What should I do if I’m sued by a debt collector or creditor?
If you’re sued for an unpaid debt, you should respond to the lawsuit, either personally or through a lawyer by the date specified in the court papers.
If you have been sued or “served” by a creditor or debt collector for an overdue debt, read the lawsuit carefully and respond by the required deadlines. By taking this step, you can protect yourself and help avoid additional financial difficulties.
Why it’s important to respond when sued by a debt collector
When you respond to the lawsuit, a debt collector has to prove to the court that the debt is valid. If you owe the debt, you may be able to work out a settlement or other resolution with the collector. Responding doesn’t mean you’re agreeing that you owe the debt or that it is valid.
If you don’t respond, the court could issue a judgment or court action against you, sometimes called a “default judgment.” For example, if you refuse to accept delivery or “service” of the lawsuit, the court could view this as ignoring a properly served lawsuit, and it’s unlikely that this tactic will be effective at defending yourself against the lawsuit.
As a result, it's likely that a judgment will be entered against you for the amount the creditor or debt collector claims you owe, as well as lawful additional fees to cover collections costs, interest, and attorney fees as allowed by the judgment.
Judgments also give debt collectors much stronger tools to collect the debt from you. You may lose the ability to dispute the debt, if you believe you don’t owe it or that the amount is wrong, and depending on your situation and your state’s laws, the creditor may be able to:
- Garnish your wages
- Place a lien against your property
- Move to freeze funds in your bank account
A judgment is a court order, so it can be very difficult to get it changed or set aside once the case is over. You have a much better chance to fight a collection in court if you defend the case than if you wait until a judgment is entered against you. You may also be able to work out a compromise or settlement by negotiating with the debt collector before a court makes a judgment.
Consult an attorney to learn more about your debt collection rights
Attorneys can help you understand both your federal and state protections, if you’ve been sued or threatened with a lawsuit by a debt collector.
Some attorneys may offer free services or charge a reduced fee. You may also wish to find an attorney who has experience in the Fair Debt Collection Practices Act (FDCPA) and debt collection issues. There may also be or legal clinics in your area who will offer their services for free if you meet their criteria.
When a debt collector can’t sue or threaten to sue
You have certain rights and protections when being contacted by a debt collector who is subject to the FDCPA. A debt collector can’t use the threat of a lawsuit to collect a debt if they do not intend to file a lawsuit. They also can’t sue or threaten to sue when the statute of limitations – or the period of time they have to file a lawsuit to collect a debt – has expired.
If you're having trouble with debt collection, you can submit a complaint with the CFPB.