When a creditor chooses to sue an individual for outstanding debt, it's often as a last resort when other debt collection efforts have failed. Filing a lawsuit against a debtor requires a certain amount of time and effort and it is not something that creditors undertake unless they feel they have something to gain. Defending oneself against a creditor lawsuit requires preparation and quick action on the part of the individual being sued.
The Summons
When a creditor files a lawsuit against someone, that person must be notified. This notification will come in the form of a summons or complaint that states who is bringing the lawsuit and for what amount. A process server or other court officer may deliver it, or it may be sent via certified mail. A response may or may not be required to be filed by the defendant. While many defendants will simply ignore the summons and skip the court date, this will result in a default judgment being entered in the plaintiff's favor.
Validating the Debt
When the summons is received, the defendant's first action should be to request validation of the debt from the plaintiff to prove that they have legal standing to collect on the debt. This request should be sent in the form of a certified letter and the creditor is legally required to provide documentation that they have verified the debt and that it is owed to them. When validation is requested, it imposes a 30-day restriction on any efforts to collect on the debt.
Statute of Limitations
Once validation of the debt has been requested, the debtor should consult the laws in their state regarding debt collection. There is a statute of limitations on debt collection that varies from state to state, and if the statute has expired for the debt that is being pursued, it is legally uncollectible.
Avoiding Court
If the creditor can prove that the debt is owed to them and the statute of limitations has not yet expired, the debtor still has a chance to avoid court. They can contact the creditor and attempt to settle the lawsuit out of court. Many creditors are open to negotiation if it can help to resolve the matter quickly and at less expense than going to court.
Preparing a Defense
If a creditor refuses to negotiate a debt, then the debtor should have some sort of defense prepared prior to their court date. If the debtor can demonstrate their willingness to work things out with the creditor or a valid reason for their inability to pay, then the judge will at least have something to consider when making their judgment in the case.
The Judgment
If a creditor is able to obtain a judgment against a debtor, it can stay on their credit for up to ten years depending on what state they live in. A judgment opens the door for creditors to pursue repayment of the debt through wage garnishment, bank account levies, and/or seizing property. Judgments can be reaffirmed when the ten-year period expires and the debt will remain outstanding.
Dealing with a creditor lawsuit can be intimidating. Why or when a creditor will sue is unpredictable but knowing what to expect from the process and how to react can help debtors to protect themselves legally and financially.
Rebecca Lake - R.L. Lake is a freelance writer and virtual assistant living in the southeast. In addition to writing for Suite101, she writes content for ...
