What action should I take if my creditors sue me?

16 Jan What action should I take if my creditors sue me?

The first thing you will know if you are being sued by your creditor is the receipt of a summons from the court with a notice stating that you are being sued and that you have to respond to the complaint for money owed within 30 days from the date of your receipt. If you are being sued, do not waste your time, immediately contact an attorney to defend you.  If you think you cannot pay the debt being claimed, you can file for bankruptcy.  The filing of bankruptcy will stop the lawsuit or if there is already a judgment against you, the judgment can also be discharged in bankruptcy.  Do not disregard this notice because if a default is entered against you, the creditor will be granted a money judgment and they can levy your bank account and garnish your salary.

Most banks and creditors file an action in court to recover money whenever the debtor failed to pay on time.  When you are saddled with debts, there will be many creditors filing lawsuit.  The purpose of the lawsuit is to recover whatever money the debtor may have in their bank accounts and to garnish money from debtor’s wages.

Question:       Will bankruptcy eliminate court judgments for money owed?

Answer:         Generally, filing bankruptcy effectively eliminates judgments for money owed, tort liability such as liability for personal injury, and other types of general liability.  These will include adverse court rulings on loan defaults, nonpayment of credit cards, breach of contract and many others.

Question:       Will bankruptcy eliminate liability based on secured debts?

Answer:         If you lose your home through foreclosure and there is a deficiency balance on the second or third loan, this balance can be eliminated by filing bankruptcy.  This usually happened when you refinanced your house and got some money by getting a second or third loan. This deficiency balance is a contractual liability created by the secured notes, deed of trusts and other loan documents.  These documents survive foreclosure and the terms are still enforceable as a contract even though you no longer posses the collateral (the house or the car).  The only way to eliminate this type of liability is to file for bankruptcy.

Question:      What warning signs should I consider before filing a bankruptcy?

Answers:       If any of the following applies to you, it is time to consider filing bankruptcy:

1. If you are facing foreclosure or repossession.
2. If your creditors have attached your wages or your bank account.
3. If you can’t catch up with your bills no matter how hard you try.
4. If you no longer answer the phone because creditors call you night and day.

Question:      What can bankruptcy do for me?

Answer:         While bankruptcy cannot help you out of every single financial situation, like relief from child support, it can help you with some of the most common types of financial distress.  Both State and Federal Laws are enacted to protect your rights and save your dwelling and your ability to earn a living.  If you are feeling guilty or ashamed of the financial situation that you are in, consider that in these difficult times, you are not alone.  The rich and the poor filed for bankruptcy at least once in their lifetime.

Question:      What are the benefits of filing bankruptcy?

Answer:         Among the benefits of filing bankruptcy are:

1. Allows for the “discharge” of most, if not all of your debts. This means that you are no longer legally obligated to pay the debts.
2. Prevents property from being repossessed, or it may require creditors to return property that was repossessed.
3. Stops the collection process. This means that creditors must stop attempting to collect on the debts.
4. Prevents you from having your utilities cut off, or if they are cut off, requires the utility company to restore service.
5. Stops or prevents wage garnishment.
6. Halts the foreclosure process and gives you time to catch up on payments. This means you will not necessarily lose your house or mobile home.
7. Gives you the opportunity to dispute false claims from creditors who may be trying to collect more than what it owed to them.

Question:      Will bankruptcy improve my credit score in the future?

Answer:         YES!   Although filing for bankruptcy is a black mark on your credit report, it is also important to remember that your existing debt is also a black mark in your credit.  Filing a Chapter 7 or Chapter 13 bankruptcy, in many cases, may actually improve your current credit situation because the black mark will go away eventually. If you do not file bankruptcy, the black mark will continue in your lifetime unless you paid all your debts.