How to Settle Being Sued by a Creditor

If you default on a loan, credit card or other financial agreement, your creditor may sue you to obtain a judgment for your outstanding balance. This usually happens when you default on an unsecured debt with no collateral or lien available to guarantee repayment. Though your creditor will not sue you for a minor delinquency, you may face legal action if you prolong repayment of your debts.

Instructions

1

Contact your creditor to settle your debt. Ask your creditor how much money will settle the debt outside of the courtroom. Offer a lump sum of cash in exchange for a discount if you can afford it. If your creditor counters your offer with an unaffordable sum or rejects a reduced settlement altogether, ask for a payment plan to repay the full sum of the debt. Though this may require you to pay the debt in full, it allows you to avoid litigation.

2

File for personal bankruptcy if you fail to successfully negotiate an affordable repayment plan with your creditor. Both Chapter 7 and Chapter 13 personal bankruptcy rules implement an automatic stay on creditors at the time you file for bankruptcy that prevents them from pursuing legal action against you. File for Chapter 7 bankruptcy if you qualify in your state and the court will discharge your debts with no repayment requirements on your behalf. Expect to repay a portion of your debts over a three- to five-year period according to a payment plan determined by the bankruptcy court if you file Chapter 13.

3

Countersue your creditor if you believe that the creditor violated your legal rights outlined in the Fair Debt Collection Practices Act, or FDCPA, at any time in the past year. Keep thorough records of harassing phone calls or illegal debt collection practices to support your claim in court. Though a judgment against your creditor for violations of the FDCPA will award you a judgment and not eliminate any debt you owe, your countersuit may provide incentive for your creditor to settle your debt outside of court or drop the lawsuit against you altogether.