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This is not legal advice not should it be construed as such. If you would like legal advice, please considering scheduling a free consultation with a local attorney.

One of the biggest fears in Americans who have fallen behind on their debt payments can be summed up in two words: debt lawsuit. A debt lawsuit is a frightening thought. The consequences of a debt lawsuit can be financially devastating. They can keep you in financial trouble for years to come. So when a debt lawsuit comes your way, what are your options? How can you save yourself from financial ruin? Let’s take a look at a few ways you can get your debt lawsuit dismissed.

What Is A Debt Lawsuit?

Before looking at how to get a debt lawsuit dismissed, first let’s figure out what a debt lawsuit is. A debt collection lawsuit is when a creditor that you owe money to files a petition to the court in an attempt to recoup some of the money they stand to lose if you stop making payments. 

Normally this is not filed until there has been a significant amount of payments missed. This is because the money and time that goes into filing a lawsuit can be extreme. So most creditors are selective about when they file a lawsuit and who they will file against.   

For example, if your total debt is less than $1,000, it may not be likely for your creditor to sue you, as it would cost way may than they would stand to gain to complete the lawsuit. However, if you have a larger debt, say $5,000, it may be more likely that you might be sued because the creditor will still likely gain after all expenses are accounted for.

Who Files A Debt Lawsuit?

There are multiple levels of entities that file debt lawsuits. In some cases, the original lender may file a lawsuit once you have become delinquent. However, in many cases, the original lender might sell your account to a debt collection agency. This agency will do everything it can to try and collect on the debt in order to make a profit. One of these tactics includes filing a debt lawsuit. Regardless of who it is filing the lawsuit, if they are in possession of the debt account, they have the right to file a lawsuit.

What Are Possible Outcomes of a Debt Lawsuit?

So what happens if you have a debt lawsuit filed against you? What happens if you lose the case? Well, there are a few different outcomes that typically depend on the creditor you’re working with and the size of the debt. Ultimately, the court decides the outcome, but creditors can request the outcome they are after. Here are a few of the possible outcomes of a debt lawsuit:

Wage Garnishment

Oftentimes, creditors know that the individual they are suing does not have the means to make an immediate repayment. Because of this, they often seek wage garnishment. Wage garnishment is when a portion of your paycheck is automatically taken out of your paycheck. It is then paid directly from your employer to your creditor. This means you will not see that money before it goes to your creditor, making your paycheck significantly smaller. A wage garnishment lasts until your debt is fully paid off, unless something else occurs to you financially (like bankruptcy). 

Involuntary Bankruptcy

A creditor can request involuntary bankruptcy when filing their lawsuit. Though relatively rare, this is typically done in cases where the creditor knows the debtor has the means by which to repay the debt but is refusing to. For individuals, the only form of involuntary bankruptcy that can be filed is Chapter 7. Chapter 7 bankruptcy is often known as liquidation bankruptcy, as an individual’s assets are liquidated in an attempt to repay their creditors.  

Immediate Repayment

If immediate repayment is ordered, this means you have to immediately repay everything that you owe. This is not a repayment plan or a settlement. If you are unable to immediately repay everything that you owe, you may have to file for bankruptcy or find some other way to either put off payment or completely pay off the debt.

Settlement

Sometimes, the creditor will offer a settlement before the case even gets to court. This might be a reduced total price to pay off the debt, or it might be paying new installments. Either way, sometimes a settlement that is offered before a hearing is a good deal to take if you are in a position to make payments. 

How Can I Get a Debt Lawsuit Dismissed?

If you aren’t in a position where any of the above options are favorable, then you may be wondering how you can get your debt lawsuit dismissed. Luckily, there are some options you have available. One of the most important things to keep in mind is this: DO NOT ignore a lawsuit.

In other situations, there may be cases where ignoring what is going on might be beneficial. However, if you have a lawsuit filed against you, this is NOT the case. Ignoring the lawsuit will almost always end with an automatic judgement against you. This means that the court will automatically side with the creditor. You will not have a chance to plead your case or change the outcome. 

With that in mind, here are a few things you can do to try and get your debt lawsuit dismissed.

Request Proof of Possession of Debt

If your account has been sold by the original creditor to a debt collection agency, it is likely that your account has gone through many channels. Because of this, there is a chance that some of the critical information the debt collection agency has to have may have been misplaced. The agency suing you must be able to provide the following:

  • Show that the debt is yours
  • Proof that they own the debt
  • Proof that you owe the debt
  • The original credit agreement that you signed
  • Documentation of the “chain of custody” (how the debt collection agency now has possession of your debt)

If, for whatever reason, the debt collection agency cannot provide documentation proving any one of these factors, then the case will be dismissed and no judgement will be made against you. Even if they can provide documentation, it is worth requesting proof so that you are at least given that time to gather what you need to prepare for court. 

Ask for Alternative Form of Repayment

Typically you are given a notice before a lawsuit is filed against you. If this is the case, you may still have time to reach out to your creditor. You can request alternative forms of repayment, some of which may include:

  • Break in Payments: If you had to stop making payments due to a particular hardship, you could explain the situation to your creditor and request a break in payments until the hardship has passed. 
  • Request a Settlement: Oftentimes, your creditors are only hoping to make a portion of what you owe back. They understand that filing a lawsuit costs time and money that will take away from what they profit off of you. Because of this, they may be willing to take a smaller lump sum of money. But you will typically need to be the one to begin that conversation. 

If your creditor agrees to either of these things, the lawsuit they filed will be dismissed and you will be able to move forward with the new payment plan. 

File A Countersuit

Again, the goal of filing a lawsuit is so the creditor can recoup as much money as possible. This means spending the least amount of both time and money on your case. Filing a countersuit (if you have an actual complaint) can cause a much deeper investment than many agencies are willing to spend. 

Because of this, if you have any legitimate complaints against the agency suing you, you should definitely file a countersuit. Complaints can’t just be that you’re annoyed your creditor is filing a lawsuit. If creditors overstep your rights, granted to you by the Fair Debt Collection Practice Act, then you may have a legitimate complaint that you can countersue for. There is a potential that this will end up costing you money, but it may be worth it in the end if your case gets dismissed. 

Check the Statute of Limitations

Finally, make sure that the statue of limitations has not passed on your debt. There are many instances where a debt account is nearing its statue of limitations, which is why some collections agencies will push harder than ever to ensure they get some form of repayment. Pay attention to the date! If you are close enough, it is likely that the case will not make it to court before it expires. If this is true, then the case will be dismissed once it does get to court. 

Get In Touch

If you are anticipating a debt lawsuit, or you want more information on how to get a debt lawsuit dismissed, give our team a call! At Ascend, we want to make sure you have the most unbiased information to help you make a decision that is unique to your situation. We would love to talk and answer any questions you might have. 

Post Author: LincolnE

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