How to Answer a Lawsuit by a Creditor if You Are Insolvent

Insolvency means a person has more debts than assets, according to the Internal Revenue Service. However, insolvency is not a suitable defense in a credit card lawsuit. Declaring insolvency is the same as saying you simply don't have the money to pay the debt. Such a response to a lawsuit is sure to lead to a monetary judgment and possible garnishment of your bank account or wages. If insolvency is your only defense, it's best to settle the lawsuit out of court. However, to protect your rights, you should still provide a legal answer to the lawsuit. Failing to legally respond to the lawsuit could lead to a so-called default judgment that forfeits your right to a court hearing.

Instructions

1

Consult with an attorney, if possible. Credit card lawsuits are serious legal matters and sometimes force people into bankruptcy,. A consumer affairs attorney cannot provide a suitable defense if you really owe the money, but can file various legal motions to delay the lawsuit while you seek a settlement. The attorney also can file a legal answer to the lawsuit.

2

Prepare an answer if you don't have an attorney. States requiring a written answer to a lawsuit provide the defendant with a document called a summons and complaint. The summons is the notice of the lawsuit and is attached to the complaint, which is the actual lawsuit. The complaint lists a number of allegations, including that you opened a credit card account on a certain date and defaulted on the account, leaving a specific balance. You must respond to each allegation in writing, but exactly how you should respond may depend on the laws in your state -- a key reason for seeking legal advice. You can simply write a letter listing the number of each allegation and the word "deny" -- which is the same as pleading not guilty in a criminal case.

3

File the answer with the court by following instructions included in the summons. Then contact the creditor or debt collector to settle the lawsuit. Illinois Legal Aid reports that you are sure to lose in court if you owe the money, no matter what you included in your written answer. Working out a settlement for less than the full amount -- or even a payment plan for the full amount -- is preferable to a judgment and possible garnishment.