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The Best Strategy for Creditor Lawsuits

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If you have unpaid debts, at some point you may be sued by your creditors. Though some may choose not to sue you, that should not be your reason to ignore your debts. Upon receiving the lawsuit notification, you must carefully consider your options and what is best for your situation. Filing for bankruptcy is a strategic option which could help alleviate not only this debt but other debt you may have in your life.

Typically, a creditor can sue you fairly quickly after missed payments. However, most sue you within 1-4 years of the last payment you made. They will file suit in a specific county and then it takes them about a month to serve you. Once they serve you, you have 30 days to respond. If you do not file an answer to their lawsuit, it will become a default/ money judgment. Once it becomes a money judgment, it takes a few months for them to start collection. The creditor can garnish your wages by sending an Order via the Sheriff’s office for 25% of your wages. If you are not employed, they can levy your bank account. They will have an Order to pull straight from your bank account. It is extremely difficult to get this money back.

Once you receive notice of a lawsuit, you have three options:

  1. You can litigate the lawsuit which is a lengthy process and ultimately settle it out with the creditor for a reduced amount
  2. You can contact the creditor directly and start installment payments or offer a lump sum payment
  3. File for Chapter 7 Bankruptcy which if you qualify would discharge the entire debt and the lawsuit would get dismissed.

Bankruptcy is a strong option if the debt is a larger amount and you have other debt that can be discharged in the bankruptcy. If you file for Chapter 7, the creditor would get nothing and the lawsuit would go away. If you prefer not to file for bankruptcy, then you need to be prepared to offer a lump sum payment to the creditor. The settlement would be reported to the Credit Bureaus.

Even if the creditor starts garnishing your wages, you can still file for bankruptcy and discharge the remaining balance. It is, however, very difficult to get the already garnished wages back. When it is all said and done, bankruptcy can save you from the tribulations of a lawsuit from your creditors and help you with other debt in your life.

For more information on a creditor lawsuit or bankruptcy, contact Khan Law Offices. Alia Khan is here to help and alleviate your financial stress.  Sign up for a complimentary consultation where Alia will examine your debt and what the best options for your situation are.