The answer to the question of whether you can be sued while in debt consolidation is a resounding yes. Even if you have a debt settlement or consolidation agency working for you, creditors may still take legal action against you. When creditors receive a “no contact” letter, they will assess the balance owed on your account to determine if it is worth the cost of court and legal fees. If so, they may choose to sue you in order to garnish your wages.
Furthermore, with a monetary judgment, creditors can take cash from your bank account, place a lien on any real property owned by you, and even seize personal property such as vehicles or collections. Additionally, with a court assignment order, creditors can intercept and take your anticipated tax refund. Unfortunately, debt consolidation companies are not able to protect you from such legal action. The best way to protect yourself from being sued is to hire a bankruptcy lawyer.
Filing for bankruptcy provides protection from creditors and many other benefits. It also prevents creditors from taking steps to collect a debt while bankruptcy is pending, unless the court grants them permission to do so. If you are unable to pay your debt due to job loss, salary reduction, or other circumstances, bankruptcy may be the best option for you. Chapter 7 bankruptcy can relieve debtors of all or most of their unsecured debts (credit cards, medical bills, etc.).
Chapter 13 bankruptcy allows individuals to restructure unsecured debt into a three- to five-year repayment plan. It is important to note that debt settlement companies may make false claims about the current president signing legislation that gives consumers permission to stop paying their credit card debts. This is not true and should not be taken as legal advice. If you are struggling with debt due to COVID-19, it is best to develop a financial plan ahead of time and consider all available options.
A financial education manager, author, speaker and financial educator can help you understand your options and create a plan that works for you.