Negotiate a Payment Plan

Often, creditors are open to negotiation. They’d rather receive some form of payment rather than endure the costs and time of a lawsuit. If you can afford to make some payments, consider contacting the creditor directly to negotiate a payment plan. It’s important to get any agreement in writing.

2. Validate the Debt

Before a creditor can sue you, they must prove that you owe the debt. You have the right to request a debt validation letter. This document should provide details about the debt, including the amount owed and the name of the original creditor. If the creditor can’t provide this information, they may not have the legal right to sue you.

3. Challenge the Lawsuit

If the creditor files a lawsuit, you can challenge it in court. This involves filing an answer to the lawsuit, which should be done within the timeframe specified in the court papers. In your answer, you can dispute the amount of the debt, claim it’s not your debt, or argue that the statute of limitations has expired. In Texas, the statute of limitations for consumer debt varies depending on the nature of the debt. For lawsuits alleging violations of the consumer credit provisions of the Texas Finance Code, the suit must be brought within four years of the date of the loan or the retail installment transaction or within two years of the alleged violation, whichever is later.

In the case of revolving credit transactions (like credit card debt), the suit must be brought within two years of the occurrence of the violation. This means that if a creditor wants to sue you for an unpaid debt, they must do so within this time frame.

However, it’s important to note that even if the statute of limitations has expired, that doesn’t mean the debt goes away. It simply means that the debt is “time-barred” — a creditor or collector can’t successfully sue you to collect it. However, they can still attempt to collect the debt by other means, such as contacting you and requesting payment.

4. Hire a Lawyer

If you’re unsure about how to proceed, it might be beneficial to hire a lawyer. An experienced attorney can help you understand your options and guide you through the process. Many offer free consultations, so you can discuss your situation without financial commitment.

5. File for Bankruptcy

If you’re unable to pay the debt and other options aren’t viable, filing for bankruptcy could be a last resort. Once a bankruptcy petition is filed, an automatic stay goes into effect, which temporarily stops most creditors from pursuing collection activities, including lawsuits. However, bankruptcy has significant financial implications and should only be considered after consulting with a financial advisor or attorney.

Conclusion

Dealing with a potential lawsuit from a creditor can be daunting, but remember, you have rights and options. By taking proactive steps, you can potentially negotiate a manageable repayment plan, validate the debt, or even challenge the lawsuit. Consult with a financial advisor or legal professional to understand the best course of action for your situation.