How do you respond to a debt collection lawsuit?
In a Nutshell
Simply put, if you don't respond to the lawsuit, you'll usually lose by default. The court will issue an order called a default judgment. Losing a debt lawsuit opens you up to serious collection measures like wage garnishment, a bank account levy, or a lien on any property you own.
Approach negotiations professionally, assertively and with a clear understanding of your rights. Your goal is to reach an agreement that is manageable for you and aligns with your financial situation. Communicate in writing with the debt collector, request a payment plan and document everything for your record-keeping.
I am writing this letter to bring to your notice the following information added to my credit report. The [dispute item] along with the [creditor's name] are falsely added to my credit report without my prior knowledge. The mentioned details are incorrect and I request you to revise the report after due diligence.
If you ignore the debt collector or fail to appear in court, a default judgment or court order will be placed against you. This means you could have your wages garnished or a lien placed against your property. A default judgment typically occurs 20 days after service of a lawsuit.
If you notify the debt collector in writing that you dispute the debt within 30 days of receiving a validation notice, the debt collector must stop trying to collect the debt until they've provided you with verification in response to your dispute.
NO. You cannot go to jail simply for failing to pay your credit card debt. It is also illegal for creditors or debt collectors to threaten you with arrest or any kind of criminal penalty to try to get you to pay.
Don't provide personal or sensitive financial information
Never give out or confirm personal or sensitive financial information – such as your bank account, credit card, or full Social Security number – unless you know the company or person you are talking with is a real debt collector.
“Offering 25%-50% of the total debt as a lump sum payment may be acceptable. The actual percentage may vary depending on the circ*mstances of the borrower as well as the prevailing practices of that particular collection agency.” One benefit of negotiating settlement terms is likely to reduce stress.
If you do owe the debt, it's best to pay it off in full instead of negotiating a settlement. One way to avoid collections is to create a simple budget to ensure your money is going toward all of your current bills. Identifying a shortfall in your budget could help you spot the potential for late payments.
What is the 609 loophole?
A 609 dispute letter is actually not a dispute but is simply a way of requesting that the credit bureaus provide you with certain documentation that substantiates the authenticity of the bureaus' reporting.
- Misrepresenting the nature of the debt, including the amount owed.
- Falsely claiming that the person contacting you is an attorney.
If the debt collector receives your request within 30 days after you receive their written notice about the debt, they must stop trying to collect the debt until they provide written verification of the debt to you.
If you are struggling with debt and debt collectors, Farmer & Morris Law, PLLC can help. As soon as you use the 11-word phrase “please cease and desist all calls and contact with me immediately” to stop the harassment, call us for a free consultation about what you can do to resolve your debt problems for good.
A debt settlement company negotiates with your creditors. Often, it will require you to stop paying your creditors and make payments into a savings account. It will then use your money to pay your debt and collect the fees you owe. You may fall further behind on payments, and your credit score could plummet.
You have two tools you can use to dispute a debt: first, a debt validation letter the debt collector is required to send you, outlining the debt and your rights around disputing it; then, a debt verification letter. You can submit a written request to get more information and temporarily halt collection efforts.
By paying the collection agency directly, the notification of the debt could stay on your credit report longer than if you attempt to use another option, like filing for bankruptcy. When institutions check your credit report and see this information on it, it may harm your ability to obtain loans.
If you don't pay, the collection agency can sue you to try to collect the debt. If successful, the court may grant them the authority to garnish your wages or bank account or place a lien on your property. You can defend yourself in a debt collection lawsuit or file bankruptcy to stop collection actions.
Although the unpaid debt will go on your credit report and have a negative impact on your score, the good news is that it won't last forever. After seven years, unpaid credit card debt falls off your credit report. The debt doesn't vanish completely, but it'll no longer impact your credit score.
If you owe money for most other debts like credit cards and medical bills, you (usually) did not sign a security agreement. So, the creditors cannot seize your home to pay the debt. But, if you want to sell your home and creditors have filed judgments for unpaid debts, you may need to pay those debts before the sale.
What happens if debt collectors can't find you?
Ignoring or avoiding a debt collector, though, is unlikely to make the debt collector stop contacting you. They may find other ways to contact you, including filing a lawsuit. While being contacted by a debt collector might feel overwhelming, talking with them can help you get more information about the debt.
Generally speaking, negative information such as late or missed payments, accounts that have been sent to collection agencies, accounts not being paid as agreed, or bankruptcies stays on credit reports for approximately seven years.
It's generally not permissible for a creditor to obtain two judgments against a debtor for the same debt. However, due to errors in the collection process, such as lost paperwork or database discrepancies, a debtor might face two lawsuits for the same account.
Is it better to settle debt or pay in full? Paying debt in full is almost always the better option when possible. Research debt payment strategies — debt consolidation could be a good option — and consider getting financial counseling.
Yes, you can settle a debt after being served with a lawsuit by a creditor.
