Are You Facing a Creditor Lawsuit? You May Have an Opportunity to Negotiate

Creditor Lawsuits Often Follow Loan Default

In today’s troubled economy, creditor lawsuits are becoming more and more common. Creditors can file suit against the consumer for a number of reasons, common issues include: lawsuits for deficiency judgments on homes and cars and credit card lawsuits seeking judgments on past due accounts.

Similarly, credit card companies often sue to recover on delinquent accounts. You must receive notice of any lawsuit that has been filed against you. This is where the sheriff comes knocking on your door to “serve” you with a copy of the complaint. You haven’t broken any laws, the sheriff is simply notifying you that a creditor has filed suit and that you’re a defendant. Generally speaking, your creditor is suing on a valid debt that you owe and have fallen behind on.

As a result, they expect you to twiddle your thumbs while the time to file an answer passes, allowing them to win by default. Even if you’re broke today, the corresponding judgment can last for 10 years, and could threaten property you acquire in the future. Doing nothing is not an option, if you’ve been served with a creditor lawsuit, call an attorney, opportunity just might have knocked.

Settlement Opportunity

Even assuming you concede a valid debt is owed, it’s always best to call a lawyer to discuss your options. Hiring a lawyer to ask for an extension of time or to actually file an answer, will give you some much needed breathing room. In many cases, your lawyer can use the additional time to negotiate directly with attorneys for your creditors, bypassing the endless bureaucracy fatal to so many settlement attempts. You’ll have more leverage in these negotiations if your creditor knows you’re represented by an attorney and has been unsuccessful in locking in a coveted default judgment.

Why Settlement is More Likely After Default

By the time a complaint lands on your doorstep, your loan has already been written off your lender’s books as a non-performing asset. Perhaps the loan has been sold to a debt collection firm who purchased the note for pennies on the dollar.

A creditor’s motivation changes when a loan is delinquent; they might put on their best tough guy face, but at this stage they’re trying to get whatever they can. A delinquent loan presents an opportunity to settle the case for far less than the full amount of the debt. Of course, filing bankruptcy at this stage would silence the lawsuit and wipe out the underlying debt entirely. Bankruptcy is a powerful tool that should be considered. However, if bankruptcy is simply not an option, your lawyer might very well be able to reach a resolution of the debt you can live with.

If you’ve received a visit from the sheriff, talk to a lawyer…..opportunity might have just knocked.