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3 Ways your creditors can hurt you

In the post-economic meltdown period, underemployment and unemployment is a common thing in the U.S. Consequently, consumer debt is shooting up at an alarming rate. But when people fall behind their payments and their outstanding balance increase, creditors start getting anxious. They might use a number of methods to recover their money from the debtors. It usually starts with harassing phone calls and eventually you are sued by the creditors. This recovery process can be a far from nice experience for you. Therefore, you must know in advance, what your creditors can do to you and prepare yourself accordingly. Here are a few ways in which creditors can cause trouble to you in case you are knee deep in debt:

1. Filing a lawsuit against you

When the creditors realize that abusive phone calls are not going to make a difference, they file lawsuit against you. The creditors want you to panic. So they would present the whole thing to you in a way which would make you think that imprisonment awaits you in near future. However, you should understand that you cannot be imprisoned for a civil debt.

Lawsuit papers are generally mailed to the debtor. However, they can also be sent to through a Sheriff. The creditors like this because most people are visibly scared when a law enforcer in uniform appears before them. Debtors feel more embarrassed when this happens in front of their colleagues or neighbors.

Many debtors are often concerned over the fact that they are supposed to reply to the court within a certain period of time. They fear that if they don't answer within the specified time then it can lead to their arrest. This notion is totally baseless since you are not being sued for any criminal offense. However, you must understand that it is wise to turn up in court when summoned. If you don't then the court can very well issue a one sided judgment against you. You should also hire an experienced attorney for legal guidance. Your attorney will represent you if you fail to turn up in the court on due date.

2. Foreclosure: a serious setback for homeowners

Foreclosure is a much dreaded legal step through which a creditor forces a debtor to sale his house. Lenders often threat people with foreclosure but they usually avoid it if there is a chance of getting their money back within a certain period of time. However, the foreclosure threat would pressurize the debtors immensely since losing their home can be a major blow for an individual.

The foreclosure process involves the following steps:

  • The debtor will be served a legal notice and he will be given a chance to defend himself.
  • If the court is not convinced with your arguments then your house will be advertised for sale. This can draw the attraction of a lot of people and can be quite an awkward situation for the debtor.
  • The property is finally sold to the person who offers the highest price. When the auction is over, the debtor must shift to another dwelling place.

It is sometimes possible to avoid foreclosure and save your home through bankruptcy.

3. Exemption forms and seizing assets

This involves sending a notice to the indebted person that they can protect some of their assets in case they are listed on an exemption form submitted to the court. The debtors need to respond within a specified time. The notice is usually sent by the sheriff. Many people think that ignoring this notice is the best strategy. This is absolutely wrong. If you If you do not respond in time, the creditors might seize your valuable assets like home and car in order to put a lot of pressure on you.

In some states, the list of properties that can be protected is quite big. In that case the creditor can hardly seize the debtor's property. In this situation, the debtor's condition is described as judgment proof.

Sometimes the value of an asset is considerably high to be included in the list of protected assets. This is typical in case of business houses. Under the circumstance, the creditors can ask the sheriff to sell the property (which is usually sold at a cheaper price compared to its market value). If the money raised from selling the property does not cover the entire debt then the debtor has to pay off the outstanding balance.

It is relevant to mention here that a judgment against you can turn into a judgment lien. This means that when a property is sold, the money that you get would go to your creditor. This might exclude your home because in some states home will be in the list of protected assets.

You are certainly not in an enviable position when you are being sued by the creditors. So be wise with your money and don't give the lenders a chance to point their accusing fingers at you. If you are already in some financial trouble then do remember the above points and make plans accordingly.

With proper help you can
  • Lower your monthly payments
  • Reduce credit card interest rates
  • Waive late fees
  • Reduce collection calls
  • Avoid bankruptcy
  • Have only one monthly payment
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