Going to Court over a Loan
Whether you're the one filing the lawsuit or not, a lawsuit means something is not going right on the loan. Make sure you find a qualified attorney to represent you in court. There may be a lot of fear and uncertainty if you are served a lawsuit, and you may feel financially threatened. If you are filing the suit, there may be a lot of resentment and frustration.
For a borrower that believes the lender has accounted incorrectly on a loan, the suite is the final step in attempting to correct the problem. For a lender being sued by a borrower, the suite is a warning that the lender has not follower their obligation to service or account for the loan properly. For a lender looking for a judgement against a borrower, the suit is the means to secure repayment from a borrower that has severely violated the normal repayment terms of the loan.
There are a few things that will definitely result in a loss for the lender. If the loan contract conflicts with local or federal laws, parts of the contract may be invalid. If the lender is not licensed by local authorities as a lender or as a debt collector, there may be fines, delays, or a judgement in favor of the borrower. If the lender has done something illegal or the collateral was not legally secured, the loan might be thrown out entirely. Don't break the rules or you're likely to get in major trouble. Be sure you know the rules that apply to your loans from the outset of lending.
Borrowers often bring suits against lenders when they believe the lender has lost or misapplied their payments, or the charges are excessive or not in compliance with the agreement. If you're about to sue a lender, do the paperwork in advance. Find out exactly how much the discrepancy is between your calculations and the lender's. If you have to go back 25 years through bank statements and loan histories, do it first. You may discover that the accounting is accurate, or that the discrepancy is really only a small percentage of the loan. It may not be worth the legal expenses to win a judgement. Interest on $3000 that was not credited twenty years ago may only add up to a $500 difference in loan balance. If the payment was applied three months late, the difference in balance may only be a few dollars, even after twenty years. Do the math before filing to suit to know exactly what you stand to gain. Software like Moneylender will help you get an accurate balance on the loan.
I've talked with a handful of lawyers regarding their lawsuits from both sides of the loan. What a judge really wants to see is an accurate accounting of the funds of the loan in a way that matches the wording of the loan contract. If you can furnish the contract, as well as the ledgers that follow the terms of the contract, the judge is very likely to dismiss the lawsuit or rule in your favor. Judges have requested that the accounting be produced by loan accounting software like Moneylender, and may not be willing to accept an Excel spreadsheet as the ledger.
Avoid the headache entirely with continuous, professional servicing. Using Moneylender to service loans, sending monthly statements consistently and complying with tax reporting requirements not only ensures the borrower pays to the very best of their ability, but avoids a discrepancy between what you think they owe and what they think they owe. Avoid the disagreement, avoid the lawsuit.