How to Stop Collection Lawsuits Against You

Your Options to Stop Collection Lawsuits

Final collection noticeIf you have fallen behind on your financial obligations and have been threatened with a collection lawsuit, you may be considering bankruptcy as a way to stop legal action and get a fresh start. Before you file for bankruptcy, though, you want to do two things: prepare a detailed budget and if a suit has not already been filed, explore an out of court settlement. Finally, any settlement must be documented in a properly drafted agreement, which can be as simple as a letter signed by the lender or their collection agent, or as complex as a court order.

Prepare a Budget

Far too many people fail to budget, usually out of fear of what the numbers might tell them. But the reality is that the best way to know what you can afford and what you need to do is to have a plan. You may discover that you don’t have enough income to pay all your bills. That will allow you to start to prioritize, to determine which obligations are most important and to see that certain expenses are just not realistic. As you prioritize, remember that the most important asset you have is the one that gets you to your job and that allows you to earn income. Without a vehicle, you won’t be able to work unless you work from home.

Remember, too, that a budget is mostly an estimate. There will be some expenses that will be precise — car and mortgage/rent payments. There will be others that vary from month to month. The purpose of a budget is to give you a big picture.

Non-bankruptcy settlements.

If your budget leaves some money available to bring past due debts current, AND if you have not already been sued by one or more of them AND if you do not have a lot of separate past due bills, some people may benefit from reaching out to their creditors to explore non-bankruptcy options. Some but not all creditors will work with you to some degree. Some creditors have forbearance options that allow you to skip a payment or two and add it to the end of the loan. Many utility companies will allow you to set up a payment plan over a longer period of time.

But before doing this, you should explore the bankruptcy option. All too often we see people who struggle to pay high interest credit cards or other loans, often using up protected retirement funds. You need to clearly understand your limits and explore other options.

One such option is Chapter 13. Chapter 13 allows you to control the repayment process. Once you get approval of a repayment plan, all your creditors are bound by it. Even where the plan provides for full payment of all creditors, the repayment is almost always without additional interest. In other words, a Chapter 13 bankruptcy gives you a guaranteed court approved payment plan.

That said, Chapter 13 is not always the best option. But to know that, you need to get the help of an ethical and experienced bankruptcy attorney. Our practice is always to explain the non-bankruptcy options to our clients. And if you decide to forego bankruptcy, an attorney’s help in securing agreements from your lenders is often valuable. The bottom line is that your creditors may would rather have something paid than nothing. And their preference is not to force you into bankruptcy, as that severely limits their options and typically makes the process more expensive for them.

Settlements must be in writing.

We often say that an oral agreement is not worth the paper it is written on. What one person tells you on the phone may be ignored or forgotten by another agent. Written agreements should be reviewed by a lawyer. At a minimum they should specify who the lender is, that the signer is an authorized agent, the agreed payment terms, that so long as you abide by those no further collection action will take place, and what the lender will do when all payments are made. That said, this is still an area where the help of an attorney may be money well spent.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we know that the bankruptcy process can be intimidating and confusing. We offer a free initial consultation to every client. We do, however, reserve the right to charge a fee to review any work done by another attorney. For an appointment, call our office at (856) 596-2828 or send us an e-mail. Evening and weekend appointments are available upon request.

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