Shouldering a large amount of debt and struggling to keep up with payments is extremely stressful. And if you’re served papers in a debt collection lawsuit, it only adds insult to injury. You might feel like you’ve run out of options. You might be wondering: Can you settle a debt after being served?
In short, yes, you can. Here’s what you should know about the debt settlement process when facing a lawsuit.
What Is Debt Settlement?
If you’re struggling with debt, you’ve probably been searching for solutions. One option you may have come across is debt settlement. This is a process that involves negotiating with your creditors to pay back less than the full amount owed. In exchange for a lump sum settlement or payment plan, the creditor will agree to close the collection account and stop pursuing you for the full amount.
You might be wondering why a lender or credit card company would agree to accept less than the full balance. Usually, debt settlement is only possible if you’re far behind on payments. If it becomes obvious that you don’t have the money to pay them back in full, creditors might decide to accept a settlement instead of spending time and money on collections efforts. Debt settlement can also help avoid wasting resources on a lawsuit.
What Happens When You’re Served for a Debt?
Missing one or two payments on a loan or credit card debt isn’t great, but it’s not the end of the world. You’ll probably have to pay a late fee and your credit score could drop temporarily. However, it’s important to get back on track right away, or you could face bigger consequences for your financial situation.
When you continue missing debt payments, the creditor will attempt to collect it from you. They may do this via an internal collections department, or the original creditor might hire a debt collection agency or law firm for help collecting on the debt. It’s also possible that your debt is sold off to a third-party debt buyer who will then attempt to collect on the debt. Once your debt goes to collections and is written off the books of the original creditor, it’s often noted as a charge-off on your credit report. A charge-off listed on your credit report can bring your score down significantly.
Eventually, if you fail to pay back the debt, the creditor or debt collector may decide to sue you. The goal of a debt collection lawsuit is to obtain a judgment against you. A judgment allows the creditor to take certain actions to collect the unpaid debt, such as wage garnishment, freezing your bank accounts, seizing assets, and more.
If you are sued for a debt in civil court, you are served legal documents known as a court summons and complaint. The summons lets you know that you’re being sued, while the complaint explains why.
In some cases, these documents will be handed over to you in person. However, it’s also possible that you are served via the mail. (If your debt contract contains a Confession of Judgment, which is common in certain types of debts, you may not receive notice of a lawsuit but a judgment directly). Some other types of debt agreements, such as MCA contracts, alter the way you can be notified of a lawsuit. This is why it’s important to seek out an excellent MCA debt help attorney who can advise you of your rights if you are sued.
What to do if You’re Sued
It’s important to respond right away when you are served for a debt collection lawsuit. Failing to file an answer with the court by the deadline (usually, 30 days or less) means the creditor can ask the court to award a default judgment against you.
Don’t worry: Responding to the lawsuit doesn’t mean you’re admitting fault. It will actually help you, but it has to be done right. It’s best to use an attorney to assist you with responding to a lawsuit from a creditor. And once you’ve been served, you still have the opportunity to negotiate a debt settlement.
Can You Settle a Debt After Being Served?
The short answer: Yes. Going to court is expensive — for both you and the creditor. There are many legal fees involved. Plus, you could decide to file for bankruptcy, in which case the creditor may get nothing at all. So even if you’ve been served, your creditor may prefer to settle out of court.
In fact, once a lawsuit is filed, it could present a new opportunity to negotiate a settlement with the debt collection lawyer. Plus, the court may encourage both parties to come to an agreement before the trial starts, especially if you owe a large amount.
Can I Settle a Debt on my Own?
While it is possible to negotiate debt settlement on your own, this is a situation when it’s best to hire an experienced debt relief attorney. Debt settlement on its own can be tricky and requires great negotiation skills. If not done right, you could end up with credit, legal, and tax problems. If you’re also facing a debt collection lawsuit, the situation is especially complex.
It’s best to work with a debt help attorney who is experienced with handling settlements, lawsuits, and other debt-related issues. They can advise you on the best course of action and ensure you get a favorable outcome that works within your budget. An attorney will act in your best interest and ensure your rights are upheld throughout the process.
Many settlement agreements require a lump sum payment to the creditor. However, you may not have that much cash on hand (otherwise, you wouldn’t be in this situation in the first place). With the help of an attorney, you might be able to arrange an affordable monthly payment plan instead, which works in your budget and resolves the collection and legal part of the lawsuit. This may prevent your bank accounts or wages from being garnished.
Where to Get Debt Settlement Legal Help
Getting sued over a past due debt can be scary. But you don’t have to face this challenge alone. If a debt collection agency files a lawsuit against you, be sure to take it seriously. Consult with an experienced debt relief attorney who can improve your chances of getting a settlement agreement and/or having the court rule in your favor.
Tayne Law Group has more than two decades of experience helping consumers and businesses with their debts. We offer a free phone consultation so you can learn about our process and how we can help. You’ll always speak with an experienced, dedicated attorney, and never have your matter outsourced to a call center. So don’t wait — give us a call today and learn about your options when in debt. Our phone number is (866) 890-7337. Or you can fill out our short contact form. We never share or sell your information and all conversations are confidential.