Advice on recourses if you are being sued by a creditor

UpdatedApr 3, 2024

I recently decided to seek help though a debt settlement co. Now I have been sued because they didn't contact anyone. Can you

I have always paid my bills and all of my ex-husband's to avoid bankruptcy. I could never collect on a judgment against him and raised his child by myself. I have struggled for 20 years and recently decided to seek help though a debt settlement co. Now I have been sued because they took 4,000 as maintenance and didn't contact anyone because my account doesn't have enough money to settle the cards. Now my credit is destroyed even though I have remained current with home and car. I have no one to lend me $23,000 to fully fund this so they will settle the rest of my cards. Is there anywhere that you know I can turn to borrow the money?

The nature of debt settlement, in which you stop making monthly payments to your creditors, sometimes leads to problems like the one you are describing. From the information I have gathered from several settlement firms and other sources, it is uncommon for a person enrolled with a debt settlement firm to be sued. However those few that are sued can find themselves in a tough spot.

My first recommendation would be to discuss this situation with your debt settlement firm and see what they recommend. Many reputable debt settlement firms have knowledgeable staff that may be able to help you resolve this problem. If you feel that you settlement firm is not pointing you in the right direction, two possible solutions come to mind. First, if you own your home and have equity in it, you could possibly refinance or take out a home equity loan to repay this debt.

You can apply with Bills.com's approved mortgage providers.

In fact, your debt settlement firm may still be able to negotiate a reduced balance settlement on the debt if you can raise the funds through a home loan. Since you are enrolled in debt settlement, your credit score has probably suffered, and you will probably not qualify for the best mortgage rates, but when you consider how much money you may be saving in future interest and a reduction in the current principal, a home loan may make good financial sense. Again, I recommend that you coordinate any loan with your debt settlement firm to make sure that they are able to negotiate the best possible settlement terms for you.

If you do not own a home against which you can borrow, you may want to negotiate a payment arrangement with the creditor that has sued you. Some debt settlement firms will negotiate payment plans for you, while other will not, so check with you settlement firm if they can help you with this. If they cannot, you can still do it on your own. Basically, you need to call the law firm handling your account and explain your financial difficulties to them. Make them an offer, say $400 per month, to stop the lawsuit against you. Make sure any agreement you reach with the law firm is in writing; you do not want this to become a problem again once you think you have it resolved. The law firm will probably want you to sign a document called a ?consent judgment? stating that they will have a judgment against you, but as long as you make your payments, they will not try to enforce it. Once you set up a payment plan with the law firm, you can focus your energies on resolving any other debts you may have outstanding.

I hope that one of the two solutions I have discussed above will help your situation, and will help you Find. Learn. Save.

Best,

Bill

www.bills.com

Dealing with debt

Debt is used to buy a home, pay for bills, buy a car, or pay for a college education. According to the NY Federal Reserve total household debt as of Q4 2023 was $17.503 trillion. Auto loan debt was $1.607 trillion and credit card was $1.129 trillion.

According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 10% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.

Collection and delinquency rates vary by state. For example, in Delaware, 15% have student loan debt. Of those holding student loan debt, 8% are in default. Auto/retail loan delinquency rate is 4%.

While many households can comfortably pay off their debt, it is clear that many people are struggling with debt. Make sure that you analyze your situation and find the best debt payoff solutions to match your situation.

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10 Comments

RRORY, Apr, 2012

I live in Indiana. I have a HOA that was due January 1,2012. I just started working and gave them a check for a portion of the payment as well as a letter stating my delinquency and that I would make 50.00 payments every two weeks until it was paid. They have since cashed the checks that I have sent, however, they sent me a letter today stating they are going to sue me for the balance if not paid by a certain date. Since I have been making payments and they have accepted them can they still sue me in court for the balance? Thank you

BBill, Apr, 2012

See the Bills.com resource If I Pay a Small Amount on My Debt, Can I Be Sued? for an extensive discussion of the issue you raised. Take a moment to scan the comments from other Bills.com readers to see that others have the same idea.

It does not seem reasonable for the HOA management to take a hard-line stance on a fellow owner who is making a good-faith effort to pay their dues. In my opinion, which really means nothing, such an aggressive attitude can only serve but to antagonize you. HOAs are contentious enough as it is.

JJane, Apr, 2011

Hello, I don't have a work yet but I'm currently looking for job right now if the collection agency made a decision to filed lawsuit against me. Should they affect my first job? if so, How can I clear my bad account record history?

BBill, May, 2011

By federal law, an employer may not fire an employee due to one wage garnishment. Regarding your credit history, read the Bills.com resource Fix Credit Report to learn more about repairing inaccurate information on a credit report.

BBill, Sep, 2009

You have at least four issues to resolve. First and most importantly, does your spouse recognize there is a problem? If so, is your spouse willing to take action to resolve it? If the answer to these two questions is "no" then there is not much you can do within the law except put a freeze on your own credit report so that your spouse doesn't open any credit cards in your name without your knowledge. Read "Consolidate My Credit Card Debt" to understand your spouse's options. You also need to understand your liability for your spouse's debts. See "Advice if Liable for Wife's Debt" for a brief overview. Regarding your knowledge of the debt, that is an irrelevant fact. Regarding the tax issue, you are getting a little ahead of yourself. You are referring to the requirement that a creditor file a 1099C for any debt forgiven greater than $600. At this point, the tax issue is important but secondary -- your spouse needs a plan to resolve the debt first before you start worrying about the tax implications.

RRichard Moseley, Sep, 2009

My wife has over $65,000 in credit card debt in her name. She has many collections companies calling and will not talk to them. She hid this from me for years and now one is sueing her. My credit is good, but i am 62 and semi retired. Should i get involved and try to talk to the colletors. She has a good job and does not pay any of the household expense, bills, etc. I have enough to do that, but have several health issues. If credit card debt is reduced, do you have to pay taxes? I am i responsible since she has this in her name only and i just have found out in the last few months.

BBill, Jun, 2009

There is no way to avoid going to court. You will have to present your side of the story at court. Have all the paperwork handy. An important thing you could check for, is if the statute of limitations has expired. You can check for your state laws here: https://www.bills.com/collection-laws/. If the statute has expired then you should bring it to the notice of the judge who will then dismiss the case. I cannot guess the amount of the court fees, you will need to find out at the court itself. I also advise that you consult with an attorney.

BBruce, Jun, 2009

I've been served papers and being sued by Alarm One. I signed the contract 9 years ago, have not heard anything from Alarm One or collection agency in over 7 years. Alarm One is suing me for 2900.00 dollars. The court date is in 13 days. I tried to cancel the contract two days after the equipment was installed, but I called them to cancel, but their policy say's I should have written them within 72 hours. Bottomline, what options do I still have with only 13 days before my court date. P.s., what is the typical court fees and additional cost, and at the end of the day, how much do you think I'll be forking over????

BBill, Jun, 2009

You can still negotiate a lump sum payment with the attorney and avoid having to go through the court process. Just make sure to get any payment agreement in writing before you make any payments. If you feel more comfortable with an attorney doing this for you, you should hire one.

SScott Ude, Jun, 2009

I have been served papers for default of a credit card in the amount of approximately 4500.00, supposedly they attorneys office working for the credit cards company states they will accept payment of 250.00 for 18 months for the debt but the court papers say I have 20 days to respond and the interest is 8% and the court costs for this action should and can I still pay the amount off in a lump sum should I contact a attorney