You can be sued for credit card debt if you don’t make the payments on time. Now, you can think about whether or not debt consolidation can help you if a creditor has filed a lawsuit against you. Before going to that topic, let’s discuss the process of debt consolidation in brief. It will help to discuss whether or not, consolidation can help you stop a credit card debt lawsuit, and if yes, then how.
What is debt consolidation?
Debt consolidation is a process through which you can consolidate your multiple bills into one single monthly payment. This method also helps to reduce interest rate but your outstanding debt amount remains the same. You can’t negotiate with your creditor about reducing the debt amount but you can make negotiation on the interest rate and how much you pay every month. In such a way, you can save a considerable amount while paying less interest.
There are 3 ways to consolidate your unsecured bills. You can choose one as per your suitability.
When does a lawsuit occur?
When you owe money to a credit card company or a creditor and you fall behind in making payments, your creditor can file a lawsuit against you. The lawsuit occurs when the creditor files a complaint with the court. The complaint comprises of the reason for filing a lawsuit and the demand of the creditor that includes repayment of the debt amount with interest.
You will receive a copy of the complaint with a summons from the creditor. The summons will let you know that you are being sued along with other information like when you should formally respond to it.
The creditor may file a lawsuit in the state civil court or federal court (if you owe money to the federal government).
How to respond to the lawsuit
You will be given 20 to 30 days to respond to the lawsuit. The response will be in the written form which is known as the “Answer”.
Sometimes it may be quite difficult for you to prepare a formal answer. That’s why it is recommended to get help from a reputable lawyer who will manage every step on behalf of you. The steps include deciding all your defenses, preparing a formal answer, and at last, presenting you in the court.
You’re in a great trouble when you have defaulted on your debts without any defenses. In such a situation, you should get professional help. A lawyer can help you find out any defenses or mark any violations against your creditor.
Can debt consolidation help you to stop a lawsuit?
Well, it can be a ‘yes’ or a ‘no’ at the same time.
Please continue reading to know why.
Opting for a consolidation program won’t really help you to stop the court proceedings once a lawsuit is already filed. So, a consolidation company will not be able to help you with this matter.
However, a settlement company might help you by opting for out of court settlement. What a settlement lawyer can do is convince your creditor(s) to accept a lower payoff amount against the outstanding due amount. Because if you file bankruptcy they won’t get anything. So, in most cases, they will accept a lower amount than getting nothing at all.
When you take out a consolidation loan and pay off your existing debts, all your existing dues are paid off altogether. So, the lawsuit will automatically stop.
However, while opting for this option, make sure you take out a loan lower than the sum total of your existing loan payments.
Transferring your balance to another credit card can also help you out, provided you have a card with a relatively lower rate of interest and sufficient credit limit. You can use that card to repay the existing balance on another card.
Opting for a new 0% or lower interest credit card might be difficult for you when you are already neck-deep in debt. However, it is not impossible. If you get one, it will help you to stop the lawsuit. But make sure you repay the outstanding amount within the low rate introductory period; otherwise, you’d have to pay the remaining amount at a much higher rate of interest.
Advice from debt consolidation company to handle the situation
Though there are fewer chances to strike off the case with the help of debt consolidation, you can handle credit card debt lawsuit by acting upon this advice:
1) Reply the calls:
You might get unlimited calls from your creditors and your instinct will say not to receive them. Here, you’ll make a mistake by ignoring their calls. Ignoring the problem is not the ultimate solution but it can make the situation more complicated. It is quite normal for your creditor to assume that you are avoiding payment. So, take their calls to understand the problem fully and take proper steps to resolve the issue.
2) Respond to the letters:
If your creditor sends you a letter, don’t get frightened but open it and respond to it immediately. Don’t think that without your presence, the case won’t go forward, rather it’ll set a strong allegation against you. In turn, you will be left with very limited options to stop the lawsuit and settle the debt.
3) Make an attempt to negotiate with your creditor:
When your creditor calls you or sends you a letter, don’t ignore it. Rather, make good use of it i.e., start negotiating with them. A lawsuit generally takes a lot of time and costs money as well. So, you’ll have a great opportunity to negotiate with your creditors, which will be beneficial for both you and your creditors.
4) Don’t accept liability blindly:
Before you accept the liability, check if there is any discrepancy like wrong debt amount, escalated interest rates with extra fees, and so on. So, when you talk to your creditors or receive their letters, check every detail they are telling you or they have mentioned in their letters. A thorough checking can help you to get out of this difficult situation by handling it tactfully. Remember, if you challenge the lawsuit, it’s not the same as denying that you haven’t taken out the amount ever. So, you can always challenge if there’s an issue.
5) Consult a lawyer:
If you can’t hire a lawyer, you can consult a lawyer, who can review your case and suggest you whether or not he/she will contest the case. If the lawyer refuses to do it, you won’t have to pay a cent. It may also happen that you don’t have to pay the full fees until you win the case. It is advisable you inquire these things before hiring a professional.
So, gather knowledge and decide what can be the best way to find a way out of your situation.