What Happens When Pay Day Advance Lenders File A Lawsuit Against Their Debtors?

Payday Loans Debt Consolidation

What Happens When Pay Day Advance Lenders File A Lawsuit Against Their Debtors?

When you fail to repay your debts that you owe to pay day advance lenders, they have the legal right to file a lawsuit against you, but it has to be a civil lawsuit, not a criminal lawsuit. No criminal charges can be placed against you. They cannot even file an FIR or get you arrested just because you are financially so poor that you cannot repay the debts you owe to them. It is illegal for them even to give such threats that they will get you arrested or file a criminal lawsuit. Such threats are rated as harassments under the Fair Debt Collection Practices Act. In a civil lawsuit, if the court gets convinced that your lenders are not doing anything illegal and you do owe certain amount of debts to them, the judgment is very much like to come in favor of your lenders only. Some possible consequences that you may have to face in such cases include the following.

Wage Garnishment

The court may allow pay day advance lenders to get their money back through wage garnishment. As per this process, your employer gets a legal order to pay a certain amount of money from your salary to your payday lenders every month. This way, the money will get deducted directly from your paycheck. But, it is not just all about getting a reduced monthly salary. The real problem that wage garnishment causes is to your credit report. The entry regarding wage garnishment stays in your credit report for a very long period of time. The damage it causes to your credit score brings harsher consequences.

Liquidation Of Assets

Another possibility is that the court may order for liquidation of some of your assets so that your pay day advance lenders can be paid back using the proceeds thus received. In such cases, a trustee is appointed to look after the entire process. Certain assets are seized, which can include your car or any other expensive asset (including your home), and then they are sold off under the supervision of the court-appointed trustee. The money thus received is paid to your lenders in full settlement of your debts as per court order. Such forced liquidation also results in a serious negative entry reported to your credit report that causes severe damage to your credit score, which eventually makes your financial life more difficult.

How To Deal With Such Lawsuits?

If your pay day advance lenders are running a legal business in full compliance of the state and federal payday loan laws, you cannot do much against such lawsuits. But, you can still use certain defensive strategies. To start with, it is very important for you to keep in mind that the liability to present the proof of loan lies to the lenders, but sometimes they do not maintain proper written record. So, it is always wise to request the court to ask your lenders to submit documented proof that you really owe the debts to them. If they fail to submit proof within a certain time period as given by the court, the lawsuits can get dismissed straight away. Obviously, you have to be extremely lucky to succeed with this strategy. However, if the debts you owe to them are older than a year, you must look into the statute of limitations for such debts in your state. In many states, when payday loans remain unpaid for longer than one year, debtors can no longer be held liable to repay those debts. Those debts are considered as null and void.

However, on a practical note, you can easily avoid such lawsuits by utilizing the services of a debt relief organization. If your pay day advance lenders are doing legal business, you will have to repay them anyhow. But, you can make things much easier and more affordable by allowing a professional debt consolidator to mediate between you and your lenders. They will help you find out a middle way to get rid of the debts. A series of negotiation will take place between them and your lenders. Eventually, you are offered a plan to pay off a reduced amount of money in easy installments over a certain number of months. If you are not sure about how such programs work, you can contact such organizations directly because they do not charge any fee for first consultation.