Sometimes, you find yourself using the majority of your paycheck in the face of an emergency to settle unpaid debt. Then, you keep incurring more debts to settle your payday loans until you arrive at a point where you can no longer pay back what you owe.
At this stage, the first process often explored by payday loan companies is contracting a collecting agency that threatens you with repayment calls. This is often followed by an attempt to secure wage garnishment on your bank account.
When this stage is activated, you will most likely receive a letter from the company’s legal team demanding that you pay back your payday loan debt within a specific time frame. If you do not meet the specific demands of this letter, you may be hit with a lawsuit.
If you are curious about what to do if you get a court summons, follow the plan we have designed below to get out of this situation. Trust us. You don’t have to panic.
Understanding the Court With Jurisdiction Over Payday Loans
Don’t worry. You cannot go to jail for failing to repay a payday loan. Payday lenders can only go to a civil court to seek redress, not a criminal court. Thus, no criminal charges will be held against you.
Non-payment of your payday loan is an issue between you and the payday lender. Therefore, it is not a criminal offense that gives the criminal court the jurisdiction to oversee or sentence you to jail terms. Nonetheless, a court summons is often the last course of action.
Still, a court summons comes with many financial repercussions, so it is very important to borrow from a safe source. Applying for a payday loan through a secure channel, such as MoneyZap, gives you access to working structures like a free consultation to help you create a payment plan and access debt consolidation loans when needed.
When these structures are in place, an unpaid payday loan hardly becomes an external issue requiring a civil court’s intervention but simply an internal affair that you and your lender can resolve.
Regardless, the civil court handles matters like this, and when they issue a summons, the summons doesn’t attract jail terms. A court summons is not a big deal; however, when you are faced with hostile payday lenders, you should enter a negotiation with your lender to formulate a payment plan that will essentially get you out of debt instead of waiting for a summons. When the inevitable eventually hits you, here are the few things you must do:
1. Read the Court Summons
A court summons is often initiated by a debt collector, who could be your lender directly or through a collecting agent. You must read through the summons carefully to assess if the claims against you are correct. Reading through your summons will help you determine a few key factors, such as:
- Whether the suit is statute-barred
- Whether the amount sought is indeed correct
- Whether the amount you have repaid is reflected in the amount being claimed against you
- Whether the debt is indeed yours
- Ensure you don’t have a countersuit
Sometimes, the approach used in demanding repayment by your lender could amount to illegal practices, forming the basis for a counteraction. When you read through the Fair Debt Collection Practices Act (FDCPA) provisions, you may identify some inconsistent actions with the debt recovery process.
This is where you might need an attorney. Although you may respond to your summons and appear on your behalf, securing a lawyer will go a long way. Ordinarily, you may incur some attorney fees, but you may also secure the services of a non-profit credit attorney available in your district to help you with your matter.
2. Prepare a Response
When preparing a response, you can either secure professional help or do it yourself. Often, when a summons is issued, you have a limited timeframe to respond to it. Failure to respond may result in the court giving an order in favor of the lender.
When a lender takes you to court, your answer to the summons goes a long way toward determining whether or not you will win the suit. Also, using professional help will give you better insight regarding the options available to you, such as bankruptcy.
3. Verify Your Debt
When a summons is issued, it must be accompanied by documents that show you owe money to the lender. This may be your loan agreement or, in cases where a debt collector has been appointed, proof that the debt collector has such a right to demand payment.
If proof that you owe a debt to your lender is missing, you have the right to demand a debt verification. In some cases, a debt verification may reveal that the lender is not licensed to give out payday loans. When this happens, the suit may be dismissed, and the lender may be held liable under the law.
4. Consider Filing for Bankruptcy
Financial hardship is unavoidable, even when payday lenders garnish your wages to settle your debt. When your monthly income can no longer service the total sum owed, you may explore filing for bankruptcy with a bankruptcy attorney.
Bankruptcy discharges you from all debts and loans, but it may harm your credit score, social standing, and ability to secure future loans or even buy a home.
Frequently Asked Questions
What Are the Consequences of Not Paying a Payday Loan?
The negative effect of not paying back a payday loan starts with accumulating debts and default payment percentages. The interest rates and penalty fees quickly amass to an amount significantly greater than the loan obtained.
This is why it is important to use payday loans only to meet important needs and emergencies, such as medical bills, utility payments, etc. There should never be a time when you accumulate more debt than your income.
Can You Be Sued for Not Paying a Payday Loan?
Payday lenders can take you to court for not paying your loan, but it is often the last recourse. Credible lenders, or payday loan connection providers like MoneyZap, will explore all internal settlement plans with a free professional debt consultation to ensure your debt is repaid.
At other times, when you have several payday loans from different lenders, they help you consolidate your debt and negotiate accruing interest as part of the consumer protections structure they have in place.
What if a Payday Loan Company Sues You?
It is not the end of the world if payday loan companies take you to court—just ensure you appear in court and answer the complaint against you. However, if a lender succeeds, your wage may be garnished.
Wage garnishment means your employer will automatically set aside some or all of your wages to pay your lender directly. If your income is not sufficient and there are no other means to support it, this may result in you being bankrupt.
What Happens if a Loan Company Takes You to Court?
A lender will take you to court when they believe that is their last and only option to get their money back. After your hearing, the court may consider proof and evidence before either discharging you from the suit, helping you arrive at a settlement plan to offset your debt or ordering that your wages be garnished to realize the loan sum.