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Legal action from a creditor

An Arkansas resident who falls significantly behind with a creditor might face an eventual lawsuit in spite of efforts to negotiate repayment plans or alternative settlements. In some cases, legal action might even be threatened on a debt that is no longer valid due to the applicable statute of limitations. A response or lack of response in dealing with creditors and legal action could affect the outcome.

If a suit is ignored, there is a significant possibility of an adverse judgment being entered. Although creditor harassment may include threats of lawsuits or other negative activities, a real suit can create more difficult circumstances, opening the door for possible wage garnishment or freezing of a bank account. Even if a balance is disputed or if the validity of a debt is questioned, it is important to respond to a lawsuit prior to a court date and to appear in court so that a judgment isn't rendered without the debtor's side of the issue being heard.

In dealing with a single debt that is disputed, it may be helpful to seek guidance from an attorney before the issue reaches the point of legal action. However, many individuals reach the stage of legal action due to many debts affecting their ability to keep up with payments. These issues may arise because of unemployment, health problems or other financial setbacks. In such cases, it may be beneficial to consider bankruptcy instead of allowing a debt to be adjudicated in court.

An individual who needs to manage many past-due accounts through bankruptcy may find that an attorney is helpful for explaining the process and providing guidance for the first steps. If a lawsuit is pending, it may be important to take these steps quickly by going through required credit counseling and gathering a full list of debts.

Source: Consumer Financial Protection Bureau, "What should I do if a creditor or debt collector sues me?", November 09, 2014

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