In this article I’m going to share with you three options you have when you’re facing a debt collection lawsuit. If you’ve been sued by a debt collector and you recently just got the summons and the complaint and the process server showed up at your house, you’re probably feeling a lot of stress right now, a lot of anxiety and most of that comes from the fact that you aren’t sure exactly what you need to do or what the end result is going to be.
I even run into a lot of people in my law practice that think that they’re going to go to jail over this. It’s important to know that jail is not on the table. You’re not going to go to jail for not paying your credit card, debtors prisons were abolished in the United States in the late 1800s, so you’re good there. But let me give you three options that are actually really something that you can use to deal with this debt problem. It’ll reduce some of that anxiety and help you put a plan together as far as what you want to do.
#1 – Fight Back
The first option is you can contest it. Now, most debt collection lawsuits in the United States are brought by what are called junk debt buyers. These are companies that went out and purchased old charged off accounts, usually for pennies on the dollar and then they file a lawsuit against you, the consumer, in hopes of getting a default judgment or a judgment period, so that they can garnish your wages, they can levy bank accounts and just make life miserable.
The dirty little secret about junk debt buying is that often they don’t have all of the documentation, the evidence, the witnesses, all the things that are necessary in a court proceeding to be able to get a judgment against you. Now a lot of people say that seems really weird that they would take that approach, why would they sue you if they didn’t have the documentation. The reason is nationwide the statistics are 95%+ of people who get sued by a debt collector do not respond to that debt collection lawsuit. If you don’t respond to it, you end up a with a default judgment against you. Essentially the court says, he didn’t respond, we assume that you agree with everything that’s being stated and the enter the judgment against you. The very few people who do respond though, they do have some good defenses. Now my YouTube channel is full of all types of videos, so is my website, ConsumerWarrior.com. I have a bunch of articles on how to deal with that. I’m not going to go into the specific defenses in this article. But your first option is that you can contest it. You have some strong defenses. All the evidence they need is often not there. And there are ways that you can resolve it by taking it to trial and getting the case thrown out completely.
#2 – Settle the Debt
The second option you have is settlement. Settlement is a good option because it gives you some of the control over the overall process. If you go to trial and you’re contesting and it goes to a trial or if they file a motion for summary judgment. All of the end control is left with a judge or a jury depending on how you have the process play out. And so settlement allows you to take some of the uncertainty and some of the risk out of going to trial by settling the debt with the debt collector or the original creditor or whoever it is that’s suing you. You’re paying some amount that’s less than what it is that they’re seeking. Now I’ll tell you in almost every case there’s always a number where it starts to make sense to settle, even if you have a really good case. I have clients that will come in, we have good facts, the law’s on our side. But the debt buyer or the debt collector will come in with kind of a low ball offer. I usually will tell them to take it because there’s always uncertainty at trial. I can’t tell you how many cases I’ve taken to court and we have facts, we have law, we have everything we need but then the judge throws us a curveball. If you talk to any attorney and they’re being honest with you, they’re going to tell you that losing in any case is possible. And so there’s always some risk in taking the case to trail.
So settlement is a way where you can negotiate with a creditor, you may be able to pay payments over time or do some type of lump sum. Generally if you can do a lump sum, you’re going to get a better deal. And sometimes there’s a combination between litigating the case, defending it, option one and then settling as it gets a little bit closer to trial. You always got to remember the debt collector’s position is they want to get out of this case as quickly as possible with as much as possible. They don’t want to put a lot of work into it. Particularly the law firms that are handling these cases, they file thousands. And in Arizona tens of thousands of cases per month. They have very limited staff. They can’t take every case to trial. They want to settle it, get some money and get out.
#3 – Bankruptcy
The third option you can use to get rid of a debt collection lawsuit is kind of the nuclear option. It’s bankruptcy. Now, if someone, like a debt collector like Midland Funding or Portfolio Recovery is suing you for $2500 or even $5000. I generally wouldn’t say, bankruptcy is not a good option. Unless, it’s part of a much larger debt problem. If you’re being sued for $2500, but there’s another $50,000 of credit card debt that’s probably going to be coming down the pipe pretty soon, then I would have you look at a bankruptcy option. Because bankruptcy does two really powerful things. First, as soon as you file the bankruptcy case, it stops the lawsuit in its tracks. It cannot move forward. Not only that, it eliminates the debt and it eliminates most other debts. Unsecured debts like credit card, medical bills, personal loans, most of those go away 100% in a Chapter 7 bankruptcy. So, if you’re dealing with an overall big debt problem or if you’re being sued by a debt collector and it’s for a large amount, $20,000, $30,000, $40,000, $50,000 or more, you may want to look at a bankruptcy option because that’ll eliminate those debts. One little caveat that I’m going to give you, if you’re being sued by a debt buyer like National Collegiate Student Loan trust or any other student loan lender, student loans are often not dischargeable in bankruptcy.
So before you choose the bankruptcy option and abandon settlement or fighting the lawsuit, I would recommend you go meet with a bankruptcy attorney wherever you live and discuss that situation, as far as if that debt’s going to go away in bankruptcy. Because you don’t want to give up your rights as far as litigating the case or entering into a good settlement when it’s not going to go away in bankruptcy in the long term. So, I hope those three options help you. Again, your options are to fight it, settle it or file bankruptcy on it. No matter which option you choose the one thing it will do is it’ll give you some peace of mind that you have a plan. You know what’s going to happen. You know how you’re going to deal with this and it’s going to make it so that you can sleep at night and not have to worry that someone’s going to put you in jail, which again, will never happen.
If you are facing a debt collection lawsuit and need help set up a consultation where we can discuss the specifics of your case. You can do so right now by picking a date and time below:
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John Skiba, Esq.
We offer a free consultation to discuss your debt problem and help you put together a game plan to eliminate your debt once and for all. Give us a call at (480) 420-4028