If a creditor has sued you while you’re in a debt settlement plan, take a deep breath. You are not alone, and you still have options.
As a bankruptcy lawyer I often meet with people who are trying to figure out why the are being sued. After all they joined a debt settlement plan because you wanted to do the right thing. They wanted to pay back what you could and get your life back on track. So getting court papers in the mail can feel like a punch in the gut. You might feel scared, angry, or even ashamed. After all they were making their payments to the settlement company.
Those feelings are normal. But please know this: a lawsuit is not the end of the road. Many people face this exact problem, and many of them come through it just fine. The most important thing is to act quickly. This guide will walk you through what to do, step by step.
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Why Can a Creditor Sue Me If I’m Already in a Plan?
A debt settlement plan does not stop creditors from suing you. This surprises a lot of people, so it’s not your fault if you didn’t know.
Here’s why it happens. In most settlement plans, you stop paying your creditors and save money in a special account instead. Once enough money builds up, the settlement company tries to make a deal with each creditor. But your creditors never agreed to wait. While your payments are on hold, some creditors get tired of waiting and decide to go to court to get their money.
A debt settlement company is not a court, and it is usually not a law firm. It cannot legally stop a lawsuit. Only a few things can do that, such as reaching a deal with the creditor, winning in court, or filing for bankruptcy.
What to Do Right Away
The first few days after you get sued matter the most. Here are the steps to take.
- Don’t ignore the papers. We know it’s tempting to put them in a drawer and hope they go away. But they won’t. Open them and read them, even if it’s hard.
- Find your deadline. The papers are usually called a “summons” and a “complaint.” The summons tells you how many days you have to respond. In Maryland, most debt cases are filed in District Court. There, you usually have just 15 days after you’re served to file a form called a “Notice of Intention to Defend.” If your case is in Circuit Court instead, you usually have 30 days to file an answer. That’s not much time, so write your deadline on your calendar right now.
- Call your debt settlement company. Tell them about the lawsuit right away. Ask if they can try to settle this debt first, using the money in your account. Get any promises in writing.
- Check the details. Make sure the debt is really yours and the amount looks right. Look at who is suing you. Sometimes it’s not your original creditor but a company that bought your debt. Also note how old the debt is. In Maryland, creditors generally have three years to sue on most consumer debts. After that, Maryland law says they can’t sue you for it at all.
- Talk to a lawyer. A lawyer can look at your papers, spot mistakes, and help you choose the best path. Many offer a free first meeting, so it doesn’t hurt to ask. It may be time to look at other options. They can also advise you on filing and a notice of intention to defend or an answer.
What Happens If I Do Nothing?
If you don’t respond by your deadline, the creditor will likely win automatically. This is called a “default judgment.” It means the court decides against you without hearing your side. In Maryland District Court, many creditors ask for an “affidavit judgment.” If you don’t file your Notice of Intention to Defend in time, the judge can rule for the creditor based only on their paperwork, with no trial.
A judgment gives the creditor powerful tools to collect. After the appeal period, they may be able to:
- Garnish your wages, which means taking part of each paycheck before you ever see it.
- Freeze or take money from your bank account, sometimes without warning.
- Place a lien on your property, such as your home.
A judgment can also add court costs and interest to what you owe. And it can make your other settlements harder, since money you planned to use for them may get taken. That’s why acting fast is so important. Responding on time gives you the most choices.
Your Options
You have more than one way forward. The right choice depends on your money, your debts, and your goals.
Option 1: Settle this one debt
Sometimes the creditor will still make a deal, even after suing. This might be a lump-sum payment for less than you owe, or a payment plan. If you settle, make sure the agreement is in writing and filed with the court so the case gets closed.
Option 2: Fight the lawsuit
You may have good defenses. The creditor might not have the right paperwork to prove you owe the debt. The amount might be wrong. Or the debt might be more than three years old, which is generally too old to sue on under Maryland law. A lawyer can tell you if you have a strong case.
Option 3: Consider bankruptcy
For many people, one lawsuit is a sign that more are coming. If you’re struggling to keep up with your plan, bankruptcy may be a better fit.
When you file for bankruptcy, a court order called the automatic stay goes into effect right away. It stops most lawsuits, wage garnishments, and collection calls in their tracks. That means the lawsuit against you, and others like it, would pause.
Bankruptcy can also wipe out many kinds of debt or put you on a payment plan you can afford. It may sound scary, but it’s a legal tool designed to give honest people a fresh start. A Maryland bankruptcy lawyer can help you see if Chapter 7 or Chapter 13 makes sense for you.
You Don’t Have to Face This Alone
Being sued doesn’t make you a bad person. It means you’re going through a hard time, and hard times happen to good people every day. Job loss, medical bills, divorce, and rising prices can push anyone into debt.
What matters now is your next step. You’ve already taken one by reading this. The next one is getting help from someone who knows the law and cares about your future.
At Southern Maryland Law we’ve helped many Marylanders who were sued while in a debt settlement plan. We’ll listen without judging, explain your choices in plain words, and help you find the path that protects you and your family. Call us at 301 645 4100 or to schedule your free consultation. Don’t wait for your deadline to pass. The sooner we talk, the more we can do.
