What Steps to Take if a Debt Collector Sues You

Collection letters and phone calls from debt collectors can make life extremely stressful. The situation gets even worse when a debt collector files a lawsuit against you. If a debt collector sues you, the worst thing you can do is nothing. If the collector wins the lawsuit and gets a judgment against you, they can take more aggressive collection actions.

This article walks you through the steps you should take if a debt collector sues you, including answering the complaint, preparing a defense, and attending the hearing. We’ll also cover what you can do if the debt collector breaks the law.

Step 1: Answer the Lawsuit When a Debt Collector Sues You

When a debt collector sues you, they’re required to let you know about the lawsuit by serving you with court papers. Depending on the rules in your state, the creditor might send these papers to you using certified mail. Or, the papers might be delivered by a process server or someone from your local sheriff’s office. 

Generally, these papers will include a copy of the complaint that the debt collector filed with the court and a summons form that tells you how to file your response to the lawsuit. In some cases, it will also tell you when and where the hearing on the case will be held. You may also receive other papers, depending on your state’s laws.

The complaint is the document that the debt collector filed to begin the lawsuit. It should contain the name of the debt collector and some information about the debt, such as the balance owed or the original creditor’s name. After reading the complaint, you may recognize the debt and be aware that you owe it, or you may be certain that you don’t owe the debt. In some cases, you may not be sure whether you owe the debt or not. Either way, it’s important to respond to the lawsuit.

Dodging the process server or refusing to accept delivery of the court papers won’t stop the lawsuit. All courts have procedures for continuing cases if the defendant (you) refuses service. If you don’t respond to the complaint, the court will likely enter a default judgment against you. This judgment will be for whatever amount the debt collector claims you owe, and possibly additional charges such as interest, collection costs, and attorneys fees. A judgment gives the debt collector even more effective tools for collecting money from you.

Consequences of a Default Judgment 

Most debt collections rely on you voluntarily agreeing to pay some or all of your debt. Even if a debt collector is suing you, they can’t force you to pay or take your money against your will. That all changes, though, once the debt collector gets a judgment against you. Depending on your state’s laws and your financial situation, a creditor that has a judgment against you may be able to: 

• Put a lien on your property. With a lien in place, you won’t be able to sell or refinance the property until you pay off the judgment.

• Take part of your paychecks through wage garnishment.

• Freeze your bank account(s) and take all or part of the money in the account. This is called a bank levy.

What’s more, once the court enters a judgment on a debt, you may not be able to dispute that you owe the debt. It’s difficult to get a judgment changed or set aside. You have much better chances of successfully defending against a debt while the lawsuit is still ongoing — before it becomes a judgment.

For these reasons, it’s essential that you file an answer, response, or appearance anytime you’re served with notice of a lawsuit against you, even if you think you don’t owe the debt. If a default judgment has already been entered against you, you may want to contact the creditor who filed the lawsuit to set up payment arrangements. An unpaid judgment can cause you bigger problems and can damage your credit score even more than the original debt.

Avoiding a Default Judgment 

Respond to the lawsuit to avoid having a default judgment entered against you. Thoroughly read all the court papers you receive. You should be able to find the debt collector’s name, the amount they’re claiming you owe, contact information for the court, instructions for how to answer the lawsuit, and the deadline for responding. Depending on the state and court, the paperwork may also contain the date, time, and location for when the lawsuit is set to be heard by a judge. (Some courts don’t set a hearing date until later in the process.)

Read the instructions for responding carefully. You may need to answer in writing, by showing up in court, or both. If you’re confused about the instructions, contact the court clerk. The clerk can’t give you legal advice, but they can tell you where to go, where to send your response, and what forms to use.

Usually, if you don’t answer the lawsuit, the debt collector automatically wins. By responding to the complaint, you force the debt collector to prove their case to the judge. This can mean a lot of work for a debt collection agency. When you respond to the lawsuit, the collector may be much more open to settling the debt with you, rather than proceeding with the lawsuit to get a judgment. Settling out of court is usually better than having a judgment against you.

Step 2: Prepare Your Defense Against the Creditor

To win the lawsuit and get a judgment against you, the debt collector must prove to the judge that:

• You owe the debt. This means showing proof that you agreed to pay this debt, such as your original credit agreement. It also means showing that you’re the lawful owner of the debt and not just an authorized user.

• The amount of the debt, plus any interest, court costs, and attorney fees is correct.

• The debt is legally collectible. This means showing that the debt hasn’t been discharged in bankruptcy and isn't too old to collect. Your state's statute of limitations determines how long a debt stays collectible. In most states, it's around seven years.

• The debt collector has the legal right to collect the debt from you. If the debt collector isn’t the original creditor, they’ll need to show that they bought the account from your original creditor or from another collection agency that bought the debt from your original creditor.

To prepare your defense, first, review all the information contained in the complaint and other court papers. Then, inspect any records you have related to the debt in question. This could include any: 

• Account statements

• Correspondence from the debt collector

• Bank statements, credit card statements, or other evidence of payments

• Communications from the original creditor, if different from the current collector

Check to see whether the debt collector has proof of everything they’re required to prove, or if any information is missing. Also, be sure to identify any mistakes or inaccurate information in the court papers. 

As a side note, if the debt collector has listed incorrect information in the lawsuit, they’ve probably also reported this false information to the credit bureaus. Check your credit report for these mistakes, since you may also need to dispute the mistakes with the credit bureaus. It’s easier to do this now, while you have the evidence of the correct information in front of you. In addition to looking for mistakes or missing information, make sure you know your legal rights under the Fair Debt Collection Practices Act (FDCPA), so you can point out any violations that might have occurred. 

Hire an attorney to help you prepare your defense, if you can afford it. Even if you don’t think you can afford a lawyer, you may be able to get low-cost or free legal assistance from a local legal aid organization. An experienced consumer debt attorney can show you possible defenses you might have missed, help you prepare your response to the lawsuit, and even represent you in court, if necessary. 

Debt collectors usually don’t expect you to show up in court or even respond to the lawsuit. If you file a response written by an attorney or show up in court with a lawyer, the collector might try to settle with you instead of continuing with the lawsuit. Again, settling out of court is usually better than having a judgment against you.

Step 3: Attend the Debt Collection Lawsuit Hearing

Going to court on the hearing date is essential, even if you’ve already filed a written response to the lawsuit. Showing up at the hearing gives you two key opportunities. First, going to court gives you a chance to tell the judge about any defenses you have. Second, going to court gives you a chance to meet face-to-face with the debt collector’s representative or lawyer and possibly work out a deal to settle the lawsuit.

If you owe the debt, show up early to court and find the debt collector’s representative or attorney before the hearing begins. Introduce yourself and see if you can reach an agreement without a hearing. This could mean agreeing to settle the case for less than the full amount owed. Or it could mean agreeing on a payment plan to repay the full balance. In this case, a credit counselor or debt management organization could help you set up your finances to help make sure you can pay as agreed. If you reach an agreement to settle the lawsuit, make sure to get any details in writing before you make the first payment.

If you don’t owe the debt, wait for your turn to talk to the judge (the debt collector will go first). Tell the judge why you don’t owe the debt. Bring any documents that back up your claim. Request that the debt collector proves that you owe the debt by showing the judge the original debt contract and any other necessary documents. If the collector can’t prove that you owe the debt, the judge could dismiss the case. In any lawsuit, having documents to support your claims is key for both you and the creditor.

If a Debt Collector Has Broken the Law While Trying To Collect From You...

If a debt collector has violated your rights under the FDCPA, tell the judge about those violations as part of your defense. You can also file complaints with the Federal Trade Commission (FTC), the Consumer Financial Protection Bureau (CFPB), and your state attorney general’s office. You can file a lawsuit against the creditor in state or federal court within one year after the violation. Your state might also have other consumer protection laws in addition to the FDCPA. 

Keep in mind, if the creditor was collecting a legitimate debt, you may still have to pay the debt, even if the court agrees that the debt collector broke the law. In this case, though, the debt collector might owe you money as well.

Let’s Summarize…

If you’re sued by a debt collector, ignoring the lawsuit won’t make the debt go away. If you do nothing, the debt collector could get a default judgment against you. With a judgment against you, a creditor can garnish your wages, put a lien on your property, or take money from your bank account. 

Review the information in the court papers carefully. Follow the court’s instructions for answering the lawsuit. Gather your documents and look for any mistakes or missing information in the court paperwork. And go to court on the lawsuit hearing date. Going to court allows you to tell the judge your side of the story and make sure the creditor proves their case. You may also be able to settle the case with the creditor at the courthouse before the hearing starts.