Collection lawsuits can be costly and time-consuming, so many creditors look for alternative debt repayment. They will repossess the collateral, stop providing the service, or accept reduced payments. While not all creditors turn to the courts to collect on an overdue debt, they do retain that right and may choose to pursue legal action if the debtor has any income or assets. Many creditors sell defaulted debt to collection agencies for pennies on the dollar, figuring that some payment is better than none at all. The collection agencies take on the headache and the possibility of compensation by filing lawsuits for the full-face value of the debt.
If you have been served with a debt collection lawsuit, the most important step you can take is to consult an attorney. There are deadlines that must be met, procedures that must be followed, and defenses or claims that may be available. These are some possible defenses: the information about the debt is incorrect; you never received the service or goods that the creditor’s claim is based on; the contract had illegal or deceptive provisions; you legally canceled the contract; your payments were not properly attributed to your account; or the lawsuit was not timely filed.
While preparing, and filing a formal response without a lawyer’s help can be difficult, not filing an answer at all means the creditor can ask the court to enter judgment in its favor for the amount stated in the complaint. This is known as a default judgment.
Once the creditor is granted a judgment – whether because you failed to answer or because the court ruled against you based on the evidence — the creditor can obtain a lien on your assets, place a levy on your bank accounts, and garnish your wages. Kentucky allows creditors to seize one-quarter of a debtor’s wages, which is the highest rate permitted under federal law. Even after a creditor wins a judgment, it’s not too late to try to negotiate a discount for voluntary payment. Creditors are often still willing to accept less compensation to save the money and time spent on using collection processes.
For some debtors, receiving notification that they are being sued for collection is the wake-up call that prompts them to examine their financial future. While the decision to file bankruptcy should generally not be made because of a single debt or debt collection action, they can be good reasons for reassessing your total financial picture – including the relief that bankruptcy can offer as well as the non-bankruptcy alternatives.
Creditors are in the business of making money, and they employ sophisticated financial knowledge combined with vast legal resources to protect themselves. Don’t go it alone. The Kentucky debt collection attorneys at Bunch & Brock are familiar with every aspect of debtor and creditor issues. We are a debt relief firm committed to providing each of our clients with personal attention and real solutions to financial troubles. We understand that circumstances exist that can result in financial problems for even the most conscientious of people. If you have been sued for overdue debts, we encourage you to contact our office by calling 859-254-5522 or filling out this online form.
