When will a creditor sue you for an unpaid debt?

On Behalf of | Nov 11, 2021 | Uncategorized |

Being sued by a creditor in Illinois usually doesn’t happen right after you default. Creditors typically pursue other, much less expensive, methods of collecting unpaid debts before taking you to court. You may receive letters and frequent calls before a lawsuit is filed.

There is no minimum balance for a lawsuit

While there is no minimum credit card balance that is necessary before a lawsuit is filed, you are more likely to be sued when you have a higher balance. That is because filing a lawsuit costs your creditor money, so they usually look at the cost-benefit ratio. If your debt is $500, for example, filing a lawsuit to collect the $500 might not be worth the expense or time. Instead, a creditor may realize it’s more cost-efficient to use threatening letters and other forms of creditor harassment against you.

Debt will keep increasing when you stop making payments

Unfortunately, that small $500 debt could grow into something much bigger if you continue to miss payments. Interest will continue to accrue, and each month there will likely be a fee for a missed payment. At a certain point, your debt could become large enough that your creditor realizes pursuing legal action against you is worth it.

Some of your income may be “lawsuit-proof”

The entire purpose of a creditor lawsuit is to ask a court for permission to collect on an unpaid debt using methods that were unavailable to them before. Some of those collection methods include wage garnishment, seizing the money from a bank account or placing a lien on valuable property.

There are certain types of income that are exempt from these types of collection actions, which could make your bank account lawsuit-proof. Child support, federal benefits and unemployment are a few of the common types of exempt income that commercial creditors cannot seize.

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