What Happens If A Creditor Sues Me?

Here’s a simple fact of life: if you owe a substantial amount of money to a creditor, such as a credit card company, and repeatedly don’t make monthly payments or maintain communication with your creditor, there is a very strong possibility that you can be sued.

Many people in this unfortunate position make the mistake of ignoring the creditor’s calls and emails about the unpaid debt, hoping that one day the calls and emails will stop.

The people who believe this are right: when the calls and emails do stop, legal action will usually follow from the creditor. So long as the debt remains unpaid and you have made no plans with the creditor to pay it back, you can be sued in civil court over the balance.

If the court rules in favor of the creditor, the government can then either take money from you directly or seize your property in order to pay back the creditor, not to mention you’ll incur a variety of legal costs from the lawsuit as well.

Needless to say, getting sued by a creditor it not an experience you will want to have, which is why you should use any means possible to pay back the debt you owe and pay the minimum monthly payments at the very least.

But still, it’s a good idea to know what you can expect in the event that you are sued and also to know what the best way for you to respond will be as well.

What Will Happen When You Are Sued By Your Creditor(s)?

The lawsuit will most likely begin when either the creditor or a collection agency (or a lawyer for either of the two) files a ‘complaint’ in court. The complaint is also sometimes referred to as a petition.

You will be listed as a defendant under the complaint, in addition to anyone else who cosigned onto the loan of the account. The complaint will also clearly state why you are being sued and what the creditor is seeking. Usually, it will be three things:

  1. Reimbursement for the amount you owe
  2. Interest
  3. Reimbursement for the costs of legal action (lawyer fees, court costs, etc.)

You will then be sent a copy of the complaint in addition to a summons, which will make clear to you that you are being sued so there can be no doubt in your mind as to what is happening. The summons will also indicate when you need to file a formal response to the court.

Many courts will require the summons to be given to you in person, which will usually be done either by your local sheriff or by a professional process server. If you aren’t home when the documents are attempted to be given to you, they can be left with another adult in the house or mailed to you instead.

You will also need to sign a form that comes with the summons as well, which legally acknowledges that you have received the summons and the complaint. Failing to sign this form and return it can result in you paying a process server cost up to a hundred and fifty dollars.

Your Response

Easily the number one mistake that people make when they are being sued by a creditor is failing to respond to the summons and complaint. They do this for the same reason that they don’t respond to the creditor knocking on their door asking for payment: they hope that the issue will just go away, which unfortunately, is simply not going to be the case.

But even if you are currently financially unable to pay back any of your debt, failing to respond at all is easily the very worst thing you can do because it opens up the possibility for wage garnishment or the government to pull money directly out of your bank account, depending on what the specific laws are in your specific state.

As a golden rule, however, you will have up to thirty days to file a written response to the lawsuit. For some states, you’ll have only twenty days. In court, this written response will be referred to as the ‘answer,’ and you will have to pay a small fee when you file it.

Take note that your answer does not even have to be very long. It’s perfectly legal to write a one or two sentence response where you deny liability to the lawsuit, which can potentially result in a negotiated settlement to save you on money.

Also take note that you must file your response to the court within those twenty to thirty days, and it will NOT be sufficient to simply send the response to your creditor.

Avoid Accepting Liability

Something to take note of is that when you respond to the summons and complaint, you should never state that you are responsible for the debt and are unable to pay back your debt, even if it’s true that you are unable to pay it back.

If you do this, you are accepting liability, which means that the creditor will not have to prove their case in court.

But by denying liability, you can fight your lawsuit to the very end. Accepting liability will always be to your creditor’s advantage, and you are likely to have very poor luck making your case in the courtroom.

But what if it is true that you can’t pay back the debt? Isn’t denying liability the least honest route to take?

Something to take note of here is that challenging the creditor’s lawsuit is not the same thing as denying that you borrowed money from them. In fact, challenging the lawsuit is not even the same thing as challenging the amount you owe.

Instead, you are simply challenging the standing of the debt collection agency, or its right to sue you.

Furthermore, many creditors and collection agencies may back down when you challenge their standing to sue you. The reason for this is because collection agencies earn profit by buying debt in bulk from creditors and then attempting to collect as much of it as they can.

In other words, chances are extremely small that the collection agency is focused on your specific debt. When you challenge their standing to sue you, it’s not at all uncommon for collection agencies to respond by offering you much more favorable settlement terms or even by completely dropping the issue.

You see, it’s not preferably for a creditor or a collection agency to sue you. Lawsuits are long, expensive, and oftentimes very bitter. This is why it will be a preferable course of action, for both parties, to seek more favorite terms in a settlement outside of court.

And even if the creditor or collection agency does still decide to sue you, they may not have the evidence to win in the courtroom. Your creditor will need to prove that you owe the debt AND that they also have the right to sue you for it. If the evidence is not up to a legal standard, the odds will be in your favor.

For example, the creditor will have to produce chain of custody paperwork that shows they obtained the right to sue you over debt. The problem here is that debt can change multiple times, as creditors will often sell debts repeatedly to a variety of different entities, so proving the proper custody of the debt in a legal way can be very difficult for both your creditor and the collection agency.

Furthermore, there are a number of defenses that you will be able to bring up as well. If it does look like that you’ll be going to court and are not able to settle with the creditor outside of it, your next best course of action will be to work with your attorney to determine what your best defenses will be.

One of the best legal defenses you can use will be to request written verification of the debt from your debt collector after you are contacted by them. If they are unable to provide this kind of written verification, chances are they won’t seek to collect from you.

In the event that a creditor or collection agency is unable to produce the correct documentation to prove the debt, you will then have a valid reason to ask the court to dismiss the lawsuit entirely.

Last but not least, the lawsuit may not even be valid to begin with. This is because consumer contracts will include a provision for settling a dispute through arbitration, or an alternative dispute contract to be handled outside of court.

The claim will also need to be filed within the debt-related statute of limitation in your state, which can be anywhere from two to six years depending on the state that you live.

Follow Court Proceedings

Throughout this whole process, it’s vitally important for you to follow court proceedings, which can vary significantly depending on the state in which you live.

Some states will allow for a process known as discovery, which is where you and the creditor will seek to obtain more information about the other, and often through witnesses. Both your attorney and your creditor’s attorney will take depositions, or oral statements that will be completed under oath before the trial begins.

If you do not deny that you owe the money and make no defense in your favor, the creditor can then turn to a summary judgment, or a ruling where the judge rules in favor of the creditor without a trial being conducted. All the same, you and your attorney can seek to have the entire case dismissed as the result of a lack of evidence.

In the event that the proceedings are set to go forward, you will be given a ‘trial date,’ which is a date where you must appear in court in order to both argue your case and to respond to the allegations that have been made against you by your creditor. It’s also not uncommon for employees of the credit card company and other witnesses to testify during this time as well.

What If You Lose?

What happens if you lose your case in court and are therefore found fully or partially liable for the debt that you owe?

In this case, you have a number of choices available before you. The first will be to fight the judgment, which is where you will claim that you were not notified properly of the case made against you.

Both Federal law and state law limit how much of your property can be legally seized. If you have little income and property, you can seek to be exempt from the seizure of your property and income to satisfy the debt.

Another option will be to work with your creditor to develop a payment plan so you can avoid garnishment or other similar drastic actions, and another will be to file for bankruptcy. Filing for bankruptcy is really a last resort option, so it should only be considered in the event that all other options have been completely exhausted (work with both your attorney and a financial counselor to find out if this is the case).

Conclusion

As we mentioned previously, suing you will generally not be the preferred course of action for a creditor or a collection agency to take. They would much prefer to solve the issue by working out a payment plan with you instead of turning to legal action, which can be quite expensive not to mention prolonged.

But if you do miss multiple payments and don’t communicate with your creditors at all, legal action may be their only recourse. In the event that this occurs in your life and you are sued by a creditor, you’ll want to take the information you have learned in this article to good heart so you’ll know what to expect and how best to respond to the situation.

SOURCES USED:

1st Pre-Filing Course