Can My Creditors Sue Me and How Can I Fight Them?

A creditor may use several means to try and collect a debt from a debtor. Some ways, such as harassing calls, are prohibited by law. However, one of the main means of debt collection is through the creditor filing a lawsuit against the debtor.

It is important to know who your creditors are, and how they are classified under the law. There are primarily two kinds of debts: secured and unsecured. For secured debt, the creditor loaned you money and took an interest in your property to secure the loan. In most cases, the creditor doesn’t have to sue you first to recover the property, they can simply repossess it. A creditor who repossesses collateral that supports a loan may sue the debtor to recover any unrecovered funds from a sale of the collateral.

Mortgages are examples of secured debt. Remember that for mortgage loans, the company that sues you may not be the company who initially owned your mortgage. Your original loan company may have sold your mortgage note to another company. It is therefore important to make sure you respond to any notice of a lawsuit concerning your mortgage, whether or not you recognize the plaintiff.

For unsecured debt, as is the case with most credit cards, the debt owed is not attached to any property or collateral. The creditor would have to sue you to recover the money you owe should you be unable to or refuse to pay it.

No matter what kind of debt you have, if the creditor recovers a money judgment against you in a lawsuit, the creditor may put a lien on your other property or garnish your wages in order to get the judgment satisfied.

How Can You Defend Yourself Against A Creditor Lawsuit?

When you receive notice that a creditor is suing you, the first thing you should do is make note of the important dates mentioned in the notice. If you fail to respond to the lawsuit in time, a judge may enter a default judgment against you.

You can proceed with responding to the lawsuit alone, or you can hire an attorney, depending on the facts of your case. There are some basic defenses that you can use in your response to the lawsuit. For example, depending on how old your debt is, you can use your state’s statute of limitations as a defense. This means that if your debt is older than the time allowed by your state’s law, the creditor cannot collect it. There are exceptions to this rule if you revive the debt after it has passed the time allowed. You can revive it by signing a document agreeing to pay the debt, or by making a payment.

Additionally, if you have been through bankruptcy, you can respond by showing that the debt was discharged in the bankruptcy proceeding.

However, pursuing a lawsuit can be expensive, and a creditor may feel it is not worth pursuing a relatively small debt by suing you. Creditors will initially try to collect the money owed through other debt collection means instead of suing. In most cases of consumer debt especially, a lawsuit by the creditor is the last resort.

If you are not sure what kind of debt you have, or if you are unsure how to prepare a response to a creditor’s lawsuit, you may want to consult an attorney for advice. In most cases, an attorney can also assist you in negotiating with the creditor to reach a settlement that avoids court altogether.