I Have Been Sued By a Debt Collector. Now What?

Getting sued by a debt collector can be overwhelming. Financial hardship takes a toll on our minds and can affect our mental health. However, it is essential to know that you’re not alone and have options if you’re facing debt-related problems. To understand what to do when you have been served, you’ll need to learn more about what happens to unpaid debts and how these lawsuits typically proceed. 

What Happens When You Don’t Pay Your Debt

When you miss a monthly payment on a loan for the first time, the creditor will most likely contact you or send you a letter via email or postal mail to recover the overdue amount. After several months of missed payments, the initial creditor is likely to cut losses and sell the loan to a collection agency. The debt collector who bought your debt will then start collecting from you. If all collection efforts fail and you proceed to fall behind on your payments, creditors can file a lawsuit against you.

You Got Served. What Does that Mean?

The creditor will inform you of the lawsuit by “serving” you with a copy of the allegation and a court summons. The summons includes details about when and how to respond, as well as the date of the court hearing. The first thing you need to know is that you can not just ignore a lawsuit notification. Ignoring a lawsuit may result in the court issuing a default judgment. A default judgment means the creditor can garnish your wages, freeze a part or all of your bank account, or put a lien against your property. 

Gather All Information Related to the Debt

You must collect all relevant details about this debt. You need to make sure to include collection letters, missing payment deadlines, and specifics about the original debt. You’ll need to find out who the creditor is and whether the collection information is correct. 

The next step is to figure out whether the loan is beyond the statute of limitations. The statute of limitations is the time limit set by your state for a borrower to sue you for an unpaid debt. After the time has passed, the collector cannot sue you, but they can continue to collect from you.

How You Can Respond

Typically, you have two weeks to file a written response to the lawsuit. An attorney can assist you in writing a complete response, making the borrower more likely to pursue a deal with you. 

If the debt is legitimate, you can either settle the debt, set up a payment plan, or file for bankruptcy if the debt is unmanageable.  Bankruptcy can also be extremely helpful if you owe debts to several creditors.  If you owe multiple creditors, bankruptcy will often be a cheaper, easier, and certainly much more effective route to resolving your debt than settlement or consolidation.

The parties have the right to settle after the filing of a lawsuit. The court will frequently order that all sides in a lawsuit attempt to negotiate a mediation deal. And it’s not unusual for cases to reach an agreement before going to trial, mainly if the sum at stake isn’t that big. A debt settlement can resolve a debt collection lawsuit.

If you have the means, it is possible to pay off the debt in a lump sum fully. When the creditor is willing, you can pay off the loan over time by establishing a payment agreement. And if a lawsuit has been filed but is not resolved yet, there is a potential settlement.

If the amount you owe is too large and you are unable to pay the debt, you may choose to file for bankruptcy.  If you owe multiple creditors small amounts, bankruptcy still might be a better option than attempting to pay off the creditor that is suing you.  If the debt you owe is collectively difficult to pay off, attempting to pay off creditors one by one as they sue you could be disastrous to your finances.  Many people will spend thousands of dollars trying to pay off creditors before realizing that their best option is bankruptcy. “I wish I did this a long time ago” is a common sentiment heard over and over by bankruptcy attorneys.  Bankruptcy will put an end to collection lawsuits. When you declare bankruptcy, the automatic stay goes into place, which prevents all collection action against you, not just the creditor who happens to be suing you at the time. 

Non-Dischargeable Debts

Non-Dischargeable Debts 

When you file for bankruptcy, most of your debts will be discharged, which means the debts are wiped out. Debts that can’t be wiped out through a bankruptcy proceeding are called non-dischargeable debts. These include student loans, most federal, state and local taxes, money borrowed on a credit card to pay those taxes. child support, and alimony. 

Debts that are otherwise dischargeable can become non-dischargeable if a creditor files an adversary proceeding against a debtor based on the debt being acquired by fraudulent acts,embezzlement, larceny or breach of fiduciary responsibility.

Texas Bankruptcy Non-Dischargeable Debts 

The following debts can’t be discharged in either Chapter 7 or Chapter 13 Texas bankruptcies, meaning that the court always considers these debts to be non-dischargeable. 

Typical Non-Dischargeable Debts

  • Student Loans
  • Child Support
  • Most Taxes 

Other Debts That Could Be Ruled Non-Dischargeable:

  • Theft
  • Embezzlement
  • Fraud
  • Divorce Decrees
  • Malicious Injury to Individuals or Their Property

Even if the majority of your debts are non-dischargeable, bankruptcy provides a helpful way to repay those debts, and keeps the creditor from attempting to collect from you or sue you while you are attempting to pay that debt. Contact a reliable bankruptcy attorney to learn about your options.

Get Proper Legal Assistance from Experienced Bankruptcy Lawyers

Do you need assistance filing for bankruptcy? Whether you’re filing for Chapter 7 or Chapter 13, bankruptcy could mean a fresh start for you. At Acker Warren, P.C. you’ll find superior legal advice for bankruptcy cases. We’ll be more than happy to help you out in your path to financial freedom.

Repossessed Car? Here’s What You Need to Know

While owning a car can certainly be a luxury, in most cases it is a necessity. When you lease a car or borrow money to buy it, you must make monthly payments. With so many financial obligations, many people struggle to stay on top of car payments. This is especially true if you also have mortgage and student loan debt. If you do not make a loan payment on time, your loan is then considered to be delinquent. 

Delinquent car loans could ruin your credit and end in car repossession. For this reason, it is important to understand how the repossession process works and what you can do about it.

What’s repossession and when it is allowed

When a borrower is behind on payments, they risk getting their car repossessed. This means that the bank or leasing company retrieves the vehicle from the borrower; once statutorily required notices have been given the vehicle will be taken without warning. Cars can be taken away on tow trucks, or lenders might send someone to collect the car. 

Why does this happen? To borrow money or lease a car, borrowers need to agree on specific terms and when those terms are not met by the borrower, the vehicle may be repossessed by the lender. The lender receives a security interest in the vehicle to secure repayment of the loan.  In Texas this is the reason that the lender holds onto the Title for the vehicle until the loan has been repaid.  This security interest means the lender can repossess the security (in this case, the vehicle) when borrowers don’t have car insurance, or they don’t make timely loan payments. 

Unfortunately, besides losing the vehicle, your credit will suffer, and you will likely owe a large deficiency balance.  A deficiency balance is the difference between the amount owed on the loan when the vehicle is repossessed and what the lender receives for the vehicle at public auction. A repossession will show as such on your credit report for years after the repossession has occurred making it difficult and expensive to finance another vehicle in the future. 

You have a repossessed car, now what?

Most lenders in Texas are required to sell the repossessed vehicle at public auction. You have the right to know when and where the sale will take.  You may owe a large deficiency balance to the car creditor after the car is sold.  The creditor can, and in a lot of a cases, will sue you to take that money owed to them from you.  Luckily, you can discharge the entire amount owed to the car creditor in a Chapter 7 bankruptcy.  If your car is in danger of repossession and you want to keep it, see the paragraph below.

Keep your vehicle through bankruptcy filing

If the car has not been sold yet, it is often possible to retrieve and keep the vehicle by filing bankruptcy. If your vehicle has not yet been repossessed a bankruptcy filing can prohibit the repossession and give a Debtor options for keeping the vehicle and getting payments back on track. Filing for bankruptcy triggers an automatic stay that stops collection efforts by creditors. Depending on the Bankruptcy Chapter you file, this buys time to gather the money to get the vehicle back or cure arrears through the bankruptcy.

Learn all about car repossessions and other matters related to bankruptcy by getting the expert advice of Acker Warren P.C.


Bankruptcy During COVID-19: What You Need to Know

The coronavirus outbreak has created an unprecedented situation that has placed the majority of people in financial hardships. Unfortunately, a lot of people have been laid off due to the pandemic which means less money to pay for their bills. And while you may be doing your part by saving as much as you can, it’s almost impossible to stop debt from accumulating. 

Local, state, and federal governments are providing safety nets along with many creditors during the COVID-19 crisis. For several people increased unemployment benefits, mandated holds placed on evictions, cash payments, and utility shut-offs will help to make this situation more manageable. However, this crisis might last longer than expected so these measures won’t guarantee financial stability in the long run. The best thing to do is to be prepared and have a plan that will ensure you’ll get back on your feet during these tough times. 

Qualify for Bankruptcy During COVID-19 Times

Bankruptcy may be the best route for people who can’t find a clear path through the coronavirus financially. In this case, the sooner you file for bankruptcy the faster you’ll be able to rebuild your credit. What does it mean to file for bankruptcy in COVID-19 times? Bankruptcy has the ability to discharge medical bills, credit card debts, and rent. These debts will rise during the pandemic. 

Keep in mind that child support arrears, student loan debts, and newly acquired tax debt are some type of debts you can’t discharge with bankruptcy. On one hand, Chapter 7 is one of the easiest and fastest chapters in bankruptcy. On the other hand, while intended for higher-income people, you can get more time to pay for your debts with Chapter 13

Acker Warren, P.C. Bankruptcy Law Experts

Our firm is open and available to help you. Due to COVID-19, we’ll conduct your consultation remotely, through a video-conference or by phone. Don’t hesitate to contact us if you have any questions.

Combating a Deficiency Balance on a Repossessed Car

Behind on your car payment? You’re not alone. A record number of Americans are behind on their auto loan payments.  This is a somewhat unsurprising fact, as lower income individuals are more frequently able to obtain financing on cars due to what seems to be an increase in predatory and sub prime lenders nationwide.

If you find yourself behind on car payments, and have your car repossessed, you will be on the hook for the “deficiency balance” which is the difference of the amount the car sells for at auction and the amount owed on the vehicle.  For instance, if your 2010 Toyota Camry sells at auction for $4,000, but you owed $14,000.00 to the lender, the lender can sue you for the $10,000.00 deficiency balance, plus costs and attorney fees. This applies even if you voluntarily surrendered your vehicle.

For those who are already unable to make their car payment, a judgement of this amount is almost impossible to pay.  The lender can take money out of your bank account to satisfy the judgement, which can put the debtor in a very dangerous position of being unable to pay rent or their mortgage.

Filing for Chapter 7 bankruptcy can provide those who owe a car lender relief from that debt.  A Chapter 7 bankruptcy typically lasts about four months from filing date to discharge. The filing of the bankruptcy protects the debtor from any collection efforts by any creditor, even a creditor with a judgement for a deficiency balance on a car loan.  The discharge of the bankruptcy (preceded by a Motion to Avoid the lender’s Judgment Lien) absolves the debtor of that debtor for forever.

Lastly, considering car payments are high on the priority list of bills to pay, an individual behind on their car payments are likely to have high balances on credit cards or other loans such as signature loans and payday loans. These types of debts are also dischargeable in a Chapter 7 bankruptcy.    If you find yourself struggling to make car payments and other debt payments, or have already had a car repossessed, a Chapter 7 bankruptcy could be your easiest and cheapest way to get back on track financially.