/what-should-i-do-if-im-sued-by-a-debt-collector-or-creditor-en-334/
[3] https://consumer.ftc.gov/articles/what-do-if-debt-collector-sues-you
[4] https://selfhelp.courts.ca.gov/debt-lawsuits/options-when-sued
[5] https://www.forbes.com/advisor/credit-cards/what-to-do-when-you-get-sued-for-credit-card-debt/
[6] https://upsolve.org/learn/how-to-deal-with-debt-collector-lawsuit/

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