Explore those exceptions and help you determine if you can settle a debt after being served by a creditor
No one likes being sued, especially by debt collectors. But often, people are sued unexpectedly. If you don’t respond to the lawsuit, you’ll automatically lose and the debt collectors can take back what you owe directly from your bank account or paycheck. For people who actually do owe part of the debt, usually, the best move is to respond to the lawsuit and then try to reach a settlement with the collector.
Why have I been served?
If you have been served a Summons for debt collection, it’s probably because you have not paid a debt. However, according to research by the Consumer Financial Protection Bureau, there is actually a high chance you don’t really owe the debt at all. If you do owe the debt, a lawsuit is usually the creditor’s last resort and it means that you have avoided paying a bill for quite a while.
If you are being sued for a debt, you will generally be served with a Summons and Complaint. These documents notify you that you are being sued and state the reason for the lawsuit. It is important to understand these documents so that you can respond appropriately and defend yourself in court.
You might be wondering how you can get served with legal documents. There are a few ways this can happen. Someone can hand them to you directly, or you may receive them in the mail. In some cases, you may not be served at all, but the lawsuit is still filed against you through a process called “sewer service.”
Many people are surprised to find out that they owe money to a collection agency – often because they never received any kind of notice about the debt. This is because collectors know that most people will simply ignore a lawsuit if they don’t know about it. If you don’t respond to the lawsuit, the collector can get a default judgment from the court. This gives the collector the legal right to garnish your wages or seize your property.
If you don’t want to be automatically judged, you can file an Answer with the court and try to come to a settlement with the collector.
Can I settle my debt after being served?
There are a few things to keep in mind if you want to come to an agreement with the person suing you. First, try to reach out as soon as possible. It’s also important to be clear about what you can afford and what you’re willing to pay.
If you are served with papers for a debt, you can still settle the debt, but make sure to file your Answer first. Here’s why:
What are my options after being served?
You have a lot of options to choose from when you are served:
- File an Answer: If you are facing a lawsuit, it is generally best to file an Answer. This will prevent the court from automatically issuing a default judgment against you. Filing an Answer also gives you more power to negotiate a settlement with the other party. Even if you believe you owe the debt or if the statute of limitations has expired, you should still consider filing an Answer.
- Do Nothing: Unless you take action, you will lose by default. The collector can file a Motion for Default Judgment against you, which would allow them to take your money directly from your paycheck or bank account. Don’t let this happen – take control of your finances today!
- Do something invalid: Many people make the mistake of taking invalid actions when they are facing debt collection, which can have disastrous consequences. Invalid actions include: filing the Answer improperly, admitting everything in your Answer, calling the collector without filing an Answer, getting a settlement without filing an Answer, and responding to the collector with the wrong document, like a letter. All of these mistakes can lead to severe penalties, so it is important to be very careful when dealing with debt collectors.
The best way to protect yourself in a debt collection lawsuit is to file an Answer. If you don’t, you may lose by default. However, just paying the debt without filing an Answer isn’t always the best idea. The collector can go behind your back and file for default judgment, which could allow them to garnish your wages and collect the debt twice. Filing an Answer gives you basic protection against this. Bankruptcy by itself may not be a good option at this point either. If you file for bankruptcy without responding to the lawsuit, the collector could win and take the entire debt from your wages before you even start the bankruptcy process.
You should always file your Answer before settling. This way, you can avoid any future complications.
What should I do first after being served?
The moment you are served, you need to act fast. If you don’t respond quickly, the situation will only get worse. Despite this, it’s important to stay calm after being served. The best way to handle the situation is to follow these steps:
It is crucial that you respond to a summons right away. This will give you a better shot at negotiating your debt after you’ve been served. The window to respond varies from state to state, but it’s usually 14 to 31 days. If you don’t file an answer after being served, the debt collector may ask for a default judgment. This could result in wage garnishment, and you would no longer be able to negotiate your debt.
Check to see if you are legally liable
Before you do anything else, take a close look at the papers you’ve been served. Make sure you actually owe money to the company that’s trying to collect a debt from you. Ask yourself some questions:
- Do you have a loan from this company? Did you borrow money from them?
- Are you being sued for the same amount that you have in your records?
It is not a question of whether you have the ability to pay off your debt, but rather a legal question of whether you are liable to pay it.
Examine your finances
If you find yourself in debt, it’s important to understand your rights and what creditors can legally take from you if they obtain a judgment.
If you are a homeowner, then your home may be at risk if you are unable to pay your debts. If you rent your home, then you will not have to worry about this issue.
It is possible for creditors to freeze your bank accounts and garnish your wages. Knowing how much they could potentially take in wage garnishment can help you prepare and ease your mind.
Although Social Security may be your only source of income, in some states, your accounts cannot be legally frozen. This means that creditors cannot come after you for payment at this time.
If you want to save money on your debt settlement, aim for a lump sum payment. This will usually be lower than what you would pay if you set up a monthly payment plan. Figure out how much you can afford to pay as a lump sum, and be prepared to offer that amount when negotiating with your creditor.
Make an offer
If you have filed an Answer to a debt collector’s lawsuit, you may be able to settle the case by sending a Debt Lawsuit Settlement Letter.
If you are dealing with a debt buyer, they will usually accept a settlement of 1% to 50% of the amount they are suing you for. On average, debt collectors buy debts for 8% of the face value of the debt. This means that if they settle for 10% of the debt, they will earn 2%. If you are dealing with the original creditor, they will be less willing to settle for a low amount. However, you may still be able to settle for 20% to 70% of the debt.
If you are in debt, it is important to create a realistic plan to pay it off. This may include looking at your finances and identifying what you can afford to pay. It may also be helpful to look at your possessions and see if there is anything you can sell in order to raise the money needed to pay off your debt.
If you’re tight on cash, then making smaller monthly payments might be the best way to go.
Continue to defend yourself
If you are being sued by a debt collector, it is important to respond to the lawsuit and make a settlement offer. The collector may refuse to settle and continue to the next phase of the lawsuit, which is usually discovery. This means they will send you a Request for Response to Admissions or Interrogatories. To defend yourself in this stage, you need to file a response to these documents. A bare-minimum response will likely be sufficient to continue driving for a settlement. Each time you respond to new documents in the lawsuit, it increases the costs for the collector and increases the likelihood they will settle.
What If I Haven’t Been Sued Yet?
If you’ve received a collections notice but no lawsuit, the best way to respond is with a Debt Validation Letter. This letter notifies the collector that you dispute the debt and requires them to provide proof that you owe the debt. They can’t call you or continue collecting until they provide validation of the debt.Clearone Advantage, Credit Associates, Credit 9, Americor Funding, Tripoint Lending, Lendvia, Simple Path Financial, New Start Capital, Point Break Financial, Sagemore Financial, Money Ladder, Advantage Preferred Financial, LoanQuo, Apply.Credit9, Mobilend
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