What to Do if You Are Being Sued for Debt

If you genuinely owe money to a company and you do not pay it back in accordance with the terms you agreed, then the hard fact is that lender is perfectly entitled to sue you in order to get their money back. In borrowing the money, or buying things on credit, you will have signed an agreement that legally binds you to paying the money back under strict terms. If you break this contract they may choose to sue you.

Finding yourself in the increasingly common situation of not being able to keep up with the repayments on a loan or credit card will almost certainly result in the lender taking some sort of action to get their money back, but this does not necessarily mean they will take legal action. What they want is to get their money back, or as much of it as they think possible. They will only decide to sue you if they believe that taking such action is the route most likely to result in them getting the most money back from you.

They will rarely proceed quickly to suing you, the typical system being to hand the debt over to either their internal debt collection people to chase you, or else an exte
al debt collection agency. It is usually only if this fails that legal action will be considered. Even then, a lender will consider various factors when considering whether to sue you or not.

If they think that it will cost them more in legal fees than is worthwhile, or they believe that you really do not have the money to pay them anyway, they may opt to try to negotiate an agreement with you instead. Taking court action will involve legal advice, which carries a cost, so you are less likely to be sued for a fairly small debt.

It is important to understand the type of debt you have if you are in danger of being sued. If you have defaulted on payments for a mortgage or secured loan, you could very easily lose your house. Any form of secondary or unsecured debt, however, can not result in the loss of your home through the initial court action. Neither can you expect to have bailiffs coming to take your possessions away (UK only). The initial result of court action (assuming you do owe money and you admit this) will be that the court makes a judgement against you and sets out a schedule for paying back what you owe.

The legal details involved in being sued for debt will vary depending what country or state you live in, but the overall processes are very similar whether you are in the US or the UK. In the UK, the claim will be dealt with through the County Court system, and in the US through the small claims court or higher court. Wherever you live, your first move if you are being sued for debt should be to seek proper legal advice.

If someone decides to sue you, they must first make a claim through the court. You will then receive paperwork informing you about the details of the claim. You must always respond to such claims within the timeframe given and attend court at the specified time in order to answer the claim. If you do not respond or do not attend court, the claim will automatically be awarded against you. In the UK you need to complete and return a form giving your own details and view of the claim.

You may wish to consider contacting the company you owe money to in order to see whether you can come to an arrangement to pay back what you owe, or as much of it as you can afford. You could also consider whether you wish to make a counter claim against the lender, if you think there is a legitimate reason for off-setting some or all of the money you owe. Reasons for a counter-claim could be because the lender has behaved unfairly towards you or not followed consumer protection laws. Making counter-claims can make it more likely that the lender will drop the case or choose to settle out of court, if they think it could be a long and costly legal process.

If a judgement is made against you in the UK this is known as a County Court Judgement. This will involve the judge looking at your financial situation and setting out a repayment schedule for you to pay back what you owe at a rate you can afford. A County Court Judgement will show up on your credit file, and therefore have an impact on any future applications for credit.

If you do get sued and a judgement is made against you, it is very important to stick to the terms of the judgement. If you do not, then the way is open for far more serious legal consequences, which could include the loss of your home and even imprisonment.

Being sued for debt can be a stressful experience, but if you understand the nature and limitations of the immediate court judgement this can help to make the process slightly less daunting. The main thing to remember if you are being sued for debt, is that if a judgement is made against you, it is extremely important to do everything you need to in order to stick to the terms of the judgement.

Remember that no debt crisis is insurmountable, and with the right advice you can take action to deal with your own debts without borrowing or spending more money. This should be the first course of action, to hopefully prevent things ever getting as far as court action.