The Consumer Financial Protection Bureau (CFPB) estimates that around 70 million Americans got contacted about a debt in collection in 2016.
Furthermore, a 2017 survey showed that 15% of consumers informed of debt in collection got sued in the previous year.
What steps should you take when a debt collector sues you? How do you challenge a debt lawsuit? Should you file for bankruptcy if you lose a case? What actions should you avoid doing?
This article discusses what you should and shouldn’t do when a debt collector files a lawsuit against you, including the steps to take when challenging a lawsuit.
This article also explains when you should accept the judgment and when to hire a lawyer or settle the debt.
AmericanDebtEnders.com is your go-to source for information about debt relief through our company’s debt dispute program. We’re also a proud member of the National Association of Certified Credit Counselors.
Sued by Debt Collectors? Here Is What to Do if a Debt Collector Sues You
Getting contacted by a debt collector can bring about various emotions, and you can feel anxious about the situation.
However, it’s important to respond, either by yourself or through a lawyer, if a debt collector files a lawsuit against you.
The following tips should help determine what you can do when a debt collector sues you.
Verify the Timeline of Events
If a debt collector sues you, you should first understand the exact timeline of events to minimize the chance of falling for an illegitimate debt collection scam.
The general timeline is as follows:
- When you receive a letter or phone call from the debt collection agency notifying you of the debt collection, the bill should be 180 days past its due.
- Within five days after the debt collector contacts you, they must send you a debt validation letter. This letter should state the creditor’s name, the amount you owe, and how to dispute the debt if you think it’s not yours.
- If you think you don’t owe the debt in question, ask the debt collector for a verification letter. They must deliver it within 30 days of sending the validation notice.
- If your debt is legitimate, respond to the debt collector and produce a plan to pay off the debt. You can pay in full, set up a payment plan, or negotiate the money owed.
- If you fail to repay or settle the debt, the debt collector can sue you. You will then receive a court notice regarding your appearance date.
- If you don’t show up on the specified court date, the judge will likely rule in favor of the debt collector.
- Should the court favor the debt collector, the judge will place a court order against you. A default judgment usually occurs 20 days after the serving of a lawsuit.
If your experience doesn’t match the timeline above, verify the legitimacy of the debt and the debt collector to avoid getting into a scam.
After confirming the validity of the debt collection in question, the next essential step is to respond to the debt collection lawsuit. The following topics should help guide your response.
Disputing a Debt
When a debt collector informs you of a debt you believe you don’t owe, is in the wrong amount, is already paid, or needs more information, you must respond to them as soon as possible.
Ensure to reply in writing when you dispute the debt. If you don’t, the debt collector will likely keep contacting you to collect the money you owe. Worse, they may end up suing you for payment.
After the debt collector contacts you, they must send you a written validation notice within five days.
However, they’re likely scamming you if they ask for your financial or personal information before sending you that validation notice.
When Is an Answer Required?
Most states don’t require you to file an answer if the lawsuit against you is in small claims court. However, you may be instructed to file a written appearance within a specific time.
How Should You Respond to a Debt Collection Lawsuit?
Getting sued can be a stressful ordeal for many people, especially those who don’t know what to do first.
However, writing a response and showing up to court on the date listed in the court papers are the important things to do, whether or not you believe you owe that debt.
Responding to the lawsuit, either through a lawyer or by yourself, can help compel the collector to prove you owe the debt, the amount of the debt is correct, and show their legal right to sue you for payment.
Even when you believe you don’t owe the debt in question, don’t ignore the lawsuit. Replying to a debt collector’s lawsuit will likely put you in a better legal position, cost you less in fees, and give you more control over debt repayment.
What Happens if You Do Not Respond to the Lawsuit?
Your case won’t go away even if you refuse to respond. The lawsuit can even proceed without you, meaning the judge can decide without hearing your argument. In this case, the debt collector can win by default because you didn’t appear in court.
Should the court rule against you and require you to pay the debt, the collector can take the money from your bank account, put a lien on your property, or deduct payment from your salary.
Additionally, the collector can ask the court to award them more money for collection costs, interests, court costs, and attorney’s fees.
How to Serve a Copy to the Plaintiff
Anything you file in the case should have copies served to the plaintiff. When filing your answer, you should produce two extra copies and have the clerk file stamp them.
Keep one copy with you and send the other to the plaintiff (the person or company suing you) via certified mail.
If an attorney filed the complaint on the plaintiff’s behalf, mail the copy to the attorney at the address specified on the complaint.
Challenge the Lawsuit
Debt collectors are third-party agencies that the original creditor hires after you default.
If you believe the debt is illegitimate, you can challenge the lawsuit for an opportunity to outsmart or win against the debt collector or collection agency.
People often challenge debt collection lawsuits for the following reasons:
- They paid the debt already.
- The debt collector is suing the wrong person.
- The debt amount is wrong.
- The time frame for the statute of limitations has passed.
The statute of limitations is a law setting the maximum time parties involved in a dispute must initiate legal proceedings from the date of an alleged offense.
Bring Evidence of the Violated Collection Rules if Applicable
If you believe the debt collector has violated your rights, you must bring evidence of such violations to court.
The Truth in Lending Act, Fair Debt Collection Practices Act (FDCPA), and Fair Credit Reporting Act can provide information on those violations.
For example, the FDCPA states that debt collectors should not do the following:
- Contact you outside the hours of 8:00 AM to 9:00 PM.
- Make fraudulent claims, such as creating false statements on how much you owe or misrepresenting who they are.
- Engage in harassment, including using profanity and threatening harm.
- Partake in unfair practices, such as threatening to seize your property when the collector has no legal right.
- Contact you when an attorney already represents you.
Keep Your Answer Brief
Avoid giving more information than needed about your side of the story.
Focus your answer on responding to the claims on the complaint document instead of giving an overly detailed description of your experience with the debt collector.
Doing the latter may reveal information that can hurt your case.
Use Standard Formatting and Style
Remember that you’re responding to a formal lawsuit. So, you must write your answer professionally and cleanly.
Consider using a standard font, such as an Arial 12-point size font, and appropriate margins for the entire document.
At the top of the answer document, include a caption outlining the case number, venue or court, and parties involved.
Include Your Affirmative Defenses
If you’ve responded to each claim, you should also include a section on your document for affirmative defenses. These defenses comprise legal reasons why the debt collector shouldn’t have a case against you.
Effective and common affirmative defenses to bring up include:
- The collector filed the case past the statute of limitations.
- The plaintiff has no proof that the debt was transferred to them, so they have no right to sue.
Prove Mistaken Identity or Identity Theft
If you believe you’re a victim of identity theft, the account being charged isn’t yours, or your credit report is mixed with someone else’s, then you should bring relevant evidence you have to court.
The plaintiff must prove you opened and owned the account in debt since the case can’t proceed if you’re the wrong defendant.
Deny As Many Claims As Possible
An answer document is more likely to win if it has a list of responses denying each claim from the plaintiff’s complaint.
Of course, some claims are likely valid, such as your name or address. However, you can strengthen your case when you deny the debt collector’s claims because the burden of proof is on them.
This burden means that they, not you, must prove anything you deny.
Include a Certificate of Service
A certificate of service lists the name and address of the party to whom you mailed a copy of your answer document. This certificate proves that you served the document to the opposing party.
Some courts require you to have this certificate, which is typically found at the end of the answer document.
Sign the Answer Document
Last but not least, don’t forget to sign the answer document.
Courts often reject documents without a signature. While this step may seem simple, it’s one of the crucial parts of the document.
Review the Statute of Limitations
The statute of limitations regulates how long a collector can sue you for a debt. The period of these limitations can vary between states or jurisdictions.
For instance, in California, there’s generally a four-year limit for filing debt collection lawsuits, mainly for debts based on a written agreement.
Once the statute of limitations expires, the collector can no longer pursue a debt collection case against you.
So if a credit card company files a case against you for a debt you owed four or more years ago, you can protect yourself through this statute.
However, this expiry doesn’t erase what you owe. Instead, the statute gives you more time to gather your funds without facing wage garnishment.
Be advised that such an allowance can adversely affect your credit score.
Wage garnishment is a legal procedure wherein the court requires your employer to withhold your earnings to pay for a debt.
File a Countersuit
The Fair Debt Collection Practices Act (FDCPA) is a law protecting consumers from unfair debt collection practices.
You can file a countersuit against debt collectors who violate this act and you can also claim compensation for damages and legal fees.
This law applies to consumer debt from purchasing goods for personal or household consumption. These include credit card debt, auto loans, student loans, and mortgages.
Reporting a Complaint: Where Do You Report a Debt Collector for Breaking the Law?
If you think a debt collector is violating state law, you can report them to the attorney general’s office.
These attorneys represent and advise their legislature and state agencies and function as “people’s lawyers” for citizens.
You can also file your complaint to the Federal Trade Commission (FTC). The commission promotes consumer protection and enforces the FDCPA.
Additionally, you can reach out to the CFPB, which can forward your complaint to the erring company and work to help you get a response.
Decide Whether to Accept the Judgment
When should you accept the court’s judgment? The following tips should help you decide whether or not to accept a debt collection lawsuit:
- If you decide to accept the judgment, consider hiring an attorney.
- If you don’t want to go to court but want to accept the judgment, try negotiating an out-of-court settlement.
- If you have limited assets and income, determine if you’re judgment proof.
- If you have significant and unmanageable debt, consider filing for bankruptcy.
Being judgment proof or collector proof means you don’t have enough assets, and the creditor or collector cannot seize them.
Where Can You Get Help?
Going to court alone may be an overwhelming experience. Fortunately, you have the following options to get legal help:
- Hiring a lawyer: Find an attorney in your state through the American Bar Association. Ensure that you can afford the attorney’s fee and ask if they have experience with debt collection defense, consumer law, or the FDCPA.
- Free or low-cost legal help: Check the American Bar Association’s website to search for a pro bono (free legal help) program. You can also use the Legal Service Corporation’s search tool to look for a legal aid organization near you.
Hiring a Lawyer
If you accepted a judgment and wondered how to win the lawsuit, consider consulting a debt collection lawyer. Many consumer law attorneys offer free consultations to discuss the options you can take.
When looking for a licensed debt collection lawyer, you should choose one from a reputable law firm. These lawyers specialize in debt defenses and will likely provide detailed legal advice.
When to Hire an Attorney
Consider hiring and working with an attorney if you have the following issues:
- The amount of money owed is large.
- You need information from the debt buyer or creditor to win the case.
- You have an FDCPA or other consumer protection counterclaim.
Settling the Debt
When the debt is legitimate, you can consider negotiating a debt settlement in exchange for the debt collector dropping the lawsuit.
Proceeding with a settlement incentivizes you and the collection agency because court proceedings can get expensive and inconvenient.
Finding Out if You Are Exempt
If you have limited assets and wages and believe you are judgment proof, you may be exempt from wage garnishment, depending on your state and how much you owe.
Consult a lawyer or credit counselor to determine if you fit the criteria to be judgment proof.
What Happens if You Lose?
Your legal journey isn’t necessarily over should the debt collector or creditor win the case. You can still do something to ease your obligation.
For example, when the court decides the collection to be done through wage garnishment, the debt collector may find this process time-consuming and expensive.
So, they’ll be willing to settle with you for a lesser amount instead.
Decide if It Is Time to File for Bankruptcy
Another option when you lose the case, depending on your financial situation and the debt size, is to file for bankruptcy. You have the following options:
- Chapter 7 bankruptcy: Filing a chapter 7 bankruptcy means all your debts are forgiven, and the debt collector can no longer collect debts from you.
- Chapter 13 bankruptcy: Declaring this bankruptcy type may help you negotiate a lower amount to pay the debt collector. After you pay the agreed amount, the debt collector can no longer go after you.
Note that filing for bankruptcy is a significant financial move with substantial adverse effects. Get a free credit consultation from AmericanDebtEnders.com before seeking out this option.
What Not to Do When Being Sued by a Debt Collector
Receiving a debt collection lawsuit can bring you all sorts of emotions that may cause you to take certain actions that you wouldn’t do with a clear head.
Below are the things you should consider when a debt collector sues you.
Do Not Act Impulsively
If a debt collector calls and insists you must pay them immediately, take a few deep breaths and calm down.
Don’t agree to anything, and instead, ask for a debt validation letter or written proof of the lawsuit before doing anything else.
Do Not Ignore the Debt Collection Lawsuit
Although there are plenty of debt collection scams out there, you should treat everything as legitimate and not ignore the lawsuit.
If you do so and the debt collector’s lawyer shows up, the judge will likely rule in favor of the debt collector by default.
Do Not Accept Liability
A legitimate debt collector will likely ask for basic personal information like your name and address to verify your identity.
However, be wary of sharing more than a few personal details. Explaining or apologizing may reveal more details that the plaintiff can use against you in court.
Never Give Access to Your Bank Accounts
Under no circumstances should you give a debt collector your bank account information. Doing so can be taken as you authorizing them to withdraw your funds.
Beware of Debt Settlement Services
If you’re considering working with a debt settlement agency, understand that not all creditors work with such companies.
Additionally, there’s a fee you must pay the agency to manage the settlement.
One affordable and safer alternative to debt settlement is a debt management plan. Contact AmericanDebtEnders.com so our trained counselors can assess your financial situation and help you manage your debt.
FAQs: Being Sued by a Debt Collector
Can a debt collector sue you?
A debt collector can sue you if your account is at least 180 days delinquent. When this happens, don’t panic and act proactively and carefully.
What happens if a debt collector sues you?
The first step is to set a date for your initial court appearance. If you don’t show up in court, the judge can rule in the debt collector’s favor and impose penalties on you, such as wage garnishment.
To avoid such penalties, consider working with a debt collection attorney to negotiate a settlement, or file for bankruptcy.
Can you settle a debt after being served?
Going to court is costly for you and the collector, so an out-of-court settlement can be beneficial even after you’ve been served.
American Debt Enders provides debt resolution services to help you resolve your financial issues, such as credit card payments, that can be challenging to handle on your own.
Get a free consultation and settle your debt today by contacting us at 877-766-2465.
- Consumer Debt Collection Facts
- Consumer Experiences with Debt Collection
- Statute of Limitations
- Debt Collectors
- What Is Consumer Debt?
- State Attorneys General
- Judgment Proof