Debt Collection Lawsuit

Debt Collection Lawsuit? Here’s What You Should Know…

Have you been served with a summons from a debt collection agency or a credit card company? Chances are, if you have received a summons and complaint from a debt collection company, you have been ignoring debt collection efforts for some time now. Ignoring the issue has obviously not worked and now is the time to be proactive.

debt collection

First off, you will need to review the complaint, take a look at your particular situation and decide if you would like to explore settling the matter or go forward with the lawsuit and defend your actions.

Let’s say you review the complaint and acknowledge that the debt is correct, but you are not in a position to pay it in full. Do you have options?

YES, you almost always have options. More than likely you have received a summons and complaint from a debt collection agency rather than a credit card company directly. Credit card companies typically sell your debt to a debt collection company at a greatly reduced rate, therefore, the debt collection companies are often willing to negotiate a reduced settlement.

The lawsuit will cost you money to defend, so it is easy to understand that it will cost the collection company money to prosecute. When you contact the debt collection company, be professional and straightforward… layout what you can afford to pay and the terms in which you plan to fulfill your commitment.

Another option is to file for bankruptcy to wipe out the debt owned by the debt collection agency. Speak with a qualified bankruptcy attorney to discuss this option in more detail.

On the other hand, if after reviewing the collection lawsuit, you wish to go forward with the lawsuit you will need to put serious consideration into what your defense will be. Just because the debt may be correct you can still have a valid defense.

One downside to going forward with the lawsuit is that should the court find against you the creditor will receive a judgment and if you do not pay the judgment you risk your wages being garnished from your payroll, having funds seized from your checking or savings accounts or a lien may be put on your real property.

If you have chosen to defend the collection lawsuit, it would be wise to contact an attorney who can provide you guidance to the many defenses you may have. A collections attorney will guide you through the court process, and can not only represent you in the action they can also provide you bankruptcy advice if that proves to be a valuable option for you. The collections attorney will thoroughly review the complaint as well as your documentation and help decide what defense is your best option.

Here are just a few of the many defense options you may have:

  • The debt has been paid and you have back up documentation to prove the payment.
  • The debt has been discharged in a previous bankruptcy and you have the discharge documentation to prove your case.
  • The debt has expired pursuant to the statute of limitations.
  • The lawsuit may be invalid if the collections agency violated any of the Fair Debt Collection Practices Act. If so, you will need to have details regarding all of the violations.

Remember, just like any lawsuit, this is a gamble and having a valid defense does not guarantee a victory. Going into it armed with the best defense, a qualified debt collection lawyer and documentation to prove your case will help your odds but you must still acknowledge the risks associated if you lose.


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Chapter 13 Debt Payment Issues?

Can’t Make Your Chapter 13 Debt Payment? Now What?

When your Chapter 13 bankruptcy case is confirmed by the Court, you enter into a debt repayment plan. The payment plan is carefully created considering your specific financial situation. It is created with the intent to pay your creditors back, while at the same time not creating an undue hardship on you. In theory that is a great concept, however, the payment terms are typically three to five years, and any number of circumstances can occur in that time period. Maybe you had a child, lost your job, develop an illness or are going through a divorce. What happens if you can no longer make your Chapter 13 Debt Payment?

First off, don’t feel alone. This happens frequently and the courts have a number of options you can explore. The first step would be to contact your bankruptcy attorney, explain your situation and remain calm as you collectively decide which option would be best.

Submit a Petition to Bankruptcy Court

If you feel you can’t make your Chapter 13 Debt payment only temporarily, you can petition the court for a suspension. This is similar to requesting a forbearance on your student loan. Your bankruptcy lawyer will petition the court to suspend your repayment plan for a certain amount of time. This is usually one to two months.

Once the petition is filed with the court, both the court and the trustee will have to agree to the terms. If granted, you will ultimately be required to make up for the missed payments by paying a slightly larger amount in the remaining repayment months. It is important to note, that the court normally only grants suspensions on five year repayment plans.

After reviewing your situation, your bankruptcy lawyer may feel that a month or two suspension will not accommodate your situation. In that case, you might want to explore a Chapter 13 debt modification.

Chapter 13 Debt Modification

The process for requesting a debt modification is similar to that of the suspension; you will begin by petitioning the court for new payment terms. The court will require you to show good cause for the new repayment terms and you will need to explicitly show what facts necessitate the need for the new repayment terms. During this process you will also be required to submit a new budget and the court will have to thoroughly review and approve it.

In rare circumstances neither a suspension nor a modification will meet your needs. In that case you may need to explore converting your bankruptcy to a Chapter 7 bankruptcy.

Convert to Chapter 7 Bankruptcy

If you feel your financial situation will still not allow you to make your Chapter 13 Debt Repayment with a modification, and you do not foresee your situation changing for the better, Chapter 7 could be the way to go.

Your bankruptcy attorney will need to petition the court to convert your bankruptcy to a Chapter 7 and will need to provide evidence of why you qualify for the conversion. If the court finds that you meet the circumstances, your case will be converted to a Chapter 7 bankruptcy and your unsecured debts will be discharged.

Bankruptcy is always full of options and its best to explore all of the options with the guidance of a highly qualified bankruptcy attorney.

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