If you owe money to a credit card company, medical provider, furniture store, student loan holder, or any other creditor, and you don’t pay or get behind in payments, at some point you might get sued. Here’s what happens if a creditor or a collection agency sues you for nonpayment of a debt.

The Complaint

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 too, 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.”

Service of the Summons and Complaint

The creditor or collection agency (or lawyer) must “serve” you with a copy of the complaint, along with 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. Most creditors hire a professional process server or a local sheriff to do this job. If the server can’t find you, often he or she can leave the summons and complaint with another adult at your home or business and then mail a copy to you.

Often, courts allow creditors to mail you the summons and complaint, along with a form for you to sign acknowledging that you received the papers. If you sign and return the form, you will have been deemed “served.” Often it’s a good idea to sign the form and return it. If you don’t and the creditor can later prove that you refused to do so, you might have to pay the process server costs, which can be between $35 and $150.

Where Will the Creditor File the Lawsuit?

The creditor may sue you in state civil court (these courts can have many type of names: municipal court, superior court, justice court, county court, to name just a few), or, if you owe money to the federal government, in federal court.

Most states also allow creditors to sue in small claims court as long as the 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. (To learn the limits in your state, see 50-State Chart of Small Claims Court Limits.)

Many courts do not allow collection agencies to use small claims court. Small claims court procedures are more informal than those in state court, and the process is streamlined.

Responding to the Lawsuit

Usually, you have about 20 to 30 days to file a written response to the 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.

Preparing Your Answer

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 what the creditor is asking 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. It’s important that you 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 important to raise all possible defenses to the lawsuit, such as that the statute of limitations has run or the goods you received were defective.

What Happens If You Don’t Respond?

If you don’t meet the filing deadline, the creditor will likely ask the court to enter a default judgment. Sometimes, the court will award the amount the creditor requests in the default judgment, some courts will review the papers carefully to make sure the amount is justified, and still others might require the creditor to present evidence before awarding any money.

Should You Default?

Sometimes it’s in your best interest to default (not respond). This might be the case if you definitely owe the debt, have no defenses, and the lawsuit and amount requested by the creditor accurately reflects what you owe.

But before you default, make sure you don’t have any defenses or claims against the creditor. Even if you have little money, it might be worthwhile to consult with an attorney—the attorney will be able to pick out defenses or violations that you are unaware of.

To learn what happens once the lawsuit proceeds (assuming you don’t default), see Creditor Lawsuits: What to Expect When the Case Is in Court.

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