A creditor lawsuit will start with the creditor serving a complaint on the debtor. The debtor then will have the opportunity to respond to the complaint with an answer. Sometimes a debtor will not respond if they do not want to contest the case, leading to a default judgment being entered. Assuming that they respond, the case will proceed through pre-trial procedures such as discovery and summary judgment motions. The parties may be able to reach a settlement before trial, or a judge or jury may need to resolve the dispute.
In most ordinary creditor lawsuits, you will receive notice of the creditor’s request for a trial and trial date. You also will receive notice of any required settlement conference, as well as the eventual trial date. If the case is less routine, or if the debtor is bringing a counterclaim, a longer series of communications between the two sides may ensue.
The discovery process may be very short or non-existent if the debtor does not assert a defense to the lawsuit.
A creditor lawsuit tends to be straightforward. Often, the debtor clearly has not paid the debt, and they have no defense, so neither side needs to collect substantial amounts of evidence. If the debtor does have a valid defense, however, each side may engage in the discovery process. This allows the creditor and the debtor to get information from each other that is relevant to the case. Discovery may include depositions, in which a witness or a party answers questions under oath, and the court reporter produces a transcript of the interview. Other common tools include interrogatories and requests for admissions. Interrogatories are sets of questions that one party asks the other party to answer in writing, while requests for admissions can narrow the case by having one party or the other admit or deny statements made by the other side. If one side has documents or tangible items that are relevant to the case, the opponent may file a request for production of the documents or a request for inspection of the items.
These are just some examples of discovery tools. Many courts have rules to curtail the scope of discovery and promote the efficient resolution of lawsuits. If you feel that a creditor is using the discovery process to harass you or for malicious purposes, you can ask the court to intervene on your behalf. Otherwise, you should take care to follow the rules of discovery and respond to requests promptly and truthfully.
Ending the Case Before Trial
Most cases do not actually go through a full trial before a judge and jury. Instead, the parties reach a settlement before the trial. Some states make a settlement conference mandatory, and it can be a useful way to get a sense of the strength of your position, since a judge or attorney usually will facilitate it in those states. You do not need to settle even if the settlement conference is mandatory. However, it can be more cost-efficient and less stressful than going to trial. If you go to trial, you may be ordered to pay back the full amount of the debt, while you may be able to pay only part of it if you settle with the creditor.
A creditor may be willing to accept only a fraction of what the debtor allegedly owes in exchange for the efficiency of a settlement.
Another way in which a case can be resolved before trial is when one side (usually the creditor) obtains a summary judgment from the court. The party moving for summary judgment needs to show that there are no disputed facts in the case and that they are entitled to judgment as a matter of law. This is a relatively high standard to meet, but you should make sure to oppose a summary judgment motion if you believe that you have a valid argument. Otherwise, the judge likely will rule for the creditor.
Resolving the Case at Trial
In the unlikely event that a creditor lawsuit goes to trial, a jury will resolve any disputed issues of fact, while a judge will make the necessary legal determinations. You probably should retain an attorney if your case goes to trial. Many complex rules apply to a formal trial, and someone who is familiar with how the process works will be better able than an individual debtor to present their case as persuasively as possible.