What to Do When a Creditor Sues You

 We all have things in our life that we ignore. It could be as innocent as delaying a call back to a friend or as serious as putting off a visit to the doctor about a lingering health issue. For some Americans, it’s ignoring overdue debt.

Life is about more than money, but overlooking debt carries significant consequences.

Here’s what to do when a creditor sues you:

Make Sure the Debt Is Yours

The moments after getting sued can send us into a tailspin of emotions. But before you throw up your hands and accept whatever fate comes your way, it’s wise to take a step back and look at the details.

It’s not unusual for lawsuits to contain errors, whether it’s your name, the debt, the amount, or how long payment has lapsed. However, these mistakes are more common when a collector sues you, as by that point the debt may have been sold off and changed hands a few times.

Is the Debt Valid?

Even if the lawsuit contains your correct info and debt information, there’s a chance it may not be valid. This is because debt carries an expiration date, known as a statute of limitations.

Each state has a different statute of limitations depending on the type of loan. In general, the best odds of your debt being exempt is if it’s an open balance, which pertain to credit cards and other lines of credit. See this list for the statute of limitations for each debt type by state.

It’s worth noting that while time-barred debt protects you from legal action, it doesn’t change the fact that you owe money. Your credit score and overall report will still reflect the unpaid debt until it clears.

Compile All Relevant Records

If you plan to respond to the lawsuit, you need to gather every document you that pertain to your debt. This includes the initial loan or credit agreement that shows when the debt’s start date, as well as how and when you were served the papers. You should also have financial information handy, like pay stubs and tax returns, that prove your inability to pay off the debt. These records will also verify if your debt is time-barred and thus exempt from legal actions.

Can You Settle?

Creditors don’t want to go to court. They just want some money back on the loan they issued. As evidenced by Freedom Debt Relief reviews, many debtors have success negotiating a settlement on past-due debt. While most of these cases occur before a debtor is served, there’s still reason to believe a creditor will accept a settlement if it’s large enough to make the costs of going to court a wash. The settlement offer can either be a lump-sum amount or a payment plan.

Make the best offer you can; and have copies of your income and bank statements to show that it’s the best you can offer. In some cases, you’ll be able to clear the debt and avoid going to court.

Think About Your Response

Regardless of whether the information in a lawsuit is incorrect or if your debt is beyond the statute of limitations, you need to choose whether you’ll respond. Per Nolo, a debtor generally has 20–30 days to file a written response to the lawsuit. This will come with a filing fee but may qualify for a waiver if you’re void of funds. If you are to respond, it’s a good idea to leverage the expertise of a lawyer. Again, if funds are non-existent, then you need to do the research to represent yourself appropriately.

Again, as Nolo notes, if the debt is unquestionably yours, and you have no defense as to why it’s unpaid, you might be better off not responding to the lawsuit. This will send the suit into default judgment, which will result in either the creditor being awarded the money, or them having to provide more proof that the debt amount is justified. However, it’s wise to respond if you have assets that can be seized. If you’re unsure of what you should do, consult with an attorney to ensure you have no legal defenses available to you.

Getting sued for anything is an easy way to ruin several months of your life. Consult the tips above to make the moments after a lawsuit manageable, and rest assured that no matter how bad things get, there’s always bankruptcy.

Zach Zorn

Zach Zorn is the owner of Money Nomad and an enthusiast of all things tech. Zach has extensive experience creating and managing niche review websites. In 2018 one of his websites was acquired by a private equity firm, igniting his passion even more. Zach also runs an Amazon FBA business that has given him experience with customer service, product manufacturing and design. While in high school Zach helped design several successful apps for Disney. When not on the computer, Zach is most likely off the coast of San Diego or Baja fishing for saltwater game fish.

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