Has a creditor ever threatened to sue you? It's not a good feeling and it certainly makes you feel uneasy knowing the Marshall or some other person of authority could come and repossess your things at any time.
It takes time and money for a creditor to do this, so the good news is you are about to find out how to put a stop to this quickly.
What Legal Actions Can Creditors Take?
If you don't pay your debts creditors have the right to take whatever action necessary to collect the debt. In the real world creditors have to assess the cost of doing this against the value of what they can recover. If it costs them $3000.00 to recover $500.00, does this make financial sense? No, so they try and use scare tactics to extract some money from the client.
Wage garnishments are probably the most common type of legal action creditors take because most people won't quit their job over this action. Once an employer receives the court order to garnish your wages, they must adhere to the order and the deductions start. As you will read there are ways to stop this and even halt this action even if your wages are garnished.
Judgements are court orders where a decision a decision is rendered by the judge, but the plaintiff has the obligation to collect on the judgement. This is one of those situations where your creditor must evaluate whether it's worth the time and money to go to court for a judgement. The cost is comparatively higher compared to what it cost to get a wage garnishment order. More times than not the creditor will write off the loss, or sell your loan to a third party collection agency for pennies on the dollar.
Liens are usually placed against property or something of material value. For example, a tax lien would be placed against the property that is behind on their taxes. Some liens stay attached to the property until the said property is sold, then the lien is paid. Other liens have a time limit, if the lien is not satisfied within a certain time frame, then the said property can be forced to sell.
How To Stop Legal Actions
The first thing you want to do is ignore your debt. Compound fees and penalties added to a small debt can quickly increase the amount owed and possibly make it worthwhile for your creditor to sue you. Don't ignore your debt problem.
Here are some things to take note of:
Don't panic - the threat of being sued is much different than actually being sued. One trick used by creditors is the threat of being sued. Creditors know how vulnerable clients are and many times this tactic works without the creditor having to take any further action.
Consult With a Lawyer - most lawyers will offer a free first consultation. You can meet with several lawyers and get a load of information for free. The one thing creditors hate to hear is, you are talking to your lawyer.
Procedures - creditors and their collection department have to obey the law, but does this mean they always do? Not always. Find out what these procedures are and keep track that they are being followed. If you see your situation headed in the wrong direction, start documenting everything you can for a future counter-suit. There are cases where the client had enough evidence to not only have their debt dismissed, but they received damages from their creditor.
Statutes - there is a statute of limitations in each state. One trick used by creditors is fear and misleading the client. The statue of limitations on debt collections is usually 7 years. Sometimes creditors will dust off old debts, if they haven't already written them off, and try one last time to collect them. They may say all kinds of things to get you to write a check, even a small amount - Don't Do It. By writing a check you have now legally renewed the contract for another 7 years and a brand new clock starts.
Bankruptcy - if you haven't caught your creditor doing something illegal, then your only recourse for stopping legal action against you is bankruptcy. Bankruptcy stops all legal actions against you and puts your financial situation under the courts jurisdiction. This is why creditors don't like to hear you have talked to a lawyer. To them this means you are thinking about filing for bankruptcy. You can try to use the threat of bankruptcy to get your creditors to negotiate, and many times it works, but if it looks like a garnishment or some other legal action is coming your way, actually filing for bankruptcy is your only protection against being sued.
