3 Ways to Avoid Being Sued by a Creditor

Getting sued by a creditor might send you into a state of panic. What's going to happen once you arrive in court? Will the judge make you pay? How will you pay? Your creditor might file suit after six months of default. And going to court for a debt can complicate your situation. The judge might order you to pay the balance and place a judgment on your credit report.

But even if you don't have the cash to write a check and strike the balance clean, you can dodge a legal battle with your creditors and perhaps keep your credit in-check.

Pay the Bare Minimum to Keep Creditors Off Your Back

Creditors will never harass you to pay off a debt in it's entirety. But skip a monthly payment, and creditors will have your phone ringing off the hook. Stay on your creditors good side by paying at least the minimum. This method might not pay down the balance quickly, but it will at least keep your credit and relationship with the creditor intact until your income increases and you're able to increase your payments.

Open Your Mouth

Creditors aren't all mean and nasty. And contrary to what you might think, some creditors are here to assist you. The key to getting assistance is opening your mouth and alerting them to changes in your employment or financial situation. If you can't afford a payment, or can't afford the amount of a payment, tell your creditors. The company might allow you to skip one or more months or reduce your interest rate to bring down the payment.

Propose a New Payment Arrangement

Payment assistance only works if you're current on your debt payments. But if you've already defaulted and a creditor threatens a lawsuit, you can avoid being sued by contacting your creditor to establish a new payment plan. Your creditor has likely already sent your account to collections or written-off the debt. But if you're ready and willing to pay, the company might give up their right to sue.

Consequences of Being Sued by a Creditor

Avoiding a lawsuit over debt is key if you're trying to build your credit score and qualify for future credit. Judgments remain on credit reports for seven years; and even if you decide to pay your creditor after acquiring a judgment, this gesture doesn't erase the mark on your record. Every future creditor will see the judgment for the next seven years and judge accordingly. Even worse, your employer might note the judgment, and if good credit is a criteria in your line of work, getting sued by a creditor could put you in jeopardy of losing your job.

Justine Harelik, "Avoiding a Lawsuit Over Credit Card Debt," Bankrate.com