In the most simple terms, a creditor may file a lawsuit once a default has occurred. That means, if you default on a loan, thereafter the creditor may seek a legal remedy. In reality, it’s a bit more nuanced.
First, consider the statute of limitations in California, which is four (4) years. That means, a creditor has up to four (4) years to file a lawsuit for damages. Not all creditors file lawsuits. In my experience, some of the more aggressive creditors like AmEx or Discover will bring a lawsuit in three (3) to six (6) months.
Also, consider the cost-benefit analysis. Ask yourself, what is the likelihood that a creditor will spend $2,000 to recover $500. That’s not to say that there aren’t a lot of rinky-dink collection lawsuits but perspective matters.
I see lawsuits soon after default and I see lawsuits right before the statute of limitations runs. It’s dependent on the creditor.
If you have question, please make an appointment to discuss your bankruptcy options with Modesto Bankruptcy Lawyer Brian Haddix.