Ask the Experts: Can I Enroll in a Debt Management Program if I’m Being Sued?
How lawsuits affect your ability to consolidate with a debt management program.
An expert answer from Gary Herman
First you need to be clear that they’re actually suing you. Did you receive court documents or did someone just say to you that they may consider legal action as a next step?
If a debt collector is seeking legal action, we can still contact them on your behalf and see if they’re willing to take payments. There’s nothing we can do to stop the legal action. They just want someone to contact them and tell them how much money the client can afford and set up payments.
If they’re saying they’re thinking about seeking legal action or you’ve got a pending date, either way you can still join the debt management program, we’ll still contact your creditors. We can’t offer any legal advice and we can’t stop the court date, but we can still set up payments that may stick straight through your court date.
Always keep in mind that enrolling in a debt management program means that a certified credit counseling team is acting and working on your behalf in negotiating with your creditors. Essentially, you can’t enroll in the program unless your creditors agree to the adjusted payment schedule you set up with your credit counselor.
In general, creditors agree to an adjusted payment schedule for two reasons:
- Receiving any payments on the debt you owe is better than nothing – in other words, the creditor is satisfied recouping what they’re owed, even if the interest rate applied to the debt is reduced during the negotiation process.
- Creditors have established relationships with credit counseling agencies that have a proven record of success in debt elimination – so the creditors trust these programs will work, because they’ve worked in so many other situations in the past.
Still, everything comes down to negotiation. The program works if your creditors agree to the terms you set out with the certified credit counselor. The counselor helps you develop a customized plan that eliminates your debt in a way that works for your budget. However, your creditors have to agree to the terms before you can move forward.
With that in mind, a credit counseling agency can try negotiating on your behalf in a number of situations. They can negotiate with the original creditor (i.e. the card issuer) that you owe, they can negotiate with debt collection agencies, with medical debt collectors and even in cases like this where the enrollee is potentially being sued already over the debt.
In some cases, enrollment in the program may satisfy the collector so they withdraw the lawsuit. It makes sense, given that the whole reason they’re taking you to court is to force you to repay the debt you owe. If you agree to follow the terms of your debt management program to pay them back, then the root reason for the suit may be moot – and it definitely may not be worth the time and money they have to use to take you to court.
That’s not to say that a debt management program will always take care of suits over debt – again, it’s up to the individual debt collector in question and what happens during negotiation. On the other hand, it’s worth a shot to see if you can satisfy the collector by making a plan to pay what you owe before you see them in court.