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I Have Been Sued By a Debt Collector. Now What?

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Getting sued by a debt collector can be overwhelming. Financial hardship takes a toll on our minds and can affect our mental health. However, it is essential to know that you’re not alone and have options if you’re facing debt-related problems. To understand what to do when you have been served, you’ll need to learn more about what happens to unpaid debts and how these lawsuits typically proceed.

What Happens When You Don’t Pay Your Debt

When you miss a monthly payment on a loan for the first time, the creditor will most likely contact you or send you a letter via email or postal mail to recover the overdue amount. After several months of missed payments, the initial creditor is likely to cut losses and sell the loan to a collection agency. The debt collector who bought your debt will then start collecting from you. If all collection efforts fail and you proceed to fall behind on your payments, creditors can file a lawsuit against you.

You Got Served. What Does that Mean?

The creditor will inform you of the lawsuit by “serving” you with a copy of the allegation and a court summons. The summons includes details about when and how to respond, as well as the date of the court hearing. The first thing you need to know is that you can not just ignore a lawsuit notification. Ignoring a lawsuit may result in the court issuing a default judgment. A default judgment means the creditor can garnish your wages, freeze a part or all of your bank account, or put a lien against your property.

Gather All Information Related to the Debt

You must collect all relevant details about this debt. You need to make sure to include collection letters, missing payment deadlines, and specifics about the original debt. You’ll need to find out who the creditor is and whether the collection information is correct.

The next step is to figure out whether the loan is beyond the statute of limitations. The statute of limitations is the time limit set by your state for a borrower to sue you for an unpaid debt. After the time has passed, the collector cannot sue you, but they can continue to collect from you.

How You Can Respond

Typically, you have two weeks to file a written response to the lawsuit. An attorney can assist you in writing a complete response, making the borrower more likely to pursue a deal with you.

If the debt is legitimate, you can either settle the debt, set up a payment plan, or file for bankruptcy if the debt is unmanageable. Bankruptcy can also be extremely helpful if you owe debts to several creditors. If you owe multiple creditors, bankruptcy will often be a cheaper, easier, and certainly much more effective route to resolving your debt than settlement or consolidation.

The parties have the right to settle after the filing of a lawsuit. The court will frequently order that all sides in a lawsuit attempt to negotiate a mediation deal. And it’s not unusual for cases to reach an agreement before going to trial, mainly if the sum at stake isn’t that big. A debt settlement can resolve a debt collection lawsuit.

If you have the means, it is possible to pay off the debt in a lump sum fully. When the creditor is willing, you can pay off the loan over time by establishing a payment agreement. And if a lawsuit has been filed but is not resolved yet, there is a potential settlement.

If the amount you owe is too large and you are unable to pay the debt, you may choose to file for bankruptcy. If you owe multiple creditors small amounts, bankruptcy still might be a better option than attempting to pay off the creditor that is suing you. If the debt you owe is collectively difficult to pay off, attempting to pay off creditors one by one as they sue you could be disastrous to your finances. Many people will spend thousands of dollars trying to pay off creditors before realizing that their best option is bankruptcy. “I wish I did this a long time ago” is a common sentiment heard over and over by bankruptcy attorneys. Bankruptcy will put an end to collection lawsuits. When you declare bankruptcy, the automatic stay goes into place, which prevents all collection action against you, not just the creditor who happens to be suing you at the time.

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