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What happens when a creditor sues you over an unpaid debt?

| Jul 6, 2021 | Bankruptcy

People fall on tough times financially often through no personal fault of their own. They might get into a car crash, get hurt at work or get laid off because their employer has financial issues. 

When your debt level is too high for your current household income, you will probably start to fall behind on certain accounts. No matter how hard you try to prioritize keeping each creditor paid in turn, lenders are often impatient when borrowers stop making the necessary monthly payments. 

They might file a civil lawsuit against you to try to compel faster repayment. What happens in a debt-related lawsuit?

Both your personal property and your income are at risk

When a creditor sues you, the primary concern won’t be your ability to repay the debt but rather its validity. Provided that the contract establishing the debt stands up to court scrutiny, the judge hearing the case will likely care less about your current financial circumstances than the promises you made to the lender. 

If they validate the debt and your creditor shows that you have not made a reasonable attempt to repay them, the judge could rule in their favor. A judgment from a creditor could lead to liens against your personal property, the loss of collateral used for the loan or even garnishment of your wages. 

Filing bankruptcy after a creditor lawsuit may not recover any property reclaimed by the creditor or end a garnishment of your wages. However, a timely filing after a creditor serves you could stop the court proceedings from taking place and possibly lead to the discharge of the debt that caused this issue for you. 

Knowing what can happen in a creditor lawsuit can help you respond appropriately, possibly by considering whether filing personal bankruptcy is the right solution.