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Will a Creditor Actually Sue You When You Default on a Debt?

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Will a Creditor Actually Sue You When You Default on a Debt?

We often have clients call us, when debt becomes unmanageable, asking if a creditor will actually sue if you default on a debt. While it may seem unlikely, it is, unfortunately, very common.

A creditor may sue you themselves, hire a paralegal to cover it, or assign your account to collections, whereby the collection agency may sue you. If a judgement is secured against you, they can then take enforcement action to obtain the funds owed.

Enforcement action may include a wage garnishment, a property lien or a frozen bank account.

All of these are embarrassing and could have other consequences.

A wage garnishment not only reduces your income (as the money is taken from the source to pay the debt), it also lets your employer know that you have a financial problem. This is particularly problematic for those in jobs where you have to be financially responsible. If you’re self-employed, the notice of garnishment is sent to your clients and intercepts their payments to you, letting them know that you’re financially in trouble. This can damage your reputation.

A lien on property will effectively mean that you can’t refinance the asset and could mean additional fees and financial consequences to get the lien discharged when it is paid. It will also make the creditor a secured creditor, thus reducing financial options should you decide to file a consumer proposal or a bankruptcy.

Not only will a frozen bank account result in an inability to access funds, it can damage your relationship with your bank. This may result in them choosing to suspend other credit products, make changes to your account (i.e. removing an overdraft), or deciding not to extend credit to you in the future.

If a creditor is threatening to sue you, you need to take action now. Waiting will often just result in one of the above.

If you find yourself worrying about such things, the first question to ask is why you are in this situation to begin with. Do you have financial challenges making it hard to pay your debt? Perhaps you just need a fresh start.

A consumer proposal is a great way to consolidate debt and:

  • Stop collection action – even a lawsuit or enforcement action from a judgement (as long as it’s not a lien)
  • Stop interest
  • Reduce debt in most cases
  • Consolidate everything into a single monthly payment

If you owe and your creditor is threatening to take you to court, don’t assume that this is an empty threat. Once legal action is initiated, you may find yourself in much deeper financial waters.

At DebtCare, we can help you deal with your debt before it gets to this point, or, if it has already reached this point, help you stop that enforcement action.

Call us today 1 (888) 890-0888.

 

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