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Promoting a Proactive Approach towards Financial Security

Mounting a defense in a debt collection lawsuit

California residents who are struggling to cope financially will likely know that debt collection companies can be extremely aggressive. A study conducted by the Consumer Financial Protection Bureau revealed that one in four of the 70 million Americans who have had dealings with debt collectors felt threatened. It is often the possibility of legal action that causes the most concern. However, there are several things that consumers can do if they are sued over an unpaid bill.

One of the biggest mistakes consumers make is not responding to a debt collection lawsuit. Failing to show up in court will result in a default judgment, which could lead to additional fees and legal costs. Creditors with judgments in hand may then pursue even more aggressive tactics such as wage garnishments and asset seizures. Instead, consumers should demand that creditors prove that the debt is legitimate as this can be difficult to do if it has been sold.

Creditors generally avoid incurring legal fees whenever possible, and they may not file a lawsuit until after the statute of limitations has lapsed. Creditors in California have four years to file a lawsuit over an unpaid debt, but making even a small payment could restart the clock. This is why debt collectors often ask for very small amounts before taking legal action.

Filing for personal bankruptcy puts an end to creditor lawsuits even if the debt is legitimate and the statute of limitations has not yet expired. This is because an automatic stay is issued when a Chapter 7 or Chapter 13 petition is filed that orders creditors to cease all collection efforts. A bankruptcy lawyer could explain how the automatic stay also protects assets like bank accounts and prevents paychecks from being garnished.

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