What To Do When A Creditor Decides To Sue

Being Sued by a Creditor?

Now that the amount of delinquencies and defaults are on the rise, many creditors are using lawsuits more frequently to collect debts.  What should a debtor do if they receive notice of a creditor lawsuit filed against them?

Below are few tips:

Tip #1:  Don’t panic.  Lawsuits filed by creditors are used to not only collect debts but to intimidate the debtor into acting in a panic.  Picking up the phone and calling the creditor right away is NOT the best move. If the debt has passed (or is nearing) the statute of limitations, you might reset the statute of limitations by calling the creditor and discussing the debt.

Tip #2: Get the facts.  Find out if the debt has exceeded the statute of limitations. Texas’ statute of limitations for credit card debt is 4 years. That means that four years after the debtor’s last payment or acknowledgment of the debt the creditor cannot use a lawsuit to collect payment.

Tip #3:  Read and respond to court documents. Do not ignore any court summons. Failing to appear in court for a lawsuit can result in a default judgment in favor of the creditor even if the debt as exceeded the statute of limitations. Debtors who believe their debt has exceeded the statute of limitations should inform the court of that fact.

Tip #4: Contact a bankruptcy attorney.  If you know you owe the debt and the debt has not exceeded the statute of limitations, then you may want to consider bankruptcy, especially if you have other outstanding debts. Telling the court that you can’t pay your debts because of a lack of income won’t stop the creditor from winning a judgment. By filing bankruptcy, you can stop the lawsuit from going forward and prevent the creditor from getting a judgment. Remember, a lawsuit judgment gives the creditor the right to garnish your bank account or wages.