Considerations

• Debt collectors file lawsuits to collect unpaid debt. The tactic is common in credit card cases, although lawsuits are also possible for credit obligations stemming from automobile repossession, home foreclosure and other loans. Debt lawsuits are serious legal matters and can force people into bankruptcy.
  
  

Consequences

• Losing a debt lawsuit results in a monetary judgment signed by a judge. The judgment requires the debtor to pay a specific amount of money to the debt collector. If the debtor fails to do so, the debt collector can request garnishment of the debtor's bank account or wages. Some people file for bankruptcy to stop garnishment and reorganize their finances with the help of a bankruptcy trustee.
  
  

Challenges

• Illinois Legal Aid reports that debt collectors almost always win debt lawsuits. Unemployment, illness and head of household hardship are all understandable reasons for not paying a debt. However, they are not suitable legal defenses against a civil suit. Identify theft is an example of a possible suitable defense, with the debtor proving in court that someone else is responsible for the debt.
  
  

Alternatives

• Out-of-court settlements are often possible in debt lawsuits and are usually preferable to a judgment. A settlement ends the threat of garnishment and prevents the listing of a judgment on the debtor's credit report. The Federal Trade Commission recognizes settlement as an option for debt management. The process allows for the debtor to pay off the debt for less than the full balance. SmartMoney reports that settlement offers on unsecured debts such as credit cards range from 20 to 70 percent of the balance. The potential savings are significant because judgments require payment of the entire balance.
  
  

Process

• Debtors with head of household hardships should call the debt collector before the court date and explain the situation. However, the debt collector is unlikely to show much sympathy given that he has already filed a lawsuit. The lawsuit and a likely judgment gives the debt collector complete leverage, all but forcing the debtor to accept whatever settlement terms the debt collector is willing to offer. Settlements or payment plans are possible until the judge hears the case. Debtors trying to settle because of head of household hardships should may have to contact the debt collector several times to negotiate an affordable agreement.