Getting Sued by Creditors

Authored by , LegalMatch Legal Writer and Attorney at Law

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Most Common Finance Law Issues:

Can I Be Sued by a Creditor?

Yes. A creditor, the person or business that you owe money to, sometimes tries to collect debt by suing the person who owes the money. This is an overview of some issues that arise when this occurs.

Can I Settle the Lawsuit by Renegotiating the Debt?

Yes, and this is a common way of resolving these types of lawsuits. Typically, one of the following settlement situations will occur:

  1. Creditors will agree to reduce the amount of your minimum monthly payment and extend the length of the loan to make payments more manageable.
  2. Creditors may agree to take less than the monthly payment or interest only payments for a limited amount of time.
  3. Creditors will accept a one-time payment of a significant amount of the debt, and in exchange they will forgive the balance of the loan to avoid the expense of debt collection.

What Does It Mean to Be Judgment Proof?

The issue of a "judgment proof" debtor arises when a creditor wins a court case against the debtor, but the debtor does not have enough assets or money to pay the creditor. This makes a debtor is "judgment proof", because any property they own is exempt from collection under state law.  



However, a debtor cannot usually stay judgment proof forever, because as soon as the debtor begins earning an income, a creditor with a judgment against him can garnish the debtor's wages to collect the court judgment. Thus, even if a debtor is being sued by a creditor, and feels that they are judgment proof, it is still important to defend the case because the creditor may be entitled to future earnings.

Do I Need a Lawyer?

If you are being sued by a creditor or collection agency, you should contact a lawyer immediately. There may be possible defenses to the lawsuit. Additionally, a lawyer may be able to help you negotiate a managable settlement agreement with the creditors and help put the situation behind you.

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Last Modified: 07-16-2014 12:18 PM PDT

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