Perhaps considered the “worst-case scenario” for most people, being sued by a creditor is stressful, costly and embarrassing. Getting served with paperwork starts a judicial process that can move quickly if the creditor is aggressive. Something must be done. Ignoring the problem certainly does not do any good. If you have viable defenses, defending the suit may be a realistic option. Sometimes, filing bankruptcy is a better option.
When You Have Been Sued
A lawsuit often forces people to hire an attorney to either defend them in the lawsuit or help them file bankruptcy–both with the purpose of stopping the lawsuit and keeping a judgment from being entered. Once served with suit papers, the borrower must answer and defend the suit. If the suit is not answered (filing papers responding to the lawsuit) or if unsuccessful in defending the suit, a judgment will be entered. Consulting an attorney to determine your defenses is critical. Where a defendant is properly served, an answer to the suit by the deadline is required or a judgment may be entered. People who cannot afford an attorney may be able to get assistance through a legal services organization. TexasLawHelp.org provides a list of resources to contact if you cannot afford legal representation.
Defenses to Lawsuit
If there is a valid defense to a lawsuit, the borrower may need to hire an attorney to assist in raising those defenses. While there are many possible defenses, examples of valid defenses are:
- Statute of limitations – In general, the statute of limitations on most debts in Texas is four years. The four years normally begins to run from the date the last debt payment was due or the date the last payment was actually made. Old debts are often sold to debt buyers who attempt to collect well beyond the statute of limitations.
- Debt previously satisfied – If an old debt was settled. and paid, this may be a defense. When debts are sold off, the new debt buyer may not be aware that the debt was already paid.
- Charges not accurate — If charges were made that were unauthorized, such as in the case of identity theft, this may be a valid defense.
By raising a valid defense, the borrower may be able to win the lawsuit and not have to file bankruptcy to keep a judgment from being entered against them. Texas Law Help offers an overview of affirmative defenses as well as some helpful forms. Consulting with an attorney before attempting to defend a suit on your own is essential.
Once the creditor suing takes a judgment, it may be able to garnish bank accounts and levy on non-exempt assets to collect the judgment. There are many assets that are exempt from seizure under Texas state law, even without filing bankruptcy. Bankruptcy, however, usually stops most garnishments and levies, and may allow the debtor to exempt or protect additional assets. In Texas, in most circumstances, the judgment creditor cannot take your homestead, however, the judgment still attaches to your property. The judgment may cloud your title and interfere with refinancing or sale of the property. There is a procedure available for removing the judgment lien from a homestead outside of bankruptcy. Using this procedure may enable you to sell your homestead, however, you would have a limited time to reinvest the proceeds in a new homestead or the proceeds of the sale may be seized to satisfy the judgment. If you have a judgment against you or think you may have one, consult an attorney for help in determining how to proceed.
Your Next Step to Debt Relief
If you are struggling with debt, consult with an attorney who can give you guidance on options available to you. Each case is different and consultation with an attorney knowledgeable about the law as it applies to your particular circumstances is an important first step in resolving debt.
Read More About Debt Lawsuit Defense
Read More About Bankruptcy and Debt Relief
Chapter 7 – Usually the cheapest and fastest type of bankruptcy, Chapter 7 can wipe out credit cards, medical bills, and loans.
Chapter 13 – Does everything that Chapter 7 does, but with the added benefit of being able to help catch up on past due mortgages, car payments, and taxes.
Taxes – If you owe money to the IRS, there may be several different options for you, including some non-bankruptcy options.
Student Loans – There are many solutions to student loan issues, including getting a better payment plan, curing a default, and even loan forgiveness.
Debt Lawsuit Defense – When a creditor sues you over a debt, you can respond with a defense, which may allow you to win the lawsuit.
Loan Modifications – A special agreement between you and your mortgage lender might help you with a past due mortgage loan.
Debt Library – More in-depth articles on some of the more detailed areas of bankruptcy and debt relief.