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Creditors (the person or business owned money) sometimes try to collect debt by suing the debtor (the person who owes the money). This is an overview of some issues that can arise if this occurs. If I am Sued by a Creditor, Can I Settle the Lawsuit by Renegotiating the Debt?Yes, and this is a common way of resolving these types of lawsuits. In some situations, creditors will agree to reduce the amount of your minimum monthly payment and extend the length of the loan to make payments more manageable. In other situations, the creditor may agree to take less than the monthly payment or interest only payments for a limited amount of time. Sometimes a creditor will accept a one time payment of a significant amount of the debt, and in exchange they will forgive the balance of the loan, so they can avoid the expense of debt collection. What Does It Mean To Be "Judgement Proof"?The issue of a "judgement proof" debtor arises when a creditor wins a court case against the debtor, but the debtor does not have enough assets (usually $) to pay the creditor. A debtor is "judgement proof", because any property they own is exempt from collection under state law.
However, a debtor cannot usually stay judgement proof forever, because as soon as the debtor begins working, a creditor with a judgement against him can garnish the debtor's wages to collect the court judgement. Therefore, if you are being sued by a creditor, and feel that you are judgement proof, it is still important to defend your case, because the creditor may be entitled to your 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 settlement agreement with the creditors to make payment of the debt more manegable, and help put the situation behind you. |
