The first thing you need to realize, once you get over the shock of being sued, is that 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 “Complaint”. While you could hire an attorney to draft this document for you, you could also do this yourself. To do it yourself, file with the Court where the Complaint originated, a sheet of paper, dated, with the following printed on it:
“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 and ask the Court Clerk to file it in your case. You’ll need your case number (found at the top of the first page of the Complaint) so the Clerk knows where to file it. Once this is done, you have placed the burden on the Creditor (Plaintiff) to prove their case against you. In doing so, you give yourself more time to accomplish one of the options explained below.
You should file an “Answer” in your case even if the Creditor has filed a “Motion for Summary Judgment” against you. This filing is supposed to take place within 30 days of your receipt of the Complaint by Certified Mail or delivery by Sheriff. However, you, or the lawyer working for you, may, in this situation, be able to convince the Court, and/or the collection agency attorney, to forgive the passing of certain deadlines and prevent the judgment from entering.
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. This should give you some short-term breathing room and allow you some time to analyze your situation before taking action on one of the options listed below. Don’t expect a long vacation from pressure by the creditor. You’ll probably receive “Interrogatories” (questions) and “Request for Admissions” (more questions) within seven to ten days after your Answer has been filed. If these questions are not denied within 30 days, they are deemed “Admitted”- which means, you lose. Then you will receive another “Motion for Summary Judgment” for which you probably have no defense. You get the picture – most creditors are relentless!
The key here is to keep the Creditor from obtaining a judgment for as long as possible. Without a judgment, the Creditor is unable to snatch your property or money from your wages or bank account.
Now then, here are your options to resolve your case:
1. LITIGATION
Depending on the facts of your case, you may have a cost effective defense that can be proven at trial. While there are limited defenses in this situation, here are a few possibilities which are worth looking at:
- The statute of limitations – typically five years after the bill came due, or your last payment, if you have signed something confirming the agreement; or four years if the agreement is verbal. If more time than that has passed, the debt is uncollectable. If you can prove this, you win.
- Prior payment (partial or full) which has not been accounted for by the creditor;
- Significant, conscience–shocking overcharging; or illegal interest rates. This is a tricky defense. A “shocking” interest rate to you may not be according to law. If the rate is over 18%, per annum (1 ½ % per month); you may be on to something.
- Mistaken identity – perhaps you didn’t even receive the goods or services described in the complaint.
If you do not have solid grounds to prove one or more of the defenses listed above, you really must carefully consider one of the other options. If you believe that you have good evidence to present a defense, you should consider hiring an attorney. It’s pretty easy for the inexperienced to shoot themselves in the foot trying to do this on their own.
2. DEBT CONSOLIDATION
The ads on television and radio are tempting – “Hire XYZ Debt Consolidation and convert all of your expensive credit card payments to one low, affordable monthly payment.” The debt consolidation company promises to negotiate with your creditors, and force them to take a much lower payment. These ads sound wonderful, almost too good to be true. Unfortunately, they are just that.
We have heard countless debt consolidation horror stories over the years. Many of these clients have told us things like, “I paid the debt consolidation company several thousand dollars, and they never settled one debt for me (or they only settled one credit card out of several).” More distressing, they usually go on to say -- “even though I always made my monthly payment to the debt consolidation company, the collection agency sued me anyway”. Then, the debt consolidation company couldn’t represent them in the lawsuit, the collection agency obtained a judgment, and then started garnishing their wages. Now they can’t afford to pay for their rent, groceries, or utilities.
The sad thing about these real life nightmares is that they are perfectly legal. The debtor approved the debt consolidation company’s actions by signing a complicated contract (typed in fine print). The contract gives the debt consolidator permission to pay itself large upfront fees before paying creditors anything, and so they do just that.
We strongly advise against retaining the services of a “non-profit” debt consolidation company. Their goal is not to help you, but to get rich off of your hard-earned paycheck. So don’t fall victim to their slick advertisements. You are much better off steering clear of this “trap”, and considering 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 debt settlement alternatives may be available to you: 1) A “payment plan” or, 2) A “lump sum settlement”.
As to the “payment plan” approach, the collection agency may be willing to set up a payment program to satisfy the debt instead of garnishing you. To investigate this option you should call, and speak to, the collection agency attorney. Don’t expect to enter into a binding agreement with just anyone who answers the phone. You need to talk to someone with the authority to commit the collector to a payment agreement. You should expect that the collector will require payment in full, within a period of six months or less. Don’t expect a large credit collection agency to agree to a few dollars a month over a period of many years.
If you reach an agreeable payment plan, with a person authorized to do so, be sure to get it in writing. Your goal should be to reach a specific agreement wherein the collection agency agrees not to garnish your wages, and/or your bank accounts, if you make the agreed upon payments on time. Collection agencies will likely want you to agree to a judgment specifying the payment plan, and basically stating that if you miss a payment, or are simply late (by even one day), they can proceed to garnish you. Keep in mind, that settling your lawsuit, by a payment plan, only takes care of that one lawsuit – it will not resolve your other debts.
Another potential way to resolve your lawsuit by debt settlement is by a “lump sum settlement”. This 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. You will be required to pay, shortly after reaching such an agreement, a percentage of the full amount owed. A person can reasonably expect that outstanding credit card debt can be settled in the 40% - 60% range, and perhaps at a lower amount than that. Our law office has recently been settling outstanding credit card debt in the 30 cents on the dollar range, and sometimes even less. Medical debt may settle in the 50% - 70% range. However, some collection agencies refuse to lump sum settle medical debt.
If you have sufficient funds available to “lump sum settlement”, consider hiring an attorney – to get the best possible deal from the creditor. Typically, an experienced debtor’s attorney would agree to do this by the hour. The best results are reached when all of the debt is on credit cards (not more than about six in number).
The key in successfully using this option is to end up with a written agreement signed by yourself and the collection agency or supervisor. This agreement should plainly set forth the terms of the settlement agreement, in language you understand.
4. BANKRUPTCY
This is your final option. It is the best fit 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.
Bankruptcy is a civil case filed in Federal Bankruptcy Court designed to help you eliminate all of your debts in a Chapter 7 Bankruptcy, or eliminate most of your debts in a Chapter 13 Bankruptcy while making some payment towards your debts.
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”. The Automatic Stay requires that all actions against you or your property must immediately stop upon the filing of your bankruptcy. This means that the lawsuit against you, and any garnishments or attempts to take your property, will be stopped once your bankruptcy is filed.
The majority of debtors in Nebraska qualify for a Chapter 7 Bankruptcy, as opposed to the more expensive and more complicated Chapter 13. In some cases the person may be required to file a Chapter 13 due to high income or a previous bankruptcy. A large majority of Nebraskans that file bankruptcy are better served by a Chapter 7, in which they do not pay any money back to their creditors, unless they so choose.
Most bankruptcy filers are able to keep all of their property, including household possessions, homes and cars, after filing. Also, most filers are frequently offered credit by auto lenders and credit card companies after their bankruptcy is completed. Since a bankruptcy filer must wait eight years to file another Chapter 7 or four years to file a Chapter 13, some credit lenders consider them an acceptable risk.
Any person wanting to file bankruptcy should obtain the services of an experienced bankruptcy lawyer. One should not attempt to represent themselves or use a “petition preparer” when filing bankruptcy. Bankruptcy law contains many traps for the inexperienced. It is sad, but true, that many people who try to represent themselves, often unnecessarily lose valuable property and goods.
Steffens Law Office
The Steffens Law Office is a debt relief agency which helps people settle debts or file bankruptcy under the bankruptcy code. We are dedicated to helping you get a fresh start by resolving the collection case filed against you. This begins by choosing the option listed above which suits you best. We can help you with that decision. Our office does not promote or persuade you to pick any particular one of these options. 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.
If you would like to talk with one of our experienced lawyers (our combined experience exceeds 30 years), simply give us a call at (308) 872-8327. We would welcome the opportunity to help you.