What to Do If You’re Facing A Debt Collection Lawsuit

Written by AskTheLawyers.com™ on behalf of David Shuster with Shuster Law, PLLC.

What to Do If You’re Facing A Debt Collection Lawsuit
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If you have received a notice that you are being sued for unpaid debt, don’t panic. It’s important to understand how a debt collection lawsuit works, as well as what your options are if you find yourself facing one. It’s important to verify the amount you are being sued for before anything else; depending on where the debt collection is coming from, this could be relatively easy. After requesting official documentation to double-check the amount owed and to identify the collection agency’s identity, it’s important to reach out to a bankruptcy attorney to discuss your situation. In some cases, you may be eligible to fight the lawsuit or to declare bankruptcy in order to waive the amount owed.

If you are facing a debt collection lawsuit, take the following steps:

  • Verify. It’s important to verify what you are being sued for. If you are being sued by a credit card company, this number should be easy to find. However, if your debt has been sold to a collections agency, the verification process can be more challenging and could be subject to additional fees. It’s important to request documentation from the party filing the lawsuit before taking any additional steps.
  • Collect documentation. If you believe the amount you are being sued for is inaccurate, or that the debt does not belong to you or has already been paid off, collect any potential documentation you have which could prove what you do or do not owe. This evidence may help you fight the lawsuit if necessary.
  • Talk to a financial advisor or bankruptcy attorney. The world of debt collections can be extremely difficult and seriously stressful to navigate without the help of an expert. This is why it’s important to reach out to someone who knows what they’re doing, and to do so long before the dates included in the notice of the lawsuit. A bankruptcy attorney can help you fight the lawsuit, request a settlement, or help you file for bankruptcy depending on the type of debt owed.

A Chapter 7 or “fresh start” bankruptcy might be a feasible option if you are facing a debt collection lawsuit.

While it’s certainly better to address the debts or take action such as filing for bankruptcy before it comes to a lawsuit, this does not mean someone facing a lawsuit is devoid of options. A Chapter 7 bankruptcy is referred to as a “fresh start” bankruptcy because it effectively wipes out a person’s unwanted debt without expectations of repayment. While not everyone is eligible for a Chapter 7 bankruptcy, there are a few ways you can test to find out if you might be a candidate.

For example, if it would be extremely unlikely for you to pay off your debt over the next five years based on your last six months of income, you may qualify for Chapter 7 bankruptcy. Additionally, if you bring in below average income for a household of your size compared to similar households in your area, you may pass the means test, which is another good indicator of eligibility for Chapter 7. However, the easiest and most effective option in this situation is probably to contact a bankruptcy attorney for a free consultation to discuss how to move forward while financially protecting you and your family as much as possible.

To learn more about what to do if facing a debt collection lawsuit, or for help filing for bankruptcy, talk to a bankruptcy attorney sooner rather than later.

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