What to do when you are threatened with legal action if a debt is not paid?

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What to do when you are threatened with legal action if a debt is not paid?

I got a call a few days ago from a check system agency stating that they have an investigation placed in their office concerning intent to defraud a financial institution and check fraud (not true). This is stemming from a payday loan over 3 years ago. I know I had a pay loan but I can’t find information on it; to my knowledge it was paid. I am told in order to avoid further legal action (including being served by a sheriff with court papers), I will have to pay $500 in less then 2 weeks (I already paid $ 50), and another $206 2 weeks after that. I do not work, and I do not think that I can raise this money this fast. Is there another course of action that I can take other than going to court? Or is going to court my best option?

Asked on September 21, 2010 under Bankruptcy Law, Michigan

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

If somone is trying to collect on a debt that you dispute, unless you can work out something with them--e.g. convince them that you don't owe the money; settle for something you can and are willing to pay; etc.--you will probably end up in court if they pursue collections activity, since the last step in collections is a lawsuit. Court is how and where disputes over who owes what are ultimately resolved. If this was a much larger debt, then declaring bankruptcy to discharge it might be a good  option, but bankruptcy is rarely the right option for debts of under $1,000. So you will possibly end up being sued, and then you can decide whether and how to defend yourself against the lawsuit; one option to consider, if the amount owed  is small and you don't have money anyway, is to simply let them win because it might cost you more to defend than you'd have to pay anyway.


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