Facing a lawsuit over unpaid consumer debt

On behalf of Bankruptcy Law Firm of Clare Casas on Tuesday, November 11, 2014.

Florida residents are likely aware that debt collection agencies are often relentless in their pursuit of payment. They frequently make phone calls to the homes or workplaces of individuals struggling with unmanageable levels of debt, and they may even contact coworkers or relatives when these calls fail to elicit the desire response. When these actions prove unsuccessful, debt collectors sometimes decide to take legal action and file a lawsuit.

Some people believe that they can stop the lawsuit by refusing to accept the letter or notice informing them that they are being sued, but this is not the case. If the party being sued does not respond to a lawsuit over unpaid consumer loans, medical bills or credit card debt, the creditor or collection agency is likely to be awarded a judgment. The amount of the judgment may be higher than the original debt due to added legal fees and collection costs.

Debt collectors often decide to take legal action because being awarded a judgment allows them to take additional steps to collect an unpaid debt. Armed with a judgment, a debt collector or creditor could seek to garnish the borrower's paycheck or place a lien against their property. They may even take steps to freeze the funds in a borrower's bank account. It is also more difficult to dispute the legitimacy of the debt in question once a judgment has been awarded.

Borrowers facing legal action over unpaid debt would be wise to fight their case in court, but debt relief options may be available even after the suit has been filed. Filing for Chapter 7 or Chapter 13 bankruptcy will at least temporarily halt creditor harassment, and an experienced bankruptcy attorney can explain the various options available to clients seeking a financial fresh start.

Source: Consumer Financial Protection Bureau, "What should I do if a creditor or debt collector sues me?", November 10, 2014