What Happens If Someone Sues You and You Don’t Have the Money?

Prepare to be honest about your financial situation and approach the matter with respect.

Ignoring the problem will only make things worse.

Maybe you lost your job and you can no longer pay rent or keep current with mortgage payments. Maybe you were in a car accident and are being sued. Maybe you purchased a large-ticket item, a car or house, and you have defaulted on the payments.

The bottom line is, you’re being sued and you don’t have the money to pay.

Here’s what happens if someone sues you and you don’t have the money …

What Happens If Someone Sues You and You Don’t Have the Money?

You will probably get reminders from your creditor that ask you nicely – at first – to pay what you owe. Those letters get more serious as time goes on. And ultimately, the word “sue” appears. You get a notice that you are being sued and you face a court appearance.

There are some things you should know and some things you can do to help yourself in this situation. One thing you can do is contact a lawyer who understands how to challenge civil suits and knows your rights.

The first thing you should probably do is send a letter to your creditor stating that your situation changed and you just don’t have the money right now to make your payments.

A couple of good things can happen from this action. It is possible that the creditor will ask if you can make lower payments or partial payments. That creditor will be more interested in getting some money from you, even a little bit, rather than nothing at all.

The other thing is, if you state you have no money and no assets, it would not make sense for the creditor to take you to court. There is nothing to be gained by doing so.

While this makes sense, there are creditors and collection agencies who tend to be overly aggressive in their attempts to collect money for their clients. You should know some of the basic rules of the collections business.

Creditors and Collection Agencies Your Creditor May

Consumer Protection Agencies protect consumers from the harassment of creditors and collection agencies. There are several prohibitions directed at debt collectors including the following.

They cannot call you at home more than twice within seven days, for each debt. They cannot call you at work if you ask them not to call and put that request in a letter to them.

They can visit you once in any 30-day period for each debt unless you give permission for additional visits.

They cannot visit your home at any time other than normal waking hours.

Collection agents cannot use obscene language or threaten to take you to court if their client does not plan on legal action.

And they cannot make your debt public by sending notices in envelopes or postcards that show you have a debt. They also cannot tell anyone else about your debt including employers, relatives, friends, and neighbors.

Conversely, creditors must identify both the name of the person calling and the name of the creditor they represent. And if you have told the creditor to contact only your attorney, they must do so and not contact you.

Going to Court

If you are sued and you must go to court, you are not defenseless. There is a process involved where you or your attorney can challenge allegations.

The burden of proof is on your creditor (the plaintiff) who must prove that you owe the debt and must prove the amount of the debt.

There is a process of Discovery that allows you to get information from the other side. You can request such information as the contract or agreement you signed that says you owe the debt. You can request the account number or the ledger (record) of what you owe.

You can ask the plaintiff to answer questions in writing about your debt. These questions can include when did the debt occur, how much it is, what interest rate was used, and how long did the company have the right to collect the debt?

You can write down a list of things you think are true about your case and ask the plaintiff if they agree or disagree.

You can ask for a deposition where the plaintiff must answer your questions under oath. An attorney can help you with this process.

Protected Income

The law does not allow creditors to take everything you own. It protects certain income and properties from creditors. You can keep property that is “protected” from creditors.

If all your income, property and possessions are protected, then you are considered “collection proof.” And if so, you don’t have any income or assets that creditors can take from you.

Protected income includes income from Social Security and Social Security Disability, child support and welfare, worker’s compensation, unemployment compensation, and veteran’s benefits.

If You Lose the Court Case

If the judge makes a decision that you do, indeed, owe money to the plaintiff, the next step is for the plaintiff to follow-up with an action to collect the money.

The possibilities include garnishing your wages if any, or taking your car or property

You may be employed but not have enough money to pay the full amount of the judgment against you. Creditors can garnish your wages by taking up to 25 percent of your earnings to recover what they lost.

Creditors can also go after bank accounts and future assets. If you are a student who will soon graduate and become employed, this could be an example.

Regarding personal property, every state has different rules about what is – and what is not – protected from creditors. In most cases, there are homestead laws that protect your home or property. Your car or another primary vehicle may also be protected from creditors (especially if you use it for commercial purposes).

There is one other possible solution that might frighten you but could be a solution to your problem. You can file for bankruptcy under Chapter 7 of the federal Bankruptcy Code. This will protect you from creditors trying to collect from you. And it may be a smart financial move.

But it does have a downside.

Bankruptcy should probably not be considered for a single debt. It is a move that can affect your ability to get credit in the future. It can affect your credit rating. It can prevent you from renting or buying a house in the future. It can have other negative effects. It should only be considered in consultation with an attorney.