Once you get over the shock of being sued, there are steps you can, and should, take to protect yourself. 

Every defendant (that’s you) has the right to file an “answer” denying the contents of the creditor’s “claim.” If you decide not to hire an attorney, the brave at heart can print out the following on a sheet of paper: 

I, (your name) , a defendant in this case, hereby deny any and all claims made against me in the Complaint. 

Then sign your name at the bottom, insert the date and your case number, and ask the court clerk to file it in your case.

Once your “answer” has been filed, or accepted by the court if filed out of time, the collection agency is temporarily prevented from obtaining a judgment against you. Without a judgment, the creditor is unable to snatch your property or money from your wages or bank account.

Now, here are your options:

1. LITIGATION

Depending on the facts of your case, you may have a cost-effective defense that can be proven at trial:

(a) The statute of limitations – typically five years;

(b) Prior payment (partial or full) which has not been accounted for by the creditor;

(c) Significant, conscience-shocking over charging; or

(d) Mistaken identity.

2. DEBT CONSOLIDATION

While the ads on television and radio are tempting, we strongly advise against retaining the services of a “non-profit” debt consolidation company. The ads sound wonderful, almost too good to be true. Unfortunately, they are just that. Typically, you pay the debt consolidation company several thousand dollars, they never settle a debt, and the collection company sues you anyway. Steer clear of this “trap” and consider one of the other options listed.

3. DEBT SETTLEMENT

This can be an appropriate way to resolve your lawsuit, in the right set of circumstances. Two alternatives may be available to you:

(1) A Payment Plan

The collection agency may be willing to set up a payment plan to satisfy the debt instead of garnishing you. Expect the creditor to require payment in full, within six months or less. Get the plan in writing – with someone who has authority. You will likely have to agree to a judgment specifying the payment plan, and if you miss a payment, you can be garnished.

(2) A Lump Sum Settlement

This option requires a large amount of cash to be paid to the collection agency, in exchange for full satisfaction of the debt and dismissal of the lawsuit. Basically, the creditor reduces the amount you owe in exchange for a one-time, lump sum payment. Consider hiring an attorney to get the best possible deal from the creditor. 

4. BANKRUPTCY

This is your final option. It is intended only for people who are in dire financial need. If your unsecured debts do not exceed $10,000, or the majority of your annual income, you are probably better off using one of the other options. We recommend attempting the other options outlined above, before resorting to this one.

Every person that files a bankruptcy, either a Chapter 7 or a Chapter 13, is immediately protected by a very powerful law called the “automatic stay”. This stops creditors in their tracks. “Exemptions” allow most debtors, in these circumstances, to keep their home and a vehicle to go to and from work. Any one wanting to file bankruptcy should obtain the services of an experienced bankruptcy attorney. Bankruptcy law contains many traps for the inexperienced. 

Your best option is always the one that is legal, fits your circumstances, and resolves your financial problem in a way that is acceptable to you. Call or write us for more information on this topic.

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