Q:

What is the best option when you are sued for unsecured debt?

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Quick Answer

When sued for an unsecured debt, the best and cheapest option is often to call the creditors yourself and offer them a payment plan that you can afford to pay, advises Nolo. Creating a budget for such a payment plan before you call the creditors includes finding ways to reduce your expenses and, when possible, to increase your income. In such negotiations, you may be able to obtain a reduction in late fees and other penalties.

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Full Answer

If this option is not possible, other possibilities include consulting a credit counseling agency to help you with the process of budgeting and negotiations, add Nolo. Credit counseling agencies provide financial education that may be helpful, and some also deal directly with creditors in negotiating a debt management plan that is acceptable to both parties. You should remember that when hiring such consulting help, you are spending money that can be used to settle part of the debt. A debt management plan also commonly involves depositing funds in an account every month that the counseling agency uses to make debt payments.

Other options when being sued for unsecured debts include filing for bankruptcy, reports Nolo. Two types of bankruptcy proceedings allow debtors to either completely eliminate their debts or to pay their creditors under the protection of bankruptcy regulations.

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