Most people file for bankruptcy once they learn that a creditor has either initiated a lawsuit against them or made their intent to sue known. The lawsuit cannot move forward, however, until you are actually served with papers. If the debt is small enough to be handled in small claims court, then you can be served via certified mail. But if the debt is too large for small claims court, then you must be served in person at your home. A creditor may even initiate a lawsuit after you’ve come to some kind of repayment agreement with them.
So what should you do? In this article, we’ll tackle that difficult question.
Understanding the Creditor Lawsuit Process
One of the scariest things about facing a lawsuit is not understanding how the process works, but knowing you have to do something and quickly.
The first step in the lawsuit process is serving you with notice. This must be done in person and is generally done at your home. The papers you receive will contain a summons and a complaint. The summons simply states that you are being sued and gives you a window of time to respond. If the claim is filed in small claims court, then you have 14 days to file a response. Otherwise, you will be given 30 days.
The complaint will include a written statement that states that the creditor believes you own a certain amount of money. This money can include whatever amount they say you owe plus attorney’s fees, interest, and whatever else. It will also include the name of the county and court where the lawsuit has been filed.
Your Response to the Summons and Complaint
You will usually have 30 days to file a response in the court that the complaint names. If you don’t respond in the allotted time, a default judgment will be entered against you. In other words, the creditor will win their lawsuit automatically and the court will assume you owe the money
they say you owe. If you have any reason to believe you do not owe the money, you should file a response indicating that. Even if you’re certain you owe the money, you should file a response to delay the process.
In the vast majority of cases, you won’t be able to raise a reasonable defense to prevent a judgment from being entered against you. It’s important to understand the consequences of having a judgment against you. Once the creditor wins their lawsuit, they can begin garnishing your wages, placing liens on your property, or levying your bank account.
If you file an answer, the court will set a date for you and the creditor to bring your arguments before the court. The creditor only needs to prove that you owe the money, but they cannot begin garnishing your wages without a judgment against you. You can also file counterclaims against the creditor alleging that they used illegal means to collect the debt, committed fraud, or that they did a poor job and that you don’t think you should have to pay them.
Other defenses include stating that you were under 18 at the time of the debt, making it unenforceable. A debt is also unenforceable if the statute of limitations has elapsed. In Oregon, a debt is only actionable for six years after the last payment.
I Lost the Judgment, Now What Should I Do?
Hopefully, you haven’t gotten to this point, because if a judgment is entered against you, a lien can be automatically placed on any real estate you own, including your homestead property. Then, the creditor can begin garnishing your wages with a court order. To prevent this, you have two options left at your disposal. First, you can simply pay off the entire debt in full, which you probably would have already done if you could. Or, you can file for bankruptcy.
If you file for bankruptcy, all creditor actions against you must immediately stop until your case is heard and your bankruptcy is processed. In other words, you can stop a creditor from suing you even after the suit has been filed. Ideally, you would do this before a judgment has been put in against you on behalf of the creditor because it may be difficult to get the lien off your property once it’s already there.
How Should I Handle a Creditor Lawsuit?
You’re going to want to talk to someone about your situation. A bankruptcy attorney can not only help you file for bankruptcy, but assess your options and make you aware of the consequences of each choice you make.
You’ll also want to move quickly and decisively. You will have at least 30 days if the amount you owe is too large for small claims court. In that time, you should be considering how you want to handle the situation. Doing nothing is almost always the worst option because the debt won’t go away and the consequences escalate if a default judgment is entered against you.
Talk to a Eugene, OR Bankruptcy Attorney Today
If you’re facing creditor lawsuits, contact Butcher Law Office, LLC today. Tom is more than willing to sit down with you and offers free, no-obligation consultations to clients who are still feeling out their options. Give us a call or contact us online and we can begin discussing your options immediately.