Debt collectors file millions of lawsuits every year and even relatively small debts can end up in a court. If you are sued over a debt, don’t panic: there are things you can do. There are also things you must not do.
Never ignore a suit or a court summons. Not appearing could lead to a judgment against you and your wages or bank account could be garnished. If you fail to appear or fail to obey a court order you can even be jailed for contempt of court. Always respond and seek legal advice whenever possible.
Understanding how debt collection suits are filed and prosecuted will help you to defend yourself
What Happens When You’re Sued For Debt?
A debt collection lawsuit involves several steps:
- Collection efforts. Any debt collection suit will start with efforts to collect the debt. Debt collectors will call you and may threaten legal action. If they do, take the threat seriously and seek legal advice.
- The creditor files a complaint in court. Almost all debt collection lawsuits are filed by collection agencies, not original creditors. Most are filed in state courts.
- You receive a summons and a copy of the complaint. This may be mailed or delivered by a process server. Don’t try to avoid receiving it. Running away will only make things worse.
- You file an answer. You will usually have 30 days to file and the ability to request a 30-day extension. You will need to consult a lawyer at this point. Even if the debt is legitimate, a lawyer may be able to point out procedural issues or other factors that you can use in your defense.
- If the case is not dismissed, there will be a trial. You will need to be there. If you are not, the court will probably rule against you.
- A judgment is made. The judge will either dismiss the case or rule that you are obligated to pay the debt.
- The judgment is enforced if it goes against you. The creditor may ask the court to garnish your wages or bank account or allow the seizure of your assets. The creditor cannot take your entire income or all of your assets. A lawyer can help you clarify what part of your income and assets cannot be seized.
At each step of this process, there are things you can do to resolve the issue and to defend yourself.
What You Should And Shouldn’t Do When Sued
If you’re being pursued by a debt collector or threatened with a lawsuit, or if a lawsuit is actually filed against you, don’t panic. There are steps you can take to protect yourself.
The single most important thing to remember, at every step of the process, is that you must never ignore the problem. It will not go away. You have to respond when contacted, appear if a court orders you to appear and follow all court orders. Disobeying a court can even land you in jail.
If You Are Sued
You will receive a summons and a copy of the complaint. Read the papers immediately. Do not wait. Make sure you know these important facts:
- Who Is Suing You?
- What Debt Are You Being Sued For?
- How Much Do They Claim You Owe?
- Where Was the Suit Filed?
- When Do You Need to File an Answer?
- Where Will You File Your Answer?
Review your records. If this is a debt you’ve previously discussed with a collection agency, check their validation letter. Check any records you have of the debt. Make sure all dates, figures and facts are consistent.
Get legal advice. Hire an attorney if you can. If you can’t, seek advice from a pro bono lawyer or a free legal clinic. Search this database of legal aid services. A lawyer can help you develop a defense and may be able to point out weaknesses or flaws in the documents or procedures used against you. A lawyer can also help you draft your answer to the charges. Some lawyers will offer free initial consultations, which can give you useful information.
If a debt collector receives an answer that was drafted by an attorney, they may be more willing to negotiate a solution.
Always file your answer with the clerk of court by the required date. You may be required to send a copy of your answer to the plaintiff.
If the debt is legitimate, contact the creditor and try to negotiate. They may be willing to agree to a payment plan or to settle for less than the full amount of the debt. Be sure to mention that you’re considering bankruptcy. Whether you are or not, it’s a reminder that the agency could get nothing.
When You Have a Court Date
Always show up. The single most important thing that you must do when sued for debt is to be there. If you do not appear the court will probably rule against you even if no evidence is submitted or the statute of limitations has expired. You could even be held in contempt of court and jailed.
Remember that many collection agencies file large numbers of lawsuits. Most of the respondents won’t show up and the collectors often count on that. They may not be prepared with evidence for every suit they file. That can work to your advantage if you are prepared.
Defending Yourself Against a Debt Lawsuit
Debts are routinely sold by a creditor to a collection agency and may have passed from one collection agency to another. Documentation may be lost along the way. Even if a debt is legitimate the creditor may not have all the papers needed to prove it. You may be able to take advantage of that with one of these defenses:
- Challenge the company’s right to sue. Demand a credit agreement with your signature and documentation proving that the paperwork is accurate and came from the original creditor with a verifiable chain of custody. Ask for complete documentation of every part of the debt. If it’s credit card debt, demand evidence for each charge. If fees have been imposed, ask for proof that you agreed to the fees.
If there are possible reasons why you might not be liable for the debt, use them. If the item you paid for was defective or was not delivered, you canceled the agreement to pay within the agreed time, or the debt contract was illegal or fraudulent, you may have a valid defense.
- Remember the statute of limitations. Collection agencies may file suits for debts even if the statute of limitations has passed. Remember that the statute of limitations is often computed from the day of the last activity on the account, for example, the date of the last charge you made on a credit card before it was canceled.
- Consider a suit of your own, if relevant. Many collection agencies will overstep the limits placed on debt collectors by the Fair Debt Collection Practices Act. If a debt collector has denied your rights under that law, a countersuit may be in order. You will need to consult an attorney.
Even if you believe the debt is legitimate, you should defend yourself and demand proof of every allegation. If the collection agency is not fully prepared with complete evidence, you may be able to get the case dismissed.
Finally, be aware of “sewer service”. Some collection agencies will claim that you were served with a complaint that you never saw. You may not even know about the complaint until after a judgment is issued. This is illegal in most states and if it happens you should consult an attorney.
What Happens If You Are Successfully Sued?
Even if you mount a good defense, it’s always possible that a judgment may go against you. If that happens you should be aware of the potential consequences. If a decision goes against you, the creditor may seek the right to garnish your wages or your bank account. You may be able to prevent this by offering a payment plan or a settlement. If your debt situation is unmanageable you may need to consider bankruptcy.
In some states, individuals with limited wages and assets may be “collection proof” or exempt from garnishment. These exemptions may not apply if you owe taxes or child support.
If a decision goes against you, use the same rule that applied at the start: don’t ignore it. Seek legal advice to determine your options. Try to reach a negotiated agreement or settlement if possible. If you ignore the problem, you’re likely to lose part of your paycheck or your bank account. If you ignore court orders you could even be jailed.
Debt collection agencies routinely file lawsuits against debtors. If you are facing a debt collection suit, don’t panic. Never ignore legal documents or a court summons or order!
If you are served with papers in a debt collection suit, read them carefully. Verify that the debt is yours and look for inaccuracies or incomplete records. Look for legal advice as you prepare a defense. If you show up and defend yourself, you may find the plaintiff unprepared.
If a debt collection case goes against you, don’t ignore the judgment. Try to set up a payment plan or negotiate a settlement. If your debts are not manageable, bankruptcy may be your only option.