In Buena Park, it’s common for creditors and debt buyers to sue debtors to recover part of their wages through foreclosure, vehicle repossession, or wage garnishment. They can also reclaim real property acquired through a credit line. If you are notified of a lawsuit by a creditor, you should declare bankruptcy as a debtor. You will obtain protection by automatic stay laws that prevent debt collectors and creditors from collecting their debt during the time of the stay.
During bankruptcy, you will develop a debt payment plan depending on your income to settle the debt. Bankruptcy further allows you to file for liquidation where some of your assets or properties are put up for sale to settle the debt.
When you face a lawsuit from your debtor, you want to speak to an experienced attorney. Los Angeles Bankruptcy Attorney will help you negotiate with creditors and debt buyers to develop a repayment plan within your earnings. Additionally, we can prevent the lawsuit, reduce your monthly payments or total debt.
Bankruptcy and Lawsuits
If your creditor is persistent and has reason to believe you might declare bankruptcy in bad faith, they will file a lawsuit against you. However, sufficient proof is required to lift the bankruptcy. Further, a creditor can still file a lawsuit if they can prove that some of your real property was acquired through credit protected by property liens. A lien on the property means that part or all the sale proceeds will settle the debt once the property is sold off.
The majority of Los Angeles residents who declare bankruptcy do it after noticing foreclosure, wage garnishment, or repossession. It means your debt collector or creditor feels you have taken too long to reply to them, and it is time they did something to recover their debt. If you are notified of a lawsuit, you have many options to stop them. Getting into the courtroom to commence the bankruptcy process is the best option because your case will be referred to the Orange County bankruptcy court, preventing debtors from engaging in any debt collection activities.
Unfortunately, bankruptcy is not for everyone. Suppose you have been notified of a lawsuit by your creditors, and you can’t declare bankruptcy. In that case, you can explore other options like negotiations or request for grace to pay the amount you owe or develop a repayment program. For better negotiations, you must retain the services of a Buena Park bankruptcy attorney. An experienced attorney will negotiate with the creditors to ensure they don’t pursue a lawsuit.
Sometimes, the debtors or creditors will fail to reach an agreement with your bankruptcy attorney because they know your income or wages aren’t enough for you to honor the debt repayment agreement faithfully. Others will be unwilling to cooperate because they are after your property.
If, after being notified of a lawsuit, your creditors have refused to negotiate willingly, you have no other option than to show up in court at the scheduled date. Even if you have not yet hired an attorney, it’s advisable to represent yourself. The reason for self-representation is that failure to appear in court means the court will favor the creditors or debt buyers. It means they can set the standards of payment through wage garnishment, foreclosure, or repossession.
You can prevent wage garnishment or foreclosure by the creditor by challenging the documents presented in court. You must demonstrate that the papers are unlawful or you never entered into an agreement. Remember, your real property or wages are on the line if the creditor wins the lawsuit. Make sure you discuss your case with a Buena Park bankruptcy attorney to ensure the creditors don’t win the lawsuit.
The same way you present evidence in the court to contest the lawsuits by creditors and debt buyers, if you declare bankruptcy in bad faith, creditors will challenge the case to demonstrate that you can clear the debt. Being caught between a lawsuit and filing for bankruptcy can be overwhelming. You need the guidance of a bankruptcy attorney to prevent the suit or ensure bankruptcy isn’t lifted.
The Outcome of a Creditor’s Lawsuit
When you are notified of a lawsuit by the creditor or debt buyer, it means they are looking for ways to recover the money you owe. Some of the ways they will claim your real property or lawfully deduct a particular amount from your check are:
Wage garnishment happens when your creditor demonstrates that you can clear the debt, but you are unwilling or neglecting your obligation. If a lawsuit against you succeeds and your wages are garnished, the creditor will be directly dealing with your employer. At the end of every pay period, the employer will be deducting the buyers’ or creditors’ checks from your wages to pay off the debt.
Instead of waiting for too long until garnishment happens, you can call the creditor or debt buyers to develop a debt settlement program that is reasonable for all parties. Your Buena Park bankruptcy attorney can also negotiate with the creditors to discharge debt accumulated over time, like late fees. Once this is done, you can renegotiate new terms with the creditor so that you can continue the debt repayment but with more favorable terms and conditions.
When it comes to mortgage loans and other credit agreements, you enter into a contract with the creditor to make monthly payments of a particular amount for a specified duration. If you fail to make these installments, primarily if the loan was used to purchase a house or real property, the creditor can reclaim the property through a lawsuit. When the court orders a foreclosure, your property is put up for sale in an auction.
Avoid foreclosure, by all means, possible because the property in the auction is sold at a throwaway price. The creditor doesn’t sell it at the original cost or current market rates because they only want to recover the debt you cannot repay and not the entire loan. You should try all means to avoid foreclosure, including declaring bankruptcy.
A lending firm might send you a notice of vehicle repossession if you cannot service your debt. Instead of waiting until it’s too late, you can move to court with the help of an attorney and stop the repossession. If the agency charged with repossession of the vehicle violated the peace policy or repossessed the automobile illegally, a lawsuit can help you prevent the repossession.
Contesting a Lawsuit in Court
When you are notified of a lawsuit, you can choose to ignore it or move to court. By ignoring the notice, you will be defaulting the loan, which means the creditor who has sued you can move in to collect their debt through repossession, foreclosure, or garnishment. However, if you move to court to challenge the lawsuit, the case will not default.
The first thing that happens when your lender or creditor moves to court is that you are notified of the lawsuit. After the notice, the best thing to do is contact your Buena Park bankruptcy attorney to discuss the case or the plaintiff to renegotiate the initial agreement’s terms and conditions. Talking to your attorney is advisable because a lawsuit by a debt buyer or creditor is a sign they are willing to collect their debt through legal means. A proficient attorney can renegotiate with the plaintiff to develop a new agreement favorable to your current economic situation.
If the case moves to a courtroom, your attorney will come in handy by challenging the prosecuting team’s claims and presenting facts to counter the claims.
Note that an attorney is critical at this stage because the accuser usually prepares a summary judgment. They present the judge with adequate evidence to prove you defaulted on the debt or breached the contract’s terms. If the judge finds out the information is accurate or you fail to present counter-arguments, the court will rule in the creditor’s favor.
However, if you show up in a settlement conference with your Buena Park bankruptcy attorney by your side, you get to meet the creditor or debt buyer in person before a trial to find common ground. If the negotiations are successful, you can avoid trial. However, if no agreement is arrived at, the case will proceed to trial.
The majority of lawsuits filed by creditors against debtors end in summary judgment or a settlement conference. However, if the case enters the trial stage, you should adequately prepare an experienced attorney’s help to convince the court otherwise.
Other Ways of Preventing a Lawsuit
You can prevent bankruptcy through negotiation or declaring bankruptcy.
Filing for Bankruptcy
When you are notified of a lawsuit, you can move to the courtroom and declare bankruptcy to prevent further debt collection activities. Once you are in bankruptcy, your debt buyers and creditors will be notified of the bankruptcy. Declaring bankruptcy means that the automatic stay laws protect you. Creditors and debt collectors are prohibited from contacting you by any means to collect a debt.
Further, an automatic stay prevents debt collection through garnishment, foreclosure, repossession, and other lawsuits creditors might file to force you to service the debt.
Negotiating With Your Creditor
When you notice a lawsuit, you can also contact the lending company and explain your situation. With the current economic times, they are likely to understand your situation. You can explain to them that you closed down your business or lost your job, hence not honoring the debt repayment agreement. If the negotiations are not fruitful, the other option is filing for bankruptcy.
Retaining Your Property Through Bankruptcy
When faced with a lawsuit by your creditor, you probably think you will be out in the streets within no time after losing the property. However, the truth is bankruptcy can save your property and prevent wage garnishment.
Filing liquidation bankruptcy is an excellent idea because you get to retain more property than you expected. In this chapter, the court assigns a trustee who acquires your non-exempt property and sells it off for cash. The proceeds of the sale are then distributed among your creditors and debt buyers. Any debt that remains unpaid is discharged, meaning your creditors will not contact you to collect what you owe.
As per California laws, any property or assets like clothes, vehicles, or other items you should continue working on will not be sold off by the trustee. You might also be allowed to keep some property below a specific value while having your debt discharged.
When you declare bankruptcy under this chapter, you and the court-assigned trustee will be required to hold a meeting. Creditors and the bankruptcy judge handling the case are not required to attend this meeting. During the meeting, the trustee’s questions will be focused on finding out if you understand your case’s regulations and policies. The trustee will also explain the effects of Chapter 7 bankruptcy on your credit score and other options you can explore if you have a stable income.
A Chapter 13 bankruptcy applies to persons with renewable income and your case’s ability to service the debt but cannot do so. This form of bankruptcy is otherwise known as reorganization bankruptcy, and it helps you keep your property and pay your creditors and debt buyers through installments. Under this chapter, you have the chance to propose a three to five years debt repayment plan based on your economic situation. Consult with your Buena Park bankruptcy attorney and develop the best proposal.
The proposal must include full repayment of accumulated debts. Otherwise, it might not be approved. Once your submission is approved, your creditors will be unable to engage in any debt collecting activity, meaning you are not required to make any payments during the automatic stay.
Find a Bankruptcy Attorney Near Me
If you find yourself in a debt collection lawsuit, the creditor or debt collector feels you are incapable of paying the debt. A successful debt collection lawsuit might result in repossession, foreclosure, or garnishment. Therefore, you must take the notice seriously and speak to an experienced bankruptcy attorney for legal advice. At the Los Angeles Bankruptcy Attorney, we are here to represent you if you decide to declare bankruptcy after receiving a notice of a lawsuit. Contact us at 424-285-5525 for a zero-obligation consultation.