Key takeaways
- If you’re sued by a debt collector, there are actions you can take. The first step is to respond to the lawsuit.
- Read the legal documents carefully. Verify that you owe the debt. Then, gather evidence and ensure the creditor can prove the debt is yours.
- Find a strategy to fight the lawsuit. Affirmative defenses like the statute of limitations can help you win your case.
Sued by a debt collector? It can be an unsettling experience, but it is not the end of the world. First, pause and understand what happened.
Debt lawsuits can come from outstanding credit card balances, medical bills, or personal loans. Approximately 22% of Americans have debt in collections, according to the Urban Institute. If you don’t pay, collectors can sue.
It’s frightening to find yourself at the end of a lawsuit. While tempting to ignore it, this is the worst thing you can do. Instead, familiarize yourself with debt collection laws, your legal rights, and be proactive. Knowing how to get rid of debt collectors without paying can protect your rights and possibly help you eliminate the debt legally.
In this guide, we’ll go over the steps you can take to address a debt collection lawsuit effectively.
Jump to:
- Can a debt collector sue you?
- First steps to take when being sued by a debt collector
- What is a debt lawsuit?
- How does debt collection work?
- What happens if a debt collector sues you?
- What to expect at court?
- What are the TOP things to ask a debt collector?
- How does the statute of limitations on debt work?
- What happens if a debt collector sues you but you can’t pay?
- How long can a debt collector pursue old debt?
- Bottom line
Can a debt collector sue you?
A debt collector can sue you to collect an unpaid debt. They will first attempt to collect the debt through phone calls and letters. If those attempts are unsuccessful, then they have the legal right to file a lawsuit against you. If the debt collector wins the lawsuit, the court may order wage garnishment, bank account levies, or a lien on your property.
First steps to take when being sued by a debt collector
Being sued by a debt collector can be a stressful experience. It’s important to take a deep breath and act promptly. If you’re sued, here’s what you should do.
- Accept court papers
- Do not ignore the lawsuit
- Read the legal documents carefully
- Verify that you owe the debt
- Gather documentation
- Prepare your response
- Plan for a court date
Accept the court papers
It’s very important to accept the court papers. Accept the papers, but don’t panic, accept liability, or pay either. Ignoring a collection lawsuit will result in a default judgment in the collector’s favor. According to The Pew Charitable Trusts, 70% of lawsuits end in default because the defendant failed to respond.
Read the legal documents carefully
The legal documents will tell you about the lawsuit, why it was filed, for what amount owed, and when you need to respond by. Understanding these documents is essential for preparing an appropriate response.
Confirm the debt is accurate and legitimate
Verify that it is a legitimate debt and the amount claimed is accurate. Collection agencies are known for making mistakes. A common one is to serve papers to a person with a similar name. Make sure the unpaid bill is indeed yours and that it’s still within the time frame for collection. If it is outdated or if you believe the claim is incorrect, you may have an affirmative defense.
Respond to a lawsuit: Do not ignore it
If you’re getting sued by a collection agency, it’s imperative to respond promptly. Even if the lawsuit is wrong, you must challenge it within 20-30 days.
Respond to a lawsuit by preparing a document called an “Answer.” In it, you need to address each allegation and state your defense. Be honest.
Collection agencies count on you not responding. Lawsuits are expensive. Their aim may be simply to scare you into paying what you owe. Just by responding, you may compel them to dismiss the case, or – more likely – negotiate a settlement.
Send a 30‑day debt‑validation letter
Send a debt validation letter within 30 days of the debt collector’s initial contact. A debt validation letter is a written request asking the debt collector to prove the validity of a debt they are attempting to collect.
In your letter, you should state that you are disputing the debt, your reasons for doing so, and request verification of its validity. Ask the debt collector to provide you with details such as the original creditor’s name, the amount of debt, the date it originated, and any supporting documentation. To be thorough, include your full name and address, the debt collector’s information, and the account number, if you know it. Send the letter via certified mail with a return receipt to have proof of mailing and delivery. Keep a copy for your records as well.
Documenting your finances
When you’re being sued, it’s important to have all your documents in order.
These include:
- Bank account statements
- A detailed record of your income, expenses, and assets
- Payment records, including bank and credit card statements
- All correspondence with the original creditor or collector.
- A debt validation letter
These documents will help you understand your financial situation and provide vital evidence if you need to negotiate a settlement or defend yourself in court.
Ensure the creditor can prove the debt
Collection agencies and creditors shoulder the burden of proof. This means it’s on them to prove to the court that you owe the money.
Request that the collector provide detailed documentation proving the amount owed, the original creditor’s information, and evidence that the unpaid bill has been legally transferred to them.
Without this documentation, the collector may not have a valid claim and may have to drop the lawsuit. Challenging the proof of debt can be a powerful defense strategy and may lead to the dismissal of the case.
Check if the debt is time‑barred
To determine if a debt is time-barred, you need to check the statute of limitations for your state and the specific type of debt. If the statute of limitations has passed, the debt is time-barred, meaning the creditor can no longer sue you to collect it.
Consider getting legal advice
You may want to check with your state bar association to find legal representation. Attorney fees can be high, but a lot offer a free consultation that you can take advantage of to assess your situation.
In some cases where the debt is yours and it’s within the timeframe for legal action, it may be beneficial to negotiate a debt settlement or talk to a credit counselor. You can get a free consultation with a non-for-profit credit counseling agency.
When to consider debt settlement
A debt settlement involves paying a portion of the amount owed in a lump sum or installments, depending on your financial situation. The collector may be happy to settle for less since it means they don’t have to deal with the hassle and expense of going to court.
Is debt settlement a good option? A settlement or a payment plan can be a good option when the debt is valid, and it keeps you out of court. Paying off your debt can help your credit score in the long run, and you won’t have to deal with debt collectors anymore.
Why does ignoring a debt lawsuit lead to default judgments?
New
Turn easy tasks into real rewards – worth up to $499/year!
Failing to respond to a debt lawsuit means that you do not present a defence. As you have not proved that the lawsuit is invalid, the court will rule in favor of the creditor or debt collector. To avoid a default judgment, accept the papers and respond to the lawsuit within the specified deadline. The deadline is usually 20 to 30 days, but it varies by state laws.
What is a debt lawsuit?
A debt collection lawsuit is a legal process initiated by a creditor or debt collector to recover unpaid debt. This can happen with outstanding credit card balances, loans, medical bills, or other types of financial obligations. The creditor or debt collector files a lawsuit in state or federal court to get a judge to order you to pay them back. Debt collectors only sue you after other methods of collection have failed. It is their last resort to enforce payment.
You’ll be served a summons either by email or hand delivered by a process server and a complaint. The summons notifies you of the legal action, and the complaint details the reasons for the lawsuit, including the amount owed. You must respond to the lawsuit in a timely manner. Failure to do so can lead to a default judgment in the creditor’s favor.
In court, both parties may present evidence and arguments. The debtor can challenge the lawsuit on various grounds, including disputing the amount owed, the ownership, or that it’s expired. All are good affirmative defenses to get the lawsuit dropped.
Do you have an unpaid bill?
How does debt collection work?
When you borrow money and then fail to pay a bill, the original lender will make several attempts to collect. This usually involves reminders and phone calls. After about 180 days, the credit card company or lender may turn the overdue bill over to a debt collection agency or sell it to a third-party collector.
Once a third-party collector is involved, they will contact you to recover the amount owed. Collection agencies are governed by the Fair Debt Collection Practices Act (FDCPA), which prohibits them from engaging in harassing, oppressive, or abusive behavior during the collection process.
Under federal law, you can sue for harassment if the collector violated the FDCPA. Harassment includes excessive communication, using obscene or profane language, and threatening violence or harm. Violations of collection laws can be reported to the Consumer Financial Protection Bureau, which oversees these practices.
Collection agencies want to be paid. If they can’t get the full sum, they may negotiate payment plans or a settlement. Learning how to negotiate credit card debt with collectors can help keep you out of court. It’s when these efforts don’t yield results that the collector sues you to recover the funds.
What happens when a debt collector sues you?
When a debt collector sues you, they are seeking a court judgment to collect the debt. A judgment will allow them to pursue collection actions like wage garnishment, bank account levies, and liens on your property. You must respond to protect your rights. If you and the debt collector cannot reach a settlement out of court, you will likely have a court hearing. At the hearing, you can present your case.
What to expect at court?
If your case proceeds to court, you will have to attend the hearings where both you and the plaintiff (creditor) will present your cases.
Most debt lawsuit trials have the same steps. You and the plaintiff will each make a short statement about the evidence you have and the decision you’re seeking. The plaintiff will present its case first. They may show evidence like contracts, invoices, or witness testimony. You will then present your own evidence and arguments. You may be able to dispute the debt, present evidence of payment, or prove that it is time-barred. The hearing will end with final arguments from both sides about why the judge should rule in their favor. The judge will then make a decision. They may decide on the spot or mail you a decision within five to ten days.
Tired of endless credit card bills?
What are the TOP things to ask a debt collector?
If you’ve been served with legal papers, knowing how to respond to a lawsuit can significantly impact the outcome. The first thing to do is question the debt collector. Collection agencies make mistakes. It may not be legitimate, they may not have a legal right to sue, or it could be a scam.
Always ask for:
- Verification of the debt
- The collector’s name, address, and phone number
- The debt amount, what it is for, and when it occurred
- The name of the original creditor
- Proof that you owe the debt
Get all information in writing. This provides a record that can be useful if you need to dispute the lawsuit.
A lot of debts are old and have been sold to third-party collection agencies. Ask for documentation proving the purchase. It is important to establish that the debt collector has a legal right to collect on the debt.
If the debt is past the statute of limitations, then they may have a right to collect it, but not a right to sue you. That’s why the date is so important. Being proactive and informed about the lawsuit and your rights can lead to a more favorable outcome.
Whatever you do, never admit that it’s yours. Admitting liability can reset the statute and give the collector the upper hand.
What happens if a debt collector sues you but you can’t pay?
If a debt collector sues you and you cannot afford to pay, you still have options. First, respond to the lawsuit and have the collector prove that it is valid.
If the debt is valid but you cannot pay the full amount, you may be able to negotiate a payment plan or a settlement where you pay a reduced amount over time. If this is still unaffordable, you may want to file for bankruptcy. Bankruptcy can discharge certain unsecured debts and give you a fresh financial start, but always talk to a lawyer first. Some lawyers offer free consultations and nonprofit legal aid organizations can help if you have limited funds.
To save for a rainy day or pay debts?
How does the statute of limitations on debt work?
The statute of limitations on debt refers to how long a creditor or collection agency has to sue you for unpaid dues. The exact amount of time varies depending on the type of debt and the state it occurred in. Generally, it ranges from three to six years, but some cases can extend up to ten or even twenty years. The clock starts ticking after your first missed payment or after the last payment was made to the account. It varies by state.
It’s important to note that the statute does not eliminate the debt. It still exists, and the creditor or collection agency can still attempt to collect it. All it stipulates is that they can no longer legally sue you. The debt will also remain on your credit report for up to seven years, whether the statute has passed or not.
Once the statute has passed, the debt is considered time-barred. If a collector sues you for a time-barred debt, you have a good defense.
You still have to respond to the collection lawsuit and provide evidence that it’s time-barred. Ignoring the lawsuit won’t help, as the court may not be aware it’s time-barred and could still rule in favor of the collector.
Another thing to keep in mind is that certain actions can reset the clock on the statute of limitations. These include making a payment, a promise of payment, or even acknowledging that it’s yours. This is why it’s crucial to be cautious in your communications with collectors and never admit liability.
If you’re facing a collection lawsuit, check the time frame. It may give you a good defense and get the case dropped.
How long can a debt collector pursue old debt?
There is no time limit on how long a debt collector can pursue an unpaid bill. They can try to collect until it’s paid. The statute of limitations only prevents them from taking you to court. Here are three examples of how this can play out.
Lisa in California is sued by a debt collector for an outstanding credit card balance of $600. She can’t remember the bill, but she knows that she stopped making payments on that card five years ago. The statute of limitations for credit cards in California is four years. She responds to the lawsuit with proof that the outstanding balance is old, causing them to drop the case, but they still call her.
Over in Indiana, John has an unpaid hospital bill from eight years ago. He is contacted by a collector, and he agrees to a payment plan. The statute of limitations on unpaid medical bills in Indiana is six years. But now that John has acknowledged and agreed to pay his bill, the statute resets, and the six-year period starts anew. If John misses a payment, the collector can take him to court.
Lastly, let’s look at Laurie in Texas. She was served with a lawsuit on an old auto loan. The statute of limitations in Texas is four years, and the loan is ten years old. So she ignored it. Due to her failure to respond, the court issued a default judgment in the collector’s favor. By court order, her wages are garnished and her bank accounts are frozen.
If a debt collector claims you owe an old bill, you may not be legally obligated to pay. But be careful, as they can still pursue any unpaid bills, and the statute only protects you from lawsuits.
Get tips for making money and more at MoneyFor.
Frequently asked questions
1. Can debt collectors sue you for an old debt?
Collectors can sue for old debts if they are within the statute of limitations. The statute varies, but it is typically 3-6 years. Once it’s past the statute of limitations, collectors lose the right to sue. However, be aware that certain actions, like making a payment, can restart the statute, allowing them to take you to court.
2. If I miss a $1,000 debt collection court date, can I be sent to jail?
You cannot be sent to jail for the debt itself. If you miss a court order to appear, you could be arrested for contempt of court.
3. What to do if a collection agency threatens to sue you?
If a collection agency threatens to sue you, verify that the debt is legitimate and within the statute of limitations. If it is valid, consider negotiating a settlement or payment plan to avoid the lawsuit. If you are served with a lawsuit, respond to it promptly to avoid a default judgment.
4. What’s the worst a debt collector can do?
The worst thing a debt collector can do is to sue you and then pursue the court judgment against you. If they win a court judgment, they can attempt to garnish wages, seize assets, or put a lien on your bank account.
5. How much will a debt collector settle for?
Debt collectors typically settle for 30% to 60% of the original debt, but this can vary depending on the type of debt, age, and if the collector believes they can get more. Some collectors may settle for even less, potentially as low as 20%, while others might hold out for higher amounts. Older debts are often more negotiable since the collector’s ability to pursue legal action diminishes over time.
6. What happens if you ignore a debt collector?
Ignoring a collector can have serious repercussions. Initially, collection efforts may intensify. If the unpaid amount is substantial, the collector might escalate to filing a lawsuit. Ignoring legal notices can result in a default judgment against you, potentially granting the collector the right to wage garnishment, bank account levies, or liens on your property. Depending on your state laws and the amount you owe, you may be considered judgment-proof and exempt from wage garnishment.
Bottom line
Facing a court summons for debt collection is never fun, but remain calm; you do have options. The worst thing you can do is ignore it.
Always verify that the debt is yours. Confirm that the collector is legitimate and has a legal right to collect the money. And find out if it is within the relevant statute of limitations. You may find you have a good affirmative defense and can win or dismiss your lawsuit.
