When a person owes a debt to another party and then fails to pay back the money according to the terms reached with the creditor, the other creditor usually has the legal right to sue the person for failing to pay the money that he owes. A creditor can threaten to sue only if he has the legal right to do so. If he does not, then this threat is illegal.
Creditors
A creditor often has the legal right to sue for an unpaid, delinquent debt. The creditor is allowed to sue on the grounds that the debtor breached the contract that was used to establish the debt. This contract is usually written, but it may simply be spoken. In either case, if both parties reached the agreement, the debtor has a legal right to follow through on it.
Lawsuits
If a creditor threatens to sue a debtor, he may well make good on this threat. This is done by filing a lawsuit in the civil court that has jurisdiction over the case. If the creditor files a lawsuit, the debtor is notified of it and asked to appear in court to defend himself. If he does not appear in court when requested, the creditor will likely be awarded a default judgment.
Statute of Limitations
There are certain situations in which a creditor is not allowed to threaten a lawsuit, as he does not have the legal right to sue. One of these is if the statute of limitations on the debt has already expired. Each state has its own statute of limitations for the filing of a lawsuit over a particular kind of debt. If a lawsuit is not filed within this period, the creditor can never file it.
Considerations
If a creditor threatens a debtor with a lawsuit that he cannot legally file, it is violating the federal Fair Debt Collection Practices act. Under this act, a creditor cannot falsely threaten a debtor in an attempt to collect on a debt. If such an instance, the creditor may actually be fined by the government and, on some occasions, forced to pay damages to the debtor.
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