When your creditors decide to discontinue or abandon a lawsuit, they have to sign a notice of discontinuance and file it in court before the judgment has been entered. It ends the litigation and withdraws the claim that is in progress. In some cases, the creditor resells the debt to a collecting agency-waiving their right to collect repayment from you—and such right is transferred to the collector.
If you don’t want your name to be dragged in court and be a judgment debtor, here are some things you can do when you are sued for debt:
Don’t ignore a lawsuit
When you receive a notice, act quickly and seek legal advice. Collect all your receipts of payment, original loan agreement and a copy of your credit report. If you have been paying through automatic deduction from your checking or savings account or a credit card, get a bank statement to prove the transfer of funds to the lending company. This paperwork will protect you from scrupulous claims of nonpayment when you actually made payment for certain months.
Understand the lawsuit process
The complaint, bearing a court number, will be served to you in person, at your address. You can fill up the notice of defense attached to it and file it in court to defend yourself. Or you can hire a lawyer who needs to take action in not more than 21 days from the date you received the complaint. If you don’t take action after that period, your credits can apply for judgment without a hearing, and if the claim is valid, the court will order a Default Judgment saying that you need to pay a debt, with the legal costs and other fees. The judgment debt will accrue interest at 9.5% every year until you pay it in full.
Pay your debts and ask the creditor to abandon the action
You can pay in full, outright or make a promise to pay in full at a later time, if you are able to convince your creditors they will discontinue the action, sign and file the corresponding paperwork and you’ll be served with a court order that the litigation has been stopped. You don’t only save yourself from the trouble of going through the court processes; your credit file will also be clean from any records of judgment debt.
What if the plaintiff creditors decided to pursue the case?
Prepare for the consequences of judgment entered against you. When the court judgment for debt repayment has been signed, you become a judgment debtor and the plaintiff becomes the judgment creditor. They can recover the money you owe through any or all of the following means:
Serve you with a summons
You need to appear in court and inform the judge about your financial situation. Use this opportunity to defend yourself and to present evidence that you have paid, or that you are not capacitated to pay the debt. You can also offer to pay in installments. Never disobey a ‘summon’ because you can be arrested if you do so.
Seize your property
When the Sherriff serves you an order to seize property and to sell items belonging to you to satisfy the debt, you can offer to pay the amount stated in the warrant or allow the Sherriff to do it. Ask your lawyer about the types of property which cannot be taken from bankrupt—and make sure that the Sherriff does not seize them. These include items that you use to earn income and necessary household items.
Attach your earnings
If you are employed the court may order compelling your employer to deduct the debts in full or in installment from your salary and transfer it to the creditor.
A judgment on debt is a warning sign for creditors. So, if you have a bad credit rating, you should try to clear credit history. Learn more about notice of discontinuance and fix bad credit by making an enquiry today.