Creditor Lawsuits: What to Expect When the Case Is in Court

What happens when a collection agency sues you? Here's how debt collection lawsuits work.

By , Attorney UCLA School of Law
Updated by Amy Loftsgordon, Attorney University of Denver Sturm College of Law
Updated 6/19/2023

If you owe money to a credit card company, medical provider, furniture store, or another creditor, and you don't pay or get behind in payments, you might get sued at some point.

When a creditor or 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.

How Does a Debt Collection 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 Next When a Collection Agency Sues You?

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.

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 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.

Should I Respond to a Collection 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.

How to Prepare Your Answer to a Collection Lawsuit

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 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 to a Collection 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.

Sometimes it's in your best interest to default (not respond). This might be the case if you owe the debt, have no defenses, and the lawsuit and amount the creditor requests 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 can pick out defenses or violations you are unaware of.

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.

Proceedings in a Collection Case

Below is a brief description of the most common of these proceedings. 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 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.

Talk to an Attorney

If you need help responding to a 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.

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