When your payday loan provider threatens to sue you, no need to worry; while they have the right to sue you, lenders hardly do it. In most cases, the goal is to pressurize you. However, if they really file a lawsuit, there are ways you can stay free.
It’s important for you to know your rights, what they can do, and what they can’t. This will help you stay safe from illegal threats. Even if the court summons you, there is no need to panic. We’ll guide you to get through it.
When Can You Receive a Court Summons?
Payday loans help you get a quick cash loan. The process of getting a payday loan is easier and more convenient. However, most borrowers fail to repay the loan on their next payday. This leads to a debt cycle, where you keep paying the high interest for several months.
When you refuse to pay any more, the creditor may sell the loan to a collection agency. These agencies will keep calling you to repay the loan. They may also try to withdraw money from your account unless you have already stopped the automated electronic debits.
If previous attempts fail, the collection agency will then send you an attorney letter and, finally, file a lawsuit. At this point, you will receive a court summon. Don’t think that the agency won’t file against you for such a small amount. They do. Therefore, it’s better to settle everything before it gets too far.
What to Do if You are Served a Court Summons for a Paycheck Loan?
Many borrowers get worried as soon as they receive the attorney letter. However, instead of worrying, follow these steps:
1. Read the Summons Very Carefully
First of all, try to calm yourself and then read the letter carefully. Double-check the name and other information to ensure it’s really for you. You should also check the creditor’s information to make sure it’s unpaid. Double-check the amount and see if it’s right.
Then, most importantly, check the dates. Payday loans have a statute of limitations, which varies depending on various factors. If it’s already past the statute of limitations, then you no longer have to repay them. You can contact the FDCPA if they are trying to scam you.
2. File an Answer
The summons will have a deadline mentioned in it, which is typically 28 days. You must provide a response by this time. If you don’t, then you will lose the case by default. Most borrowers don’t respond and lose the case in this manner.
You can hire an attorney to file an answer. Many non-profit credit counselors offer free or low-cost consultations. Regardless of the amount, you should consult a counselor about your next steps.
Send the response via mail to the attorney or the creditor, and take 3 more copies to the court.
3. Try to Settle the Debt
If you think you have been overpaying to your lender, talk to them. Try to settle the debt that benefits both of you. Ideally, it’s better to contact the creditor before they sell the debt to the agencies.
Selling debts to collectors doesn’t benefit the creditors as they lose 96% of the debt’s value. Offering 20 – 30% of what you owe might be a good offer for the creditor. In this way, you can stay away from the court hassle.
4. Demand Debt Verification
Here is a catch that many borrowers don’t know. You have the legal right to ask for the validation documents of the loan. They have to provide it. Ask for evidence that they are authorized to ask for the remaining debts.
Payday loans are not legal in some of the states. In that case, the payday loan provider may also not be registered or legitimate to collect payday debts from you. Besides, original agreement papers include the original terms and show if the loan is still active or void.
5. Find an Attorney
Look for an attorney who specializes in debt collection defense. Many legal aids are available for borrowers with low incomes. Be honest with the attorney, and share if you really owe the money.
6. Consider Bankruptcy
Filing a bankruptcy can discharge your payday loan debts. File a petition with the bankruptcy court, provide financial information, and meet specific eligibility requirements. If granted, you’ll be free from all sorts of debts. Payday loan direct providers or the collectors won’t be able to sue you then.
What Debt Collectors Can’t Do
Despite owing money to the collectors, you have certain rights. The collectors must follow federal and state laws when attempting to collect your debt. They are obliged to follow the Fair Debt Collection Practices Act (FDCPA). Things they are not allowed to do include:
- Harass or threaten you
- Use abusive language
- Give you a false or increased amount
- Continuous threatening of physician violence.
- Conduct any sort of violence.
How To Avoid a Debt Collection Lawsuit
Courtroom summons can be nerve-wracking for many borrowers. If you want to avoid this experience, then try the below steps:
- Double check the creditors and make sure the debt is legitimate. Without a validation letter, they cannot take any action against you.
- Check if the money amount is correct. You can dispute the debt if something seems wrong. The creditor or the collector cannot demand any extra money.
- Trying to settle down outside the courtroom can be a good option. In that case, it’s better to contact the loan provider directly.
- Consult with an attorney regarding money and debt management. If needed, you can also file for bankruptcy.
How To Spot Debt Collection Scams
Don’t rush to settle the debt right after receiving the letter. Scammers often intend to make money illegally. Here are a few signs borrowers can follow to spot debt collection scams:
- Asking for immediate payment. Real collectors won’t show such a rush. Instead, they will give you a timeframe or a deadline.
- No written documents. It’s a borrower’s right to ask for written proof of the money they are demanding.
- Scammers often threaten arrest, jail time, or law enforcement action. They want to pressure you without giving you enough time to think about it.
- No case numbers. Scammers often send fake legal documents or summons. The paper may look real but often does not contain any case number or court information.
- Scammers often deny to verify the debt. They may ask for immediate action as waiting is not an option for them.
Frequently Asked Questions
Can I get arrested or go to jail if I don’t repay a paycheck loan?
No, failing to repay a paycheck loan won’t get you arrested. When the collectors sue you and the court judgment, they may issue a warrant for your arrest. Paying your payday loans on time, therefore, is much better.
Do payday lenders often sue borrowers?
While payday lenders have the right to sue borrowers when they refuse to repay, lenders usually don’t file the case. Instead, they sell debt to a collector, who files the cases.
Can the lender garnish my wages?
This depends on your state law. While some states allow wage garnishments, most states don’t. You can prevent this by contacting the bank authority.
Conclusion
Your payday loan providers can file lawsuits against you. Upon receiving the letter, stay calm, double-check the information, and read the letter carefully. Contact an attorney and discuss your future steps.
