Help! I’ve Just Been Sued by a Creditor! What Do I Do Now?

Don’t react to getting lawsuit papers by avoiding them. Treat the lawsuit as a great incentive for taking the first step towards a better life.

 

If you are behind on paying your creditors and are sued by one of them, that usually means that you’re in tough financial shape. Generally collection agencies and creditors chase you with phone calls and reams of collection notices for months before filing a lawsuit. So if you’ve just been sued, you probably don’t have the money to pay that debt, and likely figure there’s not much you can do. Also you may think that there’s nothing that you should do, because the court will just confirm what you already admit, that you owe the debt. So, thinking there’s nothing that you can or should do, you do nothing.

That’s a mistake. There IS something you can do and should do. Get some competent legal advice about what this lawsuit really means, whether and how it can hurt you, and what you likely can do about it.

Doing Nothing Will Likely Hurt You

Lawsuits by most creditors aren’t “personal.” They’re just a business decision. But that should be a concern for you. Why? Because lawsuits cost money for the creditor to process and file. So the lawsuit papers you have in your hands tell you that the creditor has decided that suing you is a good bet.  It thinks that the lawsuit will help get the debt paid. The creditor likely even has in mind specifically how it expects to get paid.  It may well be targeting your bank account, your paycheck, your home, or some other income or asset.   

The creditor is also making another easy bet—that in fact you won’t do anything about the lawsuit papers after getting them. At least not in time to prevent the lawsuit from turning into a judgment against you.  Most people don’t. They don’t for the same reasons that you’re tempted not to—thinking that they can’t do anything to stop it, and that the lawsuit isn’t going to hurt them anyway.

So the creditor is banking on you letting them get a “default judgment,” a court decision in favor of the creditor which happens automatically if you do not formally reply to the lawsuit on time.

But the judgment CAN often hurt you, and quickly. A judgment often enables the creditor to start grabbing your money and your assets, through orders of the court, sometimes in ways you might not expect. That is reason enough to find out how a judgment can hurt you, and what you can do to protect yourself.  

A Judgment against You is More than Just an Admission that You Owe the Debt

But even if the judgment does not result in giving a creditor a way to get money out of your right away, it has longer-term consequences. A judgment gives the creditor serious advantages.  

One reason to find out immediately what you should do is because once the deadline to respond passes and a judgment is entered, you’ve give up on some important rights:

a) Your right to raise possible defenses.  Creditors and collection agencies can be shockingly cavalier about whether the debts they are pursuing are legally valid. Think about it: since in the vast majority of the time consumers don’t respond to lawsuits and judgments are rubberstamped, there’s not much incentive for the creditors to get their paperwork right. You need to have an attorney review the lawsuit to find out if the statute of limitations on the debt has expired, or if you have any other defenses.  After the judgment is entered against you, it is impossible or at least extremely difficult to raise any such defenses.

b) Your right to raise counterclaims.  A counterclaim is your argument that the creditor did something wrong—in the way the debt was created or in how it was collected. Counterclaims say that you have been legally damaged, entitling you to compensation. A default judgment against you either waives your right to bring a counterclaim, or takes away the counterclaim’s leverage when it would do you the most good.

c) Your right to dispute facts.  The debt could become more difficult to write off in bankruptcy after a judgment is entered, if certain facts are alleged in the lawsuit (and deemed admitted by your lack of a response).  This could put you at a serious disadvantage if you ever need to file bankruptcy.

Don’t Do Nothing When You Have a Sensible Alternative

There is no question that getting sued is serious, so you need to know its likely consequences, and your options. By the time you get sued, most likely you have other debt problems and need to get advice about how best to deal with your whole financial picture. My law office will give you a free initial consultation about your lawsuit and about your broader situation, as will many attorneys in other parts of the country. So, if you get sued, right away look through some attorney websites, call a few of them, and, well before your deadline to respond to the lawsuit, meet with at least one attorney so that you can make some informed decisions. Get beyond this lawsuit, and to a better place altogether.

FREE CONSULTATION CONSULTA GRATIS

Call Today for Appointment
305-817-3677

Looking to file Chapter 7 or 13 Bankruptcy? Fill out the form and receive more information.