What’s at risk when a creditor serves you with a lawsuit?

On Behalf of | Mar 28, 2022 | Personal Bankruptcy

Maybe you have big medical bills after an unexpected illness last year. Perhaps one of your credit cards is over the limit and past due. When you are behind on repaying a debt, your creditor could potentially take you to court. 

The first step in that process is legal service. A process server knocks on your front door or shows up at your job to get you to identify yourself and accept paperwork. After that, the clock ticks down to your hearing date. 

When you go to court, you may hope to defend against your creditor’s claim by pointing out reasons why you have fallen behind on a particular debt. Unfortunately, the courts will care less about the reason and more about whether you have complied with your repayment arrangement. If you are out of compliance, they could issue a judgment in favor of your creditor. 

What can the courts order in a debt-related lawsuit?

If courts find for your creditor, they will potentially give your creditor an option to seek faster repayment. Much of the time, creditor lawsuits lead to wage garnishment. However, creditors can seek a lien against personal property, like your home or a future insurance settlement. 

In either scenario, you lose control over income or assets that you like you need to manage your household finances. Filing for bankruptcy after a creditor serves you with a lawsuit will result in the dismissal of the lawsuit temporarily and possibly the discharge of the debt in the bankruptcy. 

A timely response is necessary if you hope to avoid the worst consequences of a creditor lawsuit. Learning more about how personal bankruptcy protects you from aggressive creditor activity helps you better respond to a pending debt lawsuit.