How Should I Respond to a Lawsuit Filed Against Me by a Creditor?

 Posted on December 07, 2022 in Creditor Lawsuits

If you have fallen behind on your debt payments and are being sued by a creditor, you may be unsure about your options. The prospect of a lawsuit can be very frightening, and you may be concerned that a creditor may attempt to garnish your wages, seize the funds in your bank accounts, place a lien on your home, or take other actions that could lead to additional financial difficulties beyond what you are already facing. In these situations, it is important to understand all of the options available to you, including whether you can address these issues by filing for bankruptcy. 

How Should I Respond After Being Notified of a Lawsuit?

If a creditor has filed a lawsuit against you in an effort to collect a debt, the first thing you should do is respond to the lawsuit. This is usually done by filing an “answer” or “response” with the court. There is a limited amount of time during which you can respond, and you will usually be required to file your answer within 30 days after the date you were served with the lawsuit. If you fail to respond within the correct time period, the court may grant a default judgment in favor of the creditor without giving you an opportunity to defend yourself. 

If your answer indicates that you intend to dispute some or all of the claims made against you in the lawsuit, then you will likely need to attend court hearings and participate in discovery (the process where information relevant to the case is exchanged between both sides). During this process, it can be beneficial to seek legal advice from an attorney who can provide advice about the available options.

One option is to dispute the claim in its entirety or some part of it—this strategy works best if there is something incorrect about the creditor's claim, such as inaccurate dates or amounts owed. Another option is to negotiate with the creditor; depending on your financial situation, they may be willing to settle for less than what is owed, or they may even waive certain fees or penalties associated with the debt. Finally, if all else fails, you can consider filing for bankruptcy.

Options for Filing for Bankruptcy During a Lawsuit

If, after evaluating your case, it appears that bankruptcy would be beneficial, there are two main options available—Chapter 7 or Chapter 13. Chapter 7 bankruptcy involves liquidating certain assets to repay creditors, and it is generally used by individuals who have few assets but high amounts of unsecured debt (such as credit card bills). On the other hand, Chapter 13 bankruptcy allows debtors to keep their assets while repaying creditors over time through installments paid out over three or five years. This type of bankruptcy is usually used by individuals who have steady incomes but high amounts of secured debts (such as car loans or mortgages). 

One of the key benefits of filing for bankruptcy is that it will place an automatic stay on creditors, preventing them from taking action to collect debts while the bankruptcy case is ongoing. The automatic stay will apply to debt collection lawsuits, and an existing lawsuit will be halted while you work out how to address your debts during your bankruptcy case. If a creditor has already obtained a judgment against you in a lawsuit, the automatic stay will stop them from taking action to enforce this judgment, and once you discharge your debts through bankruptcy, the creditor will no longer be able to collect the money you had originally owed.

Contact Our San Antonio Creditor Lawsuit Defense Lawyer

If you are facing a lawsuit from a creditor seeking payment on a debt, it is important to understand your legal rights and options so that you can make informed decisions about how best to proceed. Responding timely and accurately is key, and with the help of an experienced Boerne bankruptcy lawyer, you can take the correct steps to avoid financial consequences and receive relief from your debts. To learn how the Law Offices of Chance M. McGhee can help with your case, contact us at 210-342-3400 and set up a free consultation today.

Sources:

https://www.consumerfinance.gov/ask-cfpb/what-should-i-do-if-a-creditor-or-debt-collector-sues-me-en-334/

https://www.lendingtree.com/debt-consolidation/sued-by-a-debt-collector/

https://www.marketwatch.com/story/7-ways-to-handle-a-debt-collection-lawsuit-2019-07-17