What can you do when a creditor files a lawsuit against you?

| Oct 21, 2020 | Collections |

While there are legal limits on debt collection practices that companies can engage in against an individual, some businesses still become aggressive when they haven’t received payment in a few months. The company might start calling you frequently or sending you letters about your past due balance.

In some cases, they might sell your debt to a third-party collection agency that is far more aggressive than they would be. They may also have the option of filing a civil lawsuit against you because of non-payment on the debt. What can you do if a creditor brings a lawsuit against you?

Can you prove that you already paid the debt?

Debt-related lawsuits often favor the creditor because there is legal documentation validating the debt that will make it hard for the person in the lawsuit to defend themselves. One of the only strategies that will typically work in court will involve invalidating the debt by showing that you already paid the debt in full or that the debt isn’t one you legally have to repay.

If you haven’t paid the debt, you might question their evidence or their right to sue you because of the debt. Otherwise, if you don’t take action, you could potentially face a having a judgment against you which can become a lien on your home.

Bankruptcy can put an end to creditor lawsuits

In a situation where you don’t likely have grounds to defend against the creditor lawsuit, that doesn’t mean you are without recourse.

You may be able to stop the courts from moving forward with hearing the complaint from your creditor. When you file for bankruptcy, one of the immediate effects will be an automatic stay. That stay prevents pending collection activity from moving forward. Depending on the nature of the personal debt, you may be able to get it removed in the bankruptcy.

If you worry about a creditor lawsuit in your near future, reviewing your options for potentially filing bankruptcy may be the best strategy for protecting your income and assets.

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