Handling a debt settlement lawsuit can be overwhelming, confusing and stressful. Most people often panic in such a situation but if you want to make a significant difference in the outcome of your case, you have to stay calm and know how to respond with the right legal strategies. It’s rare but it is a possibility that a creditor sues the debtor even during the debt settlement negotiation. This usually happens when you are far behind payments and your creditor just wants you to pay the loan back in full.
In this guide, you will learn all about how to handle a debt settlement lawsuit, how you can protect your financial future and what legal rights you have.
Why Creditors File Lawsuits?
It’s not quite common for creditors to take legal actions against the debtors but in some cases, they do it and here are few key reasons;
- Missed Or Defaulted Payments: Creditors usually escalate the matter when there’s a long history of missed payments.
- High Value Debts: If you owe your creditor a significant amount of debt then he might take legal action against you to recover the amount.
- Ignoring Collection Notices: If your creditor has been trying to reach out to you about the debt and you’ve been ignoring the collection notices for a long time, this can push your creditor to pursue court intervention.
Step By Step Guide On How To Handle Debt Settlement Lawsuit
Determine The Nature Of The Lawsuit
The very first step you need to take is to read the lawsuit carefully without panicking. You’d probably receive a Summons and Complaint which includes all the information about who is suing you, the amount of debt you owe, the deadline you have to respond and the court where your case is filed. You must never ignore the lawsuit and it’s important that you respond to it on time otherwise it can result in a default judgment. It means that your creditor will win the case and the court might even grant him permission to garnish your wage.
Verification Of The Debt
You should respond to the lawsuit as soon as possible but before doing that you must verify the debt. Verification means, you should ensure that the debt belongs to you, the amount of the debt is correct and that the creditor is allowed to collect the debt from you legally. Fair Debt Collection Practices Act (FDCPA) gives consumers the right to ask for validation of the debt especially if it’s a debt buyer. The debt buyer must provide you with the original copy of the contract, documents that show that you owe the debt and a detailed document that states the total amount you owe.
Respond To The Lawsuit
This is the most crucial step of the process where how you respond to the lawsuit determines the outcome of the case. You have to file an answer to the complaint where you either deny the allegation, admit it or claim insufficient knowledge. You can also state your defense like statute of limitations, lack of standing or an already settled or paid debt. You must file the answer within 20 to 30 days of receiving the summons and complaint and then send the copy to the attorney of the plaintiff.
Explore All Your Settlement Options
If you want to avoid the trial and reduce your debt then it’s best that you explore all the debt settlement options you have. Mostly, there are three options; offer a lump sum settlement (a decided percentage of the debt like 40% to 70%), propose a payment plan that’s more affordable for you or agree to the judgement but with some certain negotiated terms. You shouldn’t ever agree to the terms that you can stick by. Whatever agreement both parties reach, you must get all of its details in writing and ensure the release of any further claims.
Hire An Attorney
Dealing with a debt settlement lawsuit alone is quite difficult especially if you don’t have any know-how about the legalities of the process. It’s best that when you face such a challenge, you hire a professional attorney who leads the case for you. If you want a more favorable outcome, a consumer defence attorney can really come in handy. Just look for the right one who offers free consultation, sliding scale payment plans or simply a flat fee.
Go To The Court With Complete Preparation
If things get serious and your case goes to trial then it’s important that you prepare to present in the court. For starters, you should gather evidence including all the payment records and records of your conversation. The next step is to ask the plaintiff to provide you with proof of the debt. Moreover, you must attend all the hearings and abide by the court rules because even a single wrong move can turn the case completely against you. Even if you want to settle, you should prepare your defense as it puts an impression on the creditor that you really are serious about the debt and you want to resolve it.
Handling A Lawsuit Alone Is Risky-Here’s Why!
If you aren’t seeking legal assistance to deal with your debt settlement lawsuit then know that you are going to make your biggest mistake. This move will put you at a significant disadvantage and here are some reasons that explain why;
Creditors Use Aggressive Tactics: Creditors often use experienced legal teams to put pressure on the debtor and this can really make the entire process more stressful and daunting for you especially if you are fighting the lawsuit alone.
Complex Legalities: Dealing with the stress of a lawsuit is quite difficult and on top of that, the legal system is complex which means that the procedures are quite strict and there are stricter rules and regulations that you must follow. Even a minor mistake like filing the wrong document or missing a court date can have serious consequences and you might even end up losing the case.
The Risk Of Default Judgement: If you don’t respond timely or effectively in the court, it automatically means that the other party will win the case by default. If you lose the case, you’ll have to face serious consequences like wage garnishment, seizure of property or bank account levies. What’s worse is that when the court makes a judgement, you don’t have time to present your side of the story even if you are correct. In a nutshell, you must have legal help alongside when you are dealing with such critical issues or else you’ll end up into a deeper, bigger financial mess.
Overall Verdict
If you are currently going through a debt settlement lawsuit, things might seem a little overwhelming but know that it’s not the end of the road. You just have to figure out a way to navigate the process with confidence and for this, you just need to use the right legal strategies, know your rights and explore your settlement options. Your focus shouldn’t be on the consequences of the lawsuit, in fact, you should be more focused on how to get out of it and how to become debt free. Whether you choose to fight the lawsuit or just settle the debt, you just need to remember that acting quickly is the key to success in such situations. Moreover, you should always seek professional and legal assistance when dealing with legal actions because as said earlier, one minor mistake can turn the whole game against you and even if you are on the right side, you can end up losing the case without even getting a chance to explain yourself.
FAQs
Q1. What Happens If I Ignore A Debt Settlement Lawsuit?
Ignoring a debt lawsuit should never be an option for you as if you do so, the court may issue a default judgement against you. This way the creditor wins the case and he can garnish your wage, freeze your bank account or seize your property. Even if you believe that the debt and the lawsuit is invalid, you should still appear in court and respond to the lawsuit accordingly.
Q2. Is Debt Settlement Possible Even After A Lawsuit Has Been Filed?
Yes, debt settlement is still an option even after your creditor has taken legal action against you. You can negotiate with your creditor to reduce the debt, propose a payment plan that’s more affordable for you or simply follow the court’s judgement but with manageable terms.
Q3. Can I Represent Myself In Court?
Yes, you can represent yourself in the court but it’s best if you hire an attorney for this purpose. Lawsuits can be complex and if you are unfamiliar with the court procedures or have a significant amount of debt over your name then it’s important that you opt for legal assistance.
Debt settlement is overwhelming and if you want to use third party debt settlement services for the best outcome then try Mountains Debt Relief. We have just the right expertise and experience that can help navigate the settlement for you without any hassle.