Collection Lawsuit Overview

Threats by a creditor or collection agency to sue on a debt can be very frightening. However, most threats of lawsuits are just that--threats. Threats should not lead you to make special efforts to pay a debt unless there is some way in which a lawsuit can hurt you. Here are the basic rules for dealing with lawsuits and threats of lawsuits:

• Not all threats of lawsuits will be carried out. Many creditors and collection agencies threaten to sue as a way to scare you into paying back money they could not otherwise collect. A threat is used because that collector has no good way of getting paid unless you choose to send in payments. A threatened lawsuit should not cause you to change your priorities about dealing with your debts.
  
• lf you are sued, it is critical that you respond to court deadlines. Ignoring a lawsuit can have unintended consequences. You might lose your right to argue that you do not owe some or all of the money. Failing to respond to a lawsuit might also result in a lien on your property. Generally, it is safe to ignore a lawsuit only if you have no defenses and if there is no possibility of being forced to pay a court judgment. You may want professional help to evaluate whether you are at risk of losing property in the legal process.
  
• You may have a defense to a lawsuit that can be raised in court. You may have a good argument that you don't owe money that a creditor is trying to collect. This can offset, in whole or in part, the amount that the creditor is claiming due. Sometimes just raising a defense will lead the creditor to drop the case.
  
• If you lose a lawsuit, the creditor can try to use the court judgment to force you to pay. Tools that can be used to enforce a judgment include garnishment of your wages or attempts to sell your property. You have exemptions that will protect you in many cases. You may need to raise those exemptions in order to benefit from them.
  
  Courts also may have special procedures to require you to make payments when there is a judgment against you. You need to comply with orders to appear in court or to make payments. However, you can raise defenses to payment in court if you cannot afford to pay. You can also consider using the bankruptcy process, because you may have more rights to deal with judgments in bankruptcy than in state court. These rights may include eliminating the judgment entirely in many situations.