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What to Do If You’re Being Sued by a Debt Collector

If you’re being sued by debt collector, then you’re in no small amount of trouble. All the creditor needs to prove is that you owe the debt they say you owe and they will get a judgment in their favor. Ninety-nine times out of a hundred, gaining a judgment is a simple process and the creditor wins.

Once they have a judgment against you, they can begin using more aggressive tactics to collect the debt. These include garnishing your wages, levying of your bank account, or placing a lien on your property.

The prospect of any of those is unpleasant. But thankfully, the law provides a way for you to stop it. Below, we’ll discuss your options for dealing with a debt collector lawsuit.

The Debt Collector Will Move Quickly
The debt collector is banking on you ignoring their lawsuit. That’s because they know that if you were to file for bankruptcy before they had a judgment against you, you could prevent them from garnishing your wages or placing liens on your property. So they want to move as quickly as possible—and so do you!

First Steps in Dealing with a Debt Collector Lawsuit
Once you’ve received notice that you are being sued by a debt collector, the first thing you’ll want to do is take an inventory of your finances. This includes all of your bank accounts, income, and even valuable assets that could be sold off to repay the debt. The debt collector is going to be targeting these after they’ve gained a judgment.

Once you have this information, you may be able to use it to negotiate a settlement for less than the total amount owed. This is particularly effective in cases where you mention the word “bankruptcy” or drop a line saying that you’re “judgment proof”. Those who are judgment proof are individuals that don’t earn enough income to repay the debt. It’s more than likely that the debt collections attorney has researched your finances prior to filing the lawsuit and determined that you’re not, in fact, judgment proof. That doesn’t mean they’re correct.

Regardless, unless you arrange to make payments on the debt, the creditor will keep coming until they’re dipping into your income or your bank accounts.

Fighting the Lawsuit
In the most likely scenario, the debtor will not have sufficient grounds to fight the lawsuit. As stated earlier, the debt collector need only show that you owe the debt, and you probably do. In some cases, fighting the lawsuit will make sense. For instance, if a landlord is suing you for breaching the lease, you may be able to provide evidence that they did not hold up their end of the bargain. But in most situations, you should count on losing the lawsuit.

If you are sued and you simply ignore the lawsuit, a default judgment will be entered against you and in favor of the debt collector.

Bankruptcy as an Option
One of the most common reasons Americans file for bankruptcy is because they are being sued by a debt collector. The moment you file for bankruptcy, all debt collection efforts against you must stop. The lawsuit against you will be dismissed until your bankruptcy case has been settled. This is known as bankruptcy’s “automatic stay.” At the very least, it can buy you time while you evaluate your options.

For the debt collector, a bankruptcy filing is a worst-case-scenario. They have invested money in the process of filing a lawsuit, and now run the risk that all those efforts will go for naught. Depending on your income, you may be able to discharge the sum entirely in Chapter 7 or roll it into a monthly payment in Chapter 13. If the debt is unsecured (and it usually is by the time it reaches a courtroom) you may not have to pay back the entirety in Chapter 13.

While bankruptcy is not the preferred option for anyone, it may be the best option for those who are facing a lawsuit. It is certainly preferable to waking up one morning to find that a large sum of money in your bank account has been frozen, your wages are being garnished, or you now have a lien on your home.

Talk to a North Carolina Bankruptcy Attorney
If you’re being sued by a debt collector, you want to move fast. The attorneys at Jack G. Lezman, PLLC have helped several individuals manage their debt strugglers and start off with a clean slate. Talk to us today for more information on how we can help.

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