What should you do if a debt collector sues you?

Don’t ignore the court papers they serve you


If you’re sued by a debt collector, gather all the information you can about the debt, but don’t acknowledge any liability in your response. Leave it to the debt collector to make a case.

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It’s one thing for a debt collector to threaten to sue you, but what should you do if they actually go ahead and sue you?

It seems with more Americans falling behind on their bills, that is a real risk for many people.

For one, the Pew Charitable Trusts, a nonprofit public policy advocate, reports that as of 2018 about 32% of Americans with a credit history had a report of debt in collections in their profile. And with the coronavirus pandemic impacting the livelihoods of millions of Americans, the situation is likely to get worse.

You should be aware of how a debt collection lawsuit process works so that you can handle this best for your own benefit.

Check out all the answers from our credit card experts.

Ask Poonkulali a question.

The debt collector should serve you court papers

The debt collector should first serve legal papers informing you about the case they have filed against you. You can’t avoid the lawsuit by refusing to receive the papers. If you ignore the papers even though they were served correctly, it will not do you any good and the case will not go away.

You should respond to the notification within the deadline given to you. However, you don’t need to acknowledge that you owe the money. It is up to the plaintiff to make this case. You may want to consult an attorney to determine how best to respond to this lawsuit. They could also represent you in court.

If you don’t respond to the papers served, the court could enter a default judgment against you, which will not do you any good. If the court rules thus, you will be asked to pay the debt outstanding and also likely the collector’s costs and attorney fees, as well as interest on the debt. So you are essentially enabling a favorable outcome for the debt collector if you don’t respond to the papers they serve you.

See related: What to do if a debt collector threatens to sue you

Debt collectors may play dirty

The Pew Charitable Trusts finds that there are some typical reasons a consumer doesn’t respond to a plaintiff debt collector’s papers.

Some see their case as a lost cause and simply give up. Others might be put off by the complexity of the system, or feel not up to the task if they can’t afford to hire a lawyer. For some, it might be because they can’t take time off from work, or don’t want to. In addition, consumers may not recognize the name of the firm suing them. This could be the case if the debt has been sold, for instance.

There’s also the possibility that you may not even know you are being sued. Debt collectors are responsible for serving you the papers by mail at your last-known address.

However, it seems some debt collectors are resorting to “sewer service” and knowingly not serving the papers while testifying in court that they did contact you. They take advantage of the fact that states typically don’t specify a process for ensuring that the papers were served to the right address.

See related: Can debt collectors come to your house at any time? 

Gather information about your debt

Before you defend yourself, you should also gather all the information you need about this debt. Get together all the paperwork you have, including the details of the original debt, and all the communication you have from the collector, such as collection letters.

Weston Legal, a law firm, advises that you have the debt collector send you a document that validates the debt, “including the chain of custody to ensure the debt collector has the right to take you to court.”

Considering that debts are often sold, it has to be clear who has the right to sue you. And if anyone else co-signed the debt with you, make sure they have received the court papers as well, since they will have to defend the case too.

Also, make sure that the debt is not past its statute of limitations, the legal limit for the period within which the debtor can sue you. If it is past the statute of limitations, they could still sue you in hopes that you will not defend yourself and they will get a default judgment against you to collect on the debt.

See related: Feds crack down on abusive debt collection practices

See if you can settle with the debt collector

If you do owe the money, you could also attempt to work out a settlement with the debt collector, by paying less than you owe, before taking the case to court. You could even come up with a monthly payment plan to pay off the debt. Be sure to get all the paperwork for any such arrangement you might work out.

The Fair Debt Collection Practices Act outlines the rules of the road for the debt collector to engage with you. In case they run afoul of this law, you could have a case against them. A collector not following the law would also give you some leverage in case you just want to settle with them.

See related: Is debt settlement worth it? 

What happens if you lose the case?

If you go to court and end up losing the case, a debt collector could get permission to garnish your wages, access funds in your bank account or even place a lien on your property.

According to Pew, “the absence of legal counsel can have serious repercussions for defendants in consumer debt claims.”

So even if you can’t afford to hire a lawyer, make sure you avail of pro bono services, provided at no cost in the public service, at least.

Contact me at pthangavelu@redventures.com with your credit card-related questions.

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