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Lawsuits Happen

One of the most difficult issues a customer can face is the concern that their creditors will file suit against them. When you are not paying your debts, including after you enroll in a settlement plan, creditors may escalate collection activities and even file lawsuits.

When necessary, we can refer customers to attorneys so the customer is able to receive help navigating through a lawsuit. We are not lawyers and don't give legal advice - only your attorney will be able to explain the complete process for your state and give you a thorough analysis of your rights.

If allowed, creditors and collection firms may try to intimidate you into doing things that are not necessarily in your overall financial best interest by threatening lawsuits, so it's important to understand the process.

Know Your Financial Situation

A customer's vulnerability to a lawsuit is based on certain factors. Were your accounts already delinquent when you enrolled in settlement? If so, how delinquent? How much do you owe the creditor? If the accounts have already been charged off then this may bring about more aggressive creditor activity sooner. Do you have any assets that a creditor might be able to attach? If so, you need to consider the likelihood that a creditor might try to use your assets for collecting their debt. For example, equity available in a home might be attractive to a creditor as a way of getting repaid. But don't panic unnecessarily, even equity positions in personal residences may be protected in some states. Your attorney can help navigate the best course of action if a creditor files a lawsuit and makes threats against any of your assets.

Keep Things in Perspective

Keep lawsuits in perspective. You joined a debt settlement program because you didn't have many other options. If you're in default on your credit, a lawsuit could occur whether you are enrolled in a settlement plan or not. By enrolling in CareOne's Debt Settlement Plan (DSP), you have a strategy for dealing with your financial situation, because you are accumulating money to negotiate a settlement. In addition, many creditors hold off on collection activities pending a potential settlement. Therefore, the threat of a lawsuit must be viewed in this context. We have had great success in getting creditors to understand our client's circumstances even after a lawsuit has been filed. With some creditors this is the most appropriate time to settle. Here are some things to know:

  • Not every creditor is going to file a lawsuit.
    Many creditors will not pursue a lawsuit at all, yet, their collection agents will threaten it constantly. Lawsuits are expensive and time consuming. Don't fall into the trap of believing everything a creditor tells you while they are trying to collect a debt. Creditors are interested in one thing and one thing only. Collecting their debt! We are interested in your entire debt situation - not just one account. Understand that debt collectors get paid by getting money from you. Just because they threaten a lawsuit doesn't mean they're going to do it.
  • You won't be alone.
    If a creditor files a lawsuit against you, we'll be able to refer you to a law firm that can help counsel you, answer the complaint, and prepare any defenses.
  • It takes the creditor time to get there.
    Creditors will usually pursue other tactics before filing a lawsuit, because it costs them money to go to court. There will be collection calls, referrals to collection agencies, and then more calls. It may take several months for the creditor to decide to file suit, assuming they even plan to file at all. Once they do, it may take as many months to get to court. And, even if the creditor files suit and gets a judgment, in most jurisdictions, the creditor must wait a period of time before attempting to execute on the judgment. Your attorney will be able to explain the process for your state. But this gives you TIME. This is what we mean by having options. Creditor's attorneys don't get paid if they can't collect. During this time there will be money accumulating in your account with which to negotiate. That's the goal.
  • If they get a judgment, they may not do anything with it.
    Many creditors file lawsuits and then do nothing with any judgment they may receive. Enforcement of the judgment is, in many cases, more difficult than being awarded a judgment. Again, we are not lawyers, so your attorney will need to explain the rules and process for your state. Keep in mind, you have may have additional options if a judgment is entered.
  • A judgment is the beginning of a process, not the end.
    Just because the creditor receives a judgment doesn't mean you've lost the battle. It can take time before they get to the point where they can do anything with the judgment. During this time you'll be saving funds to get things settled. Many creditors will sell an account after they have received a judgment. The purchaser of the account probably will have paid far less than the face amount of the judgment. These new owners will often be more than happy to settle with someone who can offer immediate payment or short-term installment payments.
  • You can always consult an attorney about bankruptcy.
    If all else fails, you can always consult an attorney about bankruptcy. Unsecured creditors know that bankruptcy may mean a total loss to them and sometimes they will negotiate when it is apparent that bankruptcy is your only option.

When you're behind on your payments, it should be no surprise that lawsuits can happen. It's important to be prepared, and know what your options are, if you are faced with that situation.

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