There are three steps you can take if a debt collector sues you. Or, you can file bankruptcy. A bankruptcy will stop any pending debt collection lawsuits against you.
Written by Attorney Tina Tran.
Updated October 20, 2020
Three Steps (or JUST ONE) to take If a Debt Collector Sues You
You’ve just received notice that the ghost of unpaid credit card debt past has come back to haunt you, in the form of a lawsuit. What now?
This type of lawsuit comes in the form of a summons and/or formal complaint. The summons gives a time limit for the submission of your answer, and the complaint details who is alleged to owe how much and to whom.
Step one: Check
Check your records and go over the information given in the complaint to see to whom you owe the debt, how much you owe, when the debt was incurred, and when the last payment was made, if any.
If enough time has passed since the last payment, the statute of limitations may be reached. The statute of limitations, varying by state, is a period of time after which it’s illegal for creditors to sue you for outstanding debt—that would be in direct violation of your consumer rights and the lawsuit against you can be dismissed.
Collection agencies sometimes knowingly sue past the statute of limitations because most people never respond to or even try to challenge debt collection lawsuits and automatically fall victim to a court order they could have disputed.
Make sure your name and/or the names of any cosigners being charged are correct, as well as the amount of debt itself. If you have evidence that anything in the complaint is incorrect, you can use that as part of your defense.
Debt passes hands between collectors that buy and sell it so many times that it’s very likely the original creditor you owe isn’t even the same entity that’s currently suing you. Amounts, names, and other information may be lost in translation and the lack of proper evidence weakens the plaintiff’s (your creditor) case against you.
Step Two: Respond
You generally have between 20 and 30 days to respond to the lawsuit, after which you’re at risk of having a judgment entered against you. Soon after, your creditor will seek to have your wages garnished, your property seized, and/or the funds in your bank accounts frozen. Depending on the laws in your state, you may be able to request a time extension of around 30 days.
If you don’t respond at all or show up for your hearing, the judge will automatically rule against you and you could lose the ability to dispute the debt in the future. After a court order has been entered, it is difficult to get the judgment reversed.
To respond to the lawsuit, a copy of your answer must be sent to the creditor’s lawyer. You may want to consider hiring an attorney or contacting a local legal-aid organization to help you draft and file your response. Otherwise, if you are planning on representing yourself (“pro se”), a visit to your clerk’s office where the case was likely filed by your creditor could be helpful. Many courthouses have free help desks that you can reach out to for assistance.
Step Three: Challenge
If you are successful in defending your case, and the judge rules in your favor, the lawsuit will be dismissed. If the judge rules in favor of the other party (your creditor), however, then collection efforts will begin. Collection efforts can include wage garnishments, seizure of property, and frozen bank accounts.
Another way to avoid a judgment being entered against you in favor of your creditor is to enter into a payment agreement. Your creditor may agree to a dismissal of your case if you can assure them that you’ll fulfill your debt obligation within a reasonable period of time.
It is also often worthwhile for you to negotiate a lower debt payment amount. Your creditor may even be amenable to a payment plan if you can show a compelling reason to need one. Keep in mind, however, that your creditor may re-file the lawsuit and pursue other collection action if you default on your plan.
Another Option: BANKRUPTCY
If this is not your only debt, and you’re potentially at risk for future lawsuits filed by other creditors, you may want to consider bypassing steps 1 through 3, entirely, and file for bankruptcy instead.
Stopping debt collection lawsuits, and preventing future debt collection actions, is a major reason people file for bankruptcy. If you have less than $10,000 in dischargeable debt from credit cards, medical bills, payday loans, etc., taking steps 1 through 3 may be the best course of action for you. If you have family or friends who are willing to help you pay off your debts, opting for a payment plan agreement can help you avoid having to file for bankruptcy.
If you have more than $10,000 in debt and are at risk of losing any of your property or wages, filing for bankruptcy in your state could very well give you the best outcome. Immediately upon filing for bankruptcy, a court order called the “automatic stay” comes into effect.
Under the automatic stay’s bankruptcy protection, any pending debt collection lawsuits against you will stop. Your creditors will be prohibited from trying to collect from you in any way for the duration of your bankruptcy case. Once you have received your discharge order, you will be relieved of all of your dischargeable debt and start fresh.