Creditor Lawsuits: What to Expect When You’re Sued by a Debt Collector

If you owe money to a credit card company, medical provider, furniture store, or another creditor, and don't pay, you might get sued by the creditor or a debt collector.

When a creditor or debt collection agency sues you for nonpayment of a debt, you'll get a copy of the complaint (lawsuit) and the chance to respond. After you file and serve your response to the creditor lawsuit, you'll receive written notification of all further proceedings in your case.

Once you've responded to the suit, the case will proceed to discovery, settlement conferences, motions for summary judgment, and (perhaps) a trial.

What Is a Debt Lawsuit?

When a creditor or debt collector files a legal action in court to get a judgment so it can collect a debt you owe, that's a "debt lawsuit." Once the creditor or collector has a money judgment, it can use regular collection methods, such as a wage garnishment or bank account levy, to collect what you owe.

Where Will the Creditor or Collector File the Collection Lawsuit?

The creditor may sue you in state civil court. These courts can have many types of names: municipal court, superior court, justice court, county court, to name just a few. Or if you owe money to the federal government, the creditor might sue you in federal court.

Most states also allow creditors to sue in small claims court if the creditor lawsuit asks for less than a certain amount. The amount varies by state and can be a few thousand dollars or as much as $10,000 or more. But many courts don't allow collection agencies to use small claims courts.

Small claims court procedures are more informal than state court procedures, and the process is streamlined.

How Does the Lawsuit Start?

The lawsuit starts when the creditor, collection agency, or, more likely, a lawyer for one of these entities files a "complaint" (sometimes called a "petition") with the court. The complaint will list you as a defendant and perhaps someone else, like your spouse or someone who cosigned the loan or account.

It will also state why the creditor is suing you and what the creditor wants. Usually, the creditor wants reimbursement for the money you owe, plus interest, and sometimes attorneys' fees and court costs. Expect the complaint to contain a lot of legalese.

What Happens When You're Sued by a Debt Collector?

The creditor or collection agency (or lawyer) must serve you with a copy of the complaint and a "summons." The summons notifies you that you are being sued and usually provides additional information, such as when you need to file a formal response in court.

Most courts require the creditor to "serve" the documents by handing them to you personally. Creditors usually hire a professional process server or a local sheriff to do this job. If the server can't find you, the server can often leave the summons and complaint with another adult at your home or business and mail a copy to you.

If the server can't serve in either of these ways, courts often allow creditors to mail you the summons and complaint, along with a form for you to sign acknowledging that you received the papers. You will have been deemed served if you sign and return the form. It's usually a good idea to sign the form and return it. If you don't and the creditor can later prove that you refused, you might have to pay the process server costs, typically between $35 and $150.

Is it Possible to Settle a Debt After Receiving a Summons?

You can settle a debt even after you receive a summons in a lawsuit. In fact, many debt collection cases are settled while the court process is ongoing.

But you need to make sure you don't ignore the suit while negotiating a settlement. Consider talking to a debt settlement attorney to ensure that your rights and interests are protected throughout the process. If you miss the deadlines to respond to the suit and appear in court, it will be significantly harder for an attorney to help you.

What to Do If You're Sued by a Debt Collector

Usually, you have about 20 to 30 days to file a written response to a debt collection lawsuit. The document you file is often called the "answer."

You will probably have to pay a filing fee when you file your response. If you don't have a lot of money, you might qualify for a fee waiver. Ask the court clerk about these.

How to Fight a Debt Collector in Court

Preparing a formal response can be difficult. It's often a good idea to hire a lawyer to help you sort out your defenses, prepare the written response, and represent you in the lawsuit. If the creditor or collector has violated the law and you stand to get a substantial payout, you might get a lawyer to take your case on a contingent fee basis—which means you don't pay attorney fees unless you win.

If you don't have the money to hire a lawyer, or paying for a lawyer would cost more than the creditor asks for in the lawsuit, you can represent yourself. To do this competently, however, you'll have to do some legal research and arm yourself with a good self-help book, like Nolo's Represent Yourself in Court by Paul Bergman and Sara J. Berman.

You must learn about all the court rules. Otherwise, you might lose the opportunity to defend your case. For example, if you raise an argument or defense at the wrong time, the court might refuse to consider it.

In your response, it's essential to raise all possible defenses to a creditor lawsuit, such as that the statute of limitations has run or the goods you received were defective.

What Happens If You Ignore a Lawsuit?

The creditor will likely ask the court to enter a default judgment if you don't meet the filing deadline. Sometimes, the court will award the amount the creditor requests in the default judgment. Some courts will review the papers carefully to ensure the amount is justified. Others might require the creditor to present evidence before awarding any money.

Should I Respond to a Collection Lawsuit?

Usually, it's a good idea to answer the suit. But sometimes, it's in your best interest to default (not respond). This might be the case if you're judgment proof.

But before you default, make sure you don't have any defenses or claims against the creditor. Even if you have little money or assets, it might be worthwhile to consult with an attorney—your judgment-proof status might change, and an attorney can pick out defenses or violations you're unaware of.

What Happens When the Collection Case Goes to Court

If you respond to the suit, the case will proceed to discovery, settlement conferences, motions for summary judgment, and, in some cases, a trial. Also, after you file and serve your response to the creditor lawsuit, you'll receive written notification of all further proceedings in your case.

Notices You'll Receive As Part of a Routine Collection Case

In a routine debt collection case, the next document you'll probably receive is a notice of the plaintiff's request for a trial and date. The paper after that will probably be a notice of the trial date.

However, some courts will notify you of a settlement conference before the trial date. Be sure to attend the settlement conference or trial.

If you move, notify the plaintiff and court of your address change.

Notices You'll Receive In a Non-Routine Collection Case

If yours isn't a routine debt collection case, or the creditor's lawyer wants to play the litigation game, a lot can happen between when you file your answer and any counterclaim and when you get a notice of the trial. You might want to take the offensive with some of this, especially if you filed a counterclaim.

How Do Court Proceedings in a Collection Case Work?

Below is a brief description of the most common proceedings in a debt collection lawsuit. It's difficult for someone without a lawyer to undertake them, but it's not impossible. (These descriptions aren't meant to be a detailed account of how to cope with court procedures. For that, again, see Nolo's Represent Yourself in Court by Paul Bergman and Sara Berman.)

Discovery in a Collection Lawsuit

"Discovery" refers to the formal procedures parties use to get information and documents from each other and witnesses. The information is meant to help the party prepare for trial or settle the case.

Don't expect the plaintiff to engage in discovery in routine debt collection cases where you don't have any defense. Discovery can be expensive, and, quite frankly, often, nothing is available for the plaintiff to "discover." You owe the money. You haven't paid.

However, if you raise a solid affirmative defense or file a counterclaim, you and the plaintiff might want to engage in discovery. Here are brief definitions of the primary discovery methods.

• Deposition. A "deposition" is a proceeding in which a witness or party is asked to answer questions orally under oath. A court reporter is present and takes down the entire proceeding. If you schedule a deposition of someone, you'll probably have to pay for the court reporter, which can be very expensive. (Get a copy of Nolo's Deposition Handbook by Paul Bergman and Albert Moore to learn more.)
• Interrogatories. Written questions one party sends to the other to be answered in writing under oath.
• Request for production of documents. A request from one party to the other to hand over certain defined documents. If you are adamant in your defense of a lawsuit that you paid the debt, the other side will most likely request that you produce for inspection (and copying) a check, money order receipt, or other document supporting your assertion.
• Request for admissions. A request from one party to the other to admit or deny certain allegations in the lawsuit.
• Request for inspection. A request by one party to look at tangible items (other than writings) in the other party's possession. For instance, if you raise as an affirmative defense that the painter who sued you spilled paint on your rug and can't be removed, the painter may request to inspect the rug.
• Request for physical examination. A request by one party that a doctor examine the other party if the other party's health is at issue.
• Subpoena. An order telling a witness to appear at a deposition.
• Subpoena duces tecum. An order telling a witness to bring certain documents to a deposition or hearing.

In some states, the trend is toward limiting discovery. For example, in some states, parties to a lawsuit can ask only a limited number of questions in their interrogatories, and a party or witness can be deposed only once. If the creditor sends you volumes of interrogatory questions or schedules your deposition after it's already been taken, you can ask the court to issue a "protective order" to stop the harassment.

Be sure to answer discovery requests in the time allowed, even if it's just to say you don't know the answer. Otherwise, the plaintiff may ask the court to compel you to answer and to pay costs for their trouble. Or you might be deemed to have admitted the plaintiff's assertions ("requests for admissions"). If the plaintiff or its attorney agrees to give you more time to answer, get it in writing. Send a letter confirming the extension of time to the plaintiff or its attorney.

Summary Judgment in a Collection Lawsuit

The creditor might try to convince the judge that none of the facts of the case are in dispute—for example, that you signed a legal loan agreement, made no payments, and have no defense as to why you're not paying. The creditor also must convince the judge that the plaintiff is entitled to judgment as a matter of law. The creditor does this by filing a summary judgment motion.

If the judge agrees with the creditor, the judge can enter a judgment against you without any trial. The creditor should not win if any material (important) facts are disputed (for example, if you claim you didn't sign the agreement).

You usually must file papers opposing the creditor's summary judgment motion if you want to fight it. If you don't, you'll probably lose. Because responding to a summary judgment motion can be complicated, and because the entire lawsuit is at stake, consider consulting with an attorney.

Settlement Conference in a Collection Lawsuit

Several states and the federal court system require that the parties come together at least once before the trial to try to settle the case. To assist you in settling, you'll be scheduled to meet with a judge or attorney who has some familiarity with the area of law your case involves.

You don't have to settle, but the judge or attorney will usually give you an honest indication of your chance of winning in a trial.

Trial in a Collection Lawsuit

The vast majority of cases don't go to trial. They settle or end in summary judgment or a similar proceeding. But once discovery is complete, any summary judgment motion is denied, and settlement efforts have gone nowhere, you will eventually find yourself at a trial.

In a trial, a judge makes all the legal decisions, such as whether or not a particular item of evidence can be used. Either a judge or a jury makes the factual decisions, such as whether the item sold to you was defective.

At the trial, you must present your case according to very specific rules of procedure and evidence. If the creditor prevails, the court will enter a judgment in their favor, ordering you to pay the debt.

What Happens If You Can't Pay a Debt Collection Lawsuit?

If you can't pay the debt, the creditor may use various collection methods, including wage garnishment, a bank levy, or a property lien.

Do's and Don'ts When Your Debt Is In Collections

If you have a debt in collection, you need to know what to do and, more importantly, what not to do.

• Don't admit guilt. If a creditor or collector calls you about a debt, don't admit you owe it. Admitting guilt might give the creditor additional leverage in a lawsuit and make it harder for you to negotiate a favorable settlement. You also might inadvertently restart the statute of limitations.
• Don't use a for-profit debt settlement company. Debt settlement companies often claim they'll be able to talk your creditors into settling your unsecured debts for pennies on the dollar. Many of these companies are scammers. If you need help settling a debt, consider hiring a reputable lawyer or working with a nonprofit agency, like one affiliated with the National Foundation for Credit Counseling. Also, if you have a lot of debt, you might want to consider filing for bankruptcy.
• Don't ignore a lawsuit. Again, if you don't answer the suit, the creditor might get a default judgment and then be able to garnish your wages or take money out of your bank account. Filing a response to a lawsuit doesn't mean that you're admitting you owe the debt or that it's valid. Responding to the lawsuit is especially important if the lawsuit contains incorrect information, the statute of limitations has expired, or you don't owe the debt because it's illegitimate, it belongs to someone else, or you already paid it. You'll have a much better chance of fighting a collection case by defending yourself in the action. Once a court grants a judgment, it's typically very difficult to get it reopened or set aside.
• Know your rights. When dealing with debt collectors, you need to know your rights under the FDCPA and other laws. If a debt collector violates the law, you might have a defense against a collection lawsuit, you could gain leverage in negotiations, and you may file a civil lawsuit against the collector.

Where Do I Report a Debt Collector for Breaking the Law?

You can file a complain against a debt collector with your state attorney general's office, the Consumer Financial Protection Bureau, or the Federal Trade Commission at ReportFraud.ftc.gov

You can also use any legal violations as leverage in debt settlement negotiations, and, if a debt collector violates the federal Fair Debt Collection Practices Act or another similar law, you can sue that collector.

Talk to an Attorney If You're Being Sued by a Debt Collector

If you need help responding to a collection or creditor lawsuit for nonpayment of a debt, consider hiring a lawyer. But keep this in mind: If hiring a lawyer costs more than the creditor seeks in the lawsuit, it makes little sense to seek assistance from an attorney.

If you can't afford an attorney, you might be able to get low-cost or free help from a legal aid program or clinic that provides legal assistance to low-income individuals and families. You can find a list of various legal aid programs on the Legal Service Corporation's website.