Can I get Sued for My Debt? | How to Owe Money Legally
Is it illegal to be a debtor? Avoiding legal action from creditors
Getting sued for not repaying your debts, and being court ordered to pay them is an outcome that costs even more than the original debt. This is how to be in debt without facing legal problems from your creditors.
Can I Go To Jail For Unpaid Debts?
What are the ultimate consequences of having an unpaid debt in Australia?
Thankfully in our modern society, we don’t have ‘debtor’s prison’ like in Medieval Europe. Some countries have conditions under which debtors can be incarcerated, but this is not the case under Australian law.
So you can relax about this point if you live in Australia, you live under a reasonably civilised legal system. However, that doesn't mean that you are off the hook in regards to paying off your debt. Creditors are able to sue you to claim back their debt, usually by forcing you to declare bankruptcy. If you are in this situation, it is important that you seek advice from a financial counsellor on how to deal with your creditors and if you choose to fight the law suit then a lawyer will be needed as well.
So unless your debt is in some way connected to a crime, you cannot go to jail for debt. Even then it would be the crime you are going to jail for rather than the actual debt. You can go to debt for breaching certain conditions that revolve around debt. This can include violating a court order, avoiding taxes and not appearing for a debtor’s examination. If you fail to pay your taxes or fail to pay a debt such as child support, you could be jailed. The other way is not showing up for a debtor's examination where you haven’t appeared for a hearing into your finances.
Under What Conditions Can I Be Sued For Debt?
Who can sue and what can they claim?
Legal conditions mainly apply to the debt collectors (creditors) rather than the debtors. They determine under what conditions they can sue you if they wish. Then it is up to the ruling of the judge to decide if they win the case, based on law, the specific situation and the discretion of the judge.
If you submit a debt agreement or personal insolvency agreement to your creditor but they don't accept it, then they are able to force you into bankruptcy. This is one of the main considerations you need to make before you submit a debt agreement or insolvency agreement. Your proposal has to be worth more to your creditor than if the forced you into bankruptcy. So if the creditor is able to earn more by forcing your into bankruptcy then that is often the path they will choose over your proposals.
Being force into bankruptcy has serious consequences that you need to consider before fighting a legal battle. Especially because you are already in debt, it can be very costly to fight your creditors who will have the best lawyers and lots of money to throw at a case. Usually, if it proved that you owe debt to the creditor and haven’t been paying it, you will be forced into bankruptcy by the courts. It can be very hard to fight your case, especially when bankruptcy is the norm for people who are not in a position to pay off their debt.
How Much Are Debtors Usually Sued For?
What will your creditors claim from you
If the creditor wins the case and forces you into bankruptcy, they often gain privilege to:
Seize property used as security for the loan even if you’ve paid more than $10,000 or 25% of the amount loaned.
Repossess property worth greater than $7300 (a figure which changes each year to account for inflation).
Garnish your wages. Meaning, a portion of your wages could be redirected to the creditor.
Freeze all or part of your bank account.
Sell the debt to another party.
You can also be forced by the court to pay the legal fees of the creditor that sued you. So there are serious risks to be avoided when in debt. Seized property can be a shock, a lifestyle-changer and a major inconvenience. Court orders to repay debt only increase the stress and urgency. And when debts get passed from one collector to another, you find yourself dealing with lots of different companies, none of which truly know or understand your situation.
How to Avoid Being Sued for Debt
What can you do to be safe from being perused legally
This is hard to answer because a lot of the time, debt collectors press charges against debtors based solely on their amount owing, time owing and if they have failed to make payments. So obviously, make the payments if you can. If you can but you aren’t making them—that is the precise reason why creditors are able to file charges against creditors. Besides this:
Don’t try to sue your debt collector. This is an unfortunate fact about the legal system, but if you try to sue them, they may try to sue you back. It’s a common strategy. What’s unfortunate is that there are many cases where the ability to sue the creditor is one of the few powers that debtors hold. And of course, if you’re being exploited, we encourage you to seek justice. But not without considering the consequence that you may have your own lawsuit on your hands as a result.
Be civil. Debt collectors are people doing their jobs for companies run by people doing their jobs. They’re not as bad as they seem when you owe thousands of dollars to a company badgering you every day. The key is to be civil, nice and above all, law abiding to them, so they have no extra ammunition to use against you in court, or extra motive to sue you.
Keep in communication with your debt collector. If you can’t make a payment, state your truthful reason and preferably state it before the collection date.
The best way to not be pursued legally for unpaid debts is taking care of them as soon as possible. If you are having trouble paying of your debt it can be a good idea to talk to a financial counsellor like the ones at Get Out Of Debt Today. They can advise you on how to best handle your situation, whether it be an informal agreement and debt negotiation or smarter budgeting. They will be able to help you handle your debt before it becomes a legal matter in the courts. The best way to make sure your creditors don’t sue you is by coming to an agreement with them well before they are considering legal action.
This way you pay off your debt under your terms with no defaults or black marks against your name. Thousands of Australians are forced into bankruptcy every year for falling behind on their debts. But by talking to a debt counsellor, this can be avoided and you can pay off your debts without being constantly harassed by debt collectors and your creditors. Debt is stressful, but if you don’t take care of it when you need to, it will just end up building up and becoming worse over time.
What To Do If I’m Being Sued For Debt?
Steps to take if someone has taken legal action against you
Respond to the lawsuit. Not responding won’t make it go away, but it may incur additional fees.
Defend yourself. If you receive a lawsuit, that’s the time to invest in a lawyer to advise you, and defend you.
Challenge the lawsuit. The basis for challenging it is the domain of the lawyer you hire. But don’t assume that the creditor has a case. They may have even sued you as part of their automatic business process that sues everyone of certain debtor criteria. One of the stronger cases to use is challenging their ability to prove what you owe.
Sue them back. What we mentioned before goes the other way. You can sue debtors back if they sue you. Strong cases often involve evidence that the debt collectors overstepped their legal limitations in asking for repayment, such as calling outside of the legal hours.
File for bankruptcy. As a last resort, for large sums of debt, filing for bankruptcy may be the strategic option. There are positives and negatives of declaring bankruptcy so make sure you have evaluated this carefully, with a few towards the long term.
At Get Out of Debt Today, we wish to empower debtors, and to give them a fair chance in repaying their debt. This is why we provide information like this, aimed at helping debtors through difficult financial situations like being sued for debt. If you’re a debtor being sued, you can interpret the main point of this article as this: stay hopeful. You still have many options and have the potential to win the case or make them withdraw.