Nothing makes one’s stomach tie up in knots faster than being served with a creditor lawsuit. It’s hardly ever a good thing when the sheriff or constable is looking for you to serve you with legal documents. So, you’ve been sued. Now what? There are basically three options you can choose:
- Respond to the lawsuit and defend yourself against it.
- Do nothing and wait and see what happens.
- File bankruptcy to stop the legal proceedings in their tracks.
There are defenses to a creditor lawsuit. They include denying the debt is yours (maybe fraud or identity theft); the debt is too old to be collected under state law (statute of limitations defense); or that the suit is brought by a party that doesn’t have a right to collect on the debt (standing defense). While all of these may be worthwhile defenses and may help you out of that particular lawsuit, there’s a chance there is another lawsuit right behind it from a different creditor. You will need an attorney to help you with these strategies in each case and that can be costly if you sit back and handle one case at time. Why handle one creditor at a time and pay attorney’s fees each time? This “pay-as-go” approach can be costly and nerve racking as you wait and see who is next to come looking for you in court!
Doing Nothing Approach:
If you choose to do nothing, then that lawsuit is likely to turn into a default judgment. That default judgment may then be collected a number of ways such as a garnishment on your non-exempt property that may include your cash accounts. It is also likely to be recorded in the county where you have property so that it can follow you around for 10 years, only to be renewed when that 10 year period is up. The default judgment will also show up on your credit report. A default judgment is a “head-in-sand” approach that doesn’t work very well and doesn’t provide any final resolution.
Two of the sweetest words in bankruptcy are “automatic” and “stay.” This means just as soon as you can notify the court where the lawsuit is pending, the lawsuit proceeding stops in its tracks. The underlying debt is likely dischargeable in the bankruptcy and so the lawsuit is essentially resolved with the bankruptcy filing. Have more debt to file bankruptcy for? This is a “two (or more) birds, one stone” approach that could make more economical sense if you are looking to spend your legal dollars wisely. If you hire an attorney to handle that one lawsuit but you know you have so many other creditors out there looking for you, why not resolve all of it at once with a bankruptcy filing for the cost of what defending that one lawsuit would set you back?
To set up a free bankruptcy consultation, contact us online or call us at 844-402-2992. For your convenience, we answer our phones 24 hours a day, 7 days a week. We will meet with you evenings or weekends upon request. Remember, your choice in attorney matters.