You get a few months behind. You start blocking numbers and not answering the phone when it is an unknown number. For the most part, this will keep your creditors at bay. However,, when it comes to credit cards, finance companies, and medical bills, the creditor will not stop until they get their money. They file a lawsuit, and you just received the civil summons. What should you do?
Do not panic. You have options to deal with these creditors without facing serious financial hardship. In this post, I hope to guide you through the options if a creditor files a lawsuit against you, and provide some resources so you can combat a lawsuit.
Step 1: Read the court’s summons
There will be some important information on the papers that the deputy or sheriff serves you with. You will want to take note of the creditor name, the case number, and the plaintiff’s attorney name. You will also want to note the hearing date and mark it on your calendar. If you miss the hearing, the court will enter a default judgment, which means you lose and the creditor will be entitled to whatever amount they claim you owe.
The attorney name for the plaintiff should also come with a phone number or office location. You may need to talk with this attorney if you want to reach a settlement.
Step 2: Analyze your options.
Is this debt the only debt you owe? Do you have the funds to pay all or a portion of this debt off? Is this lawsuit one of more possible lawsuits to come? There are many circumstances that you should consider after a creditor files a lawsuit.
Should you file an answer? If you have factual or legal reasons to dispute the debt, you may want to file an answer to the lawsuit. You may have proof that the debt was already paid, or that the debt is not even yours.
Should you negotiate a settlement? If you have some of the balance of the debt, or are capable of making a weekly or monthly payment to settle the debt, you may be able to settle. Many creditors are willing to set up installment payments to settle the debt and you will not have to attend court.
Should you do nothing? In some cases you have no options to answer the complaint or negotiate a settlement. But even if the creditor gets a default judgment, they may have no legal grounds to collect. For example, this is the case when your sole source of income is social security and you do not have any substantial assets like a house or land.
Should you file bankruptcy? It may seem like a drastic response to a lawsuit, but it could be your best recourse to get out of debt and obtain a fresh start. If this lawsuit is a symptom of greater financial hardship, or if you have more creditors than just the one who sued you, then this could be your best option to beat the lawsuit. If you file bankruptcy, the lawsuit will be stopped, and the creditor will not be able to collect against you. Your personal obligation on all debts will be discharged.
Step 3: Seek the help of an attorney
Sometimes you can settle creditor lawsuits on your own. Sometimes, representation can help achieve a better settlement than you otherwise may get. Creditors are usually entitled to fees and interest on their claims, but with the help of an attorney, these extra penalties can be waived.
If you believe that a Bankruptcy is your best option, the help of a bankruptcy attorney to prepare and file the forms can reduce stress and save time. Many attorneys offer a free consultation to discuss some strategies for debt relief.
Step 4: Rehabilitate your credit
If you are able to settle your debt, or if you file bankruptcy, you might want to take some steps to improve your credit for future use. A lawsuit is a public record that displays on your credit report for up to 7 years. A bankruptcy filing stays on your credit for up to 10 years. However, this doesn’t mean that you cannot rehabilitate your credit.
Some solutions to improving your credit include: (1) making small use of credit cards and pay them off each month; (2) keeping track of your credit weekly by subscribing to a service such as Experian; (3) do not use too many credit cards at once and do not apply for too many credit cards; and (4) boost your credit score by including on-time utility and service payments.
A lawsuit will not permanently damage your credit. Know that it can be fully rehabilitated over time.
If a creditor has recently filed a lawsuit against you, I hope these steps are useful in your decision-making. Good luck!