How to Respond When a Creditor Sues You
Take it seriously if a creditor ever sues you and know the law so you can properly protect yourself. Without this knowledge, you are bound to make a mistake that could cost you dearly. You want to be able to exercise all the rights to which you are entitled and have your case handled properly.
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Instructions
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Do not ignore the summons or complaint that comes via registered mail or a process server. Ignoring it will only worsen the matter.
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Submit an answer to the court, depending on where you live. In some states, a response is required. This basically means submitting your defense in writing and any counterclaims you want to pursue. Counterclaims are usually only brought when the creditor has harassed you or violated the law in some way.
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Request validation of the debt within 30 days of the notice, if you do not recognize the debt as something you owe. If your defense is that the debt is not yours and you don't request validation, then you essentially have no defense. Request that the creditor send you a letter stating the amount of the debt, the account number, the name of the original creditor and a photocopy of the agreement you signed when you entered into the debt. If these things cannot be provided to you, that will work in your favor in court. Also, the creditor must be able to prove that it has legal standing to sue you in the first place.
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Get an attorney, if you think you need one. Show him copies of all your paperwork regarding the debt and any collection attempts. If you are considering bankruptcy, then you should definitely talk to an attorney and a certified debt counselor to ensure you have no other options.
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Fight the suit in court or try negotiating a settlement or payment plan, if the creditor is able to validate the debt. If you choose to settle, then get the terms of the agreement in writing before making any payments. If you go to court and the debt was validated, be prepared to show why the debt went unpaid and the amount of repayment your current circumstances will allow. Sometimes the judge dismisses a case when the debtor and creditor can come to an agreement.
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Go to court and state your case, even if you feel you have no defense. If you don’t, the creditor automatically wins a default judgment. If you at least try to defend yourself, then the outcome will definitely be better than if you do nothing at all. If the creditor has harassed you and violated the Fair Debt Collection Practices Act, you are entitled to countersue for damages up to $1,000, if you can prove the creditor broke the law.
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Don’t think you can escape paying, because options exist for the creditor to get its money. These include wage garnishment, liens on your property and garnishing your personal bank accounts. These actions require more time and money but the creditor will take them if it is able to prove you have the money. The creditor can also reaffirm the judgment, if it expires. If you are "judgment-proof" but become financially solvent, the creditor can still collect. A judgment against you does not mean you have to pay immediately but you must eventually. A judgment entered against you remains on your credit for seven to 10 years, depending on the state where you live.
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Tips & Warnings
Try to work things out with the creditor before it gets to the point of going to court. If you can't, then prepare the best defense you can before you go.
If you have made efforts to repay the debt, take any records you have with you to court. Also, take copies of your financial statements and be honest about whether you can or cannot pay.
Never give a creditor access to your bank account. This will make it that much easier to find any assets and seize them, if it wins a judgment against you.
Don't ignore the Summons and definitely show up for the court date. If you at least try to defend yourself, then the outcome will definitely be better than if you do nothing at all.
References
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