I Have Been Sued by a Creditor, What Do I Do?

Unpaid debts rarely disappear. And while your creditor may temporarily halt their collection attempts, they can sue you at a later date for payment. The consequences of going to court over an unpaid debt are severe. But if being sued by a creditor, several option are available to you.

Creditors and Lawsuits

Not every creditor sues a debtor for an unpaid debt. Some creditors refer delinquent accounts over to a collection agency and charge-off the debt after 180 days or six months. But depending on how much you owe the creditor, the creditor may decide to take legal action to recover an unpaid debt. A creditor can file a lawsuit and explain its case to a judge in order to recover funds from you.

Consequences of a Lawsuit

Going to court over an unpaid debt can cause further damage to your credit rating. The judge will decide if you owe the debt to the creditor, and unless you can dispute the debt and provide evidence of why you don't owe the bill, the judge can issue a judgment against you and order you to satisfy the debt. Judgment orders go on your credit report, and this information remains for seven years and brings down your personal credit score. Unpaid judgments can eventually trigger a wage garnishment or bank account lien.

What to Do if Sued?

Avoiding a court battle can protect your credit rating and keep a judgment off your personal credit rating. Once notified of an upcoming court date, contact your creditor immediately to see if you can send a payment to pay off the debt or at least resume payments through an installment plan. The creditor may accept your offer for payment and withdraw the lawsuit. On the other hand, if you don't owe the debt, bring evidence, such as canceled checks, to your hearing. Ask the creditor to validate the debt or provide written evidence that you owe the money. If the creditor cannot prove that you owe the debt, the judge can dismiss the case.

Filing Bankruptcy

Multiple creditors may file lawsuits against you for several unpaid bills. If contemplating bankruptcy, now's the time to file your papers with the court to receive protection from creditors. Bankruptcy can eliminate your balances. And once the court receives your filing, all creditors are notified of the bankruptcy proceeding and must stop collection attempts. A bankruptcy filing cancels any pending lawsuit and creditors cannot sue you for unpaid balances.