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What to do when creditors file a lawsuit against you

Many people hope that creditors won’t keep knocking at their door forever. But, if you’ve stopped receiving collection efforts over the phone, online and in person, they probably haven’t given up just yet.

After attempting to collect unpaid debts, most creditors move on to plan B: Filing a lawsuit. If you’re being sued for overdue debt, it’s time to act fast. Here’s what you need to do to avoid legal action.

Don’t ignore the lawsuit

Don’t put off responding to the lawsuit once you receive notice of it. By ignoring the suit, the court will likely have no choice but to implement the requests of the creditor.

This may add interest, collection costs and attorney’s fees on top of the debt you already owe. To avoid being on the hook for more expenses, respond to the lawsuit by the date specified in the notice.

Stop the lawsuit

If possible, your next object should be to avoid the lawsuit from actually being carried out. Filing for bankruptcy can stop a lawsuit, wage garnishment and any other collection efforts the creditor may attempt to make.

The type of bankruptcy you choose to file will impact whether you will be released of liability to repay the debt. In a Chapter 7 bankruptcy, the debt is forgiven. However, in Chapter 13 bankruptcy, you will be obligated to fulfill a repayment plan lasting between 3 and 5 years.

You may have a choice in which bankruptcy option you file for or you may only qualify for one or the other. Each type has different benefits including which assets are exempt and whether you can get protection against foreclosure.

Find out if bankruptcy will work for you

Bankruptcy isn’t a solution for everyone. It is important to consider that some types of debt, such as child support and alimony, cannot be discharged through bankruptcy.

To learn more about whether you qualify to file for bankruptcy and how it can help, contact a skilled bankruptcy attorney for help. A lawyer can help you respond to the lawsuit notice, advise you on the best action to take and even help you negotiate a smaller debt to pay back.

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