Recently on our legal forum a user asked, “I am in a bit of a bind. I got very sick and could not work. I had to stay in the hospital for several weeks without insurance. We scrapped together a bit of money but most of the charges ended up on our credit card. Now, the credit card company and hospital are threatening to file a creditor lawsuit against me. I still cannot work. What are my options?”
Creditor lawsuit overview
Unfortunately, if you have not paid your bills and you owe creditors they eventually will demand their money, generally through a creditor lawsuit. If they are not paid it’s likely they will file a lawsuit and seek payment, referred to as a judgment. If they win their case against you they may be entitled to wage garnishments, bank account levies, or property repossession. What they are legally entitled to varies by state and by creditor.
Now, you asked what options you have to fight the lawsuit or stop the lawsuit from ever being filed. Let’s take a look at your choices.
- Talk to your creditors about the creditor lawsuit.
The very first step to avoid a lawsuit is to talk to your creditors. Filing lawsuits and harassing you for money takes time and effort. First, explain your situation to the creditors and see if you can work out some type of repayment plan.
- Fight the creditor lawsuit.
The creditor has the burden of proof to prove that you owe the debt. They have to prove the amount owed, that they have standing to sue, and that the statute of limitations has not expired on debt collection. They do not have to do this, however, if you do not insist that they provide this information.
So, what is the first step if the creditor is threatening a creditor lawsuit? Make sure to respond to the Summons and Complaint. If you do not respond, the court will issue a summary judgment for the creditor. Not only can this add additional court costs and attorney’s fees, it may allow the creditor to use a variety of collection tactics to get the money.
To avoid a summary judgment make sure to provide an Answer to the court within the designated timeframe. Request that the creditor proves that they have standing to sue, request a copy of the original signed agreement and a balance on the debt, and verify that the statute of limitations has not expired.
If the creditor can prove all of this and wins a judgment, there are still steps you can take to protect certain assets. Review common property exemptions in your state for more information about protections offered.
- File for bankruptcy protection.
Filing for bankruptcy should be a last resort after a debtor has considered all of their options. Often it’s better to get a second job, develop a budget, borrow money from family or friends, or sell assets to generate additional funds to repay debts.
If bankruptcy is the best options, however, it may allow you to discharge certain debts such as medical bills, certain consumer debts, and other unsecured personal loans.
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