How to Fight a Creditor Lawsuit
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How to Fight a Creditor Lawsuit

One of the avenues available to creditors seeking recourse for unpaid debts is to file a lawsuit against the liable debtor in small claims court. Whether or not a creditor will sue is dependent upon a number of factors including the amount of the debt owed, the age of the debt, and the financial profile of the debtor. If you're facing a lawsuit for credit card or other consumer debt, there are several steps you can take to protect your rights and defend yourself against a default judgment.

Review the Summons

When a creditor decides to sue, they must notify the defendant in the case, i.e. the responsible debtor, of their intention to do so. This notification usually arrives in the form of a summons, delivered by a court process server or via registered mail. The summons includes the relevant details of the case, including the plaintiff's identity, or who is bringing the suit, the amount of the suit, the date and time of the court hearing, and whether or not you are required to file an answer, or defense, with the court. If you receive a summons, take the time to read over it carefully. Do not simply throw it in the trash and ignore it as this is the surest way to ensure that a default judgment will be entered against you.

File Your Answer

If an answer is required on your part, the summons will notify you of how you will need to respond. Generally, there is a space on the summons where you may write your answer and this may then be taken back to the courthouse and filed. You are free to answer the lawsuit however you like, either by disavowing responsibility for the debt due to identity theft or some other means, contesting the age of the debt, or contesting the right of the creditor to bring the suit in the first place. Whatever your answer, you will need supporting documentation to back up your claim in court.

Request Debt Validation

Under the Fair Debt Collection Practices Act, when a creditor notifies you of a debt, you have thirty days to request in writing proof of the debt. What this means is that the creditor has to provide you with documentation that the debt belongs to you and that they have a legal right to pursue their case. During this period, all collection efforts against you must cease. If you fail to submit the written request within the initial thirty-day period, then you essentially waive all of your rights under the FDCPA so it is crucial that you make the request in a timely manner. Similarly, if the creditor fails to respond or to provide the requested proof, such as a copy of the original contract, then they are barred from attempting to collect on the debt.

Check the Statute of Limitations

In every state, there are regulations regarding debt collection and the timeframe for how long creditors can pursue specific types of debts. For instance, if you default on a debt in 2003 and you are sued by a creditor in 2008, and the statute of limitations on the debt is three years, then there is a very good possibility that the creditor will not be able to collect. You will need to first verify what the statute of limitations on debt is for your state by contacting your state attorney general's office. Then, you will need to get copies of your credit report from each of the three credit reporting bureaus and check to see how the account is being reported. If the account's first date of default, or first missed payment essentially, is longer than the timeframe allowed by the statute of limitations, then the debt is time-barred. You have to check your credit reports carefully, however, as some collection agencies will attempt to re-age debt in order to work around the statute of limitations.

Check State Licensing Requirements

You should also check your state's licensing requirements regarding debt collection and verify that the agent bringing the suit against you is licensed to do so in your state. If they are unlicensed, then they may not bring the suit against you and are in violation of the FDCPA.

Document Any Contact With the Creditor

If you've requested debt validation, then the creditor must refrain from pursuing any collection efforts against you until the debt has been validated. If a creditor continues to contact you or is using harassing or threatening tactics against you, you must document these instances as they may be the basis for a countersuit. Under the FDCPA, creditors are prohibited from taking certain collection actions and any violations of a debtor's rights are subject to a suit for damages up to $1,000. Similarly, if you attempt to contact the creditor with a settlement offer and they openly refuse to work with you, document any correspondence between the two of you as you may use this as evidence in court of your good faith intent to repay the debt. A judge may be more likely to offer a favorable judgment if you can demonstrate that you are willing to work with the creditor.

Appealing the Judgment

If a judgment is entered against you, you have the right to file an appeal with the court. Once a judgement is entered against you, you should be aware that it can remain on your credit report for up to ten years and be reaffirmed for additional periods of time if not paid in a timely manner. Once a creditor receives a judgment against you, it also leaves them free to pursue collection of the debt through legal means, such as wage garnishment, bank account seizure, liens, and seizure of real property. If you are deemed judgment-proof by the court, meaning you have no assets, then the creditor cannot attempt these actions until your financial situation improves.

Creditors rely on the fact that consumers will be too intimidated to attempt to fight a lawsuit, however, you should know that you do have certain rights under the law regarding creditor lawsuits. Certainly, if you have the means to hire an attorney to represent you in court, that may be a preferable option to attempting to take on creditors yourself. However, if you lack the resources to retain the services of an attorney, there are steps you can and should take to defend yourself against a creditor lawsuit and protect yourself legally and financially.

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Comments (3)
Linda Buch

Thank you for your help; I had no idea how to persue this matter. A couple questions; my creditors keeps giving me different info. as to how much I owe, plus, the amount they are sueing for ($ 3,500.) is less than the amount they tell me I owe ($4,900) why is that? Also, you ended by saying there are additional steps to take. What are they? Thank you so much,

Linda Buch

Thomas

you site that a creditor has to validate a debt if requested under FDCPA. You may want to do more research as it is my understanding that requirement is only for 3rd party debt collectors.. there are no laws or requirements that I am aware of that requires an original creditor to prove the debt. Unfortunate and wrong, but I have yet to find that law.. If you know of the law that requires an OC to prove a debt if requested please let me know.

Very comprehensive information. Voted up.

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