If you owe money to a credit card company, medical provider, or another creditor, and you don’t pay, the creditor will probably assign the debt to a collector or sell it to a debt buyer. And you might get sued at some point.
Facing a debt collection lawsuit is an anxiety-provoking experience, especially if you don’t know what to expect or how to react. While each case is a little different, and various states and courts have additional rules, here’s what generally happens if a collection agency sues you for nonpayment of a debt.
How Does a Debt Collection Lawsuit Begin?
A debt collection lawsuit begins when the collection agency files a “complaint,” sometimes called a “petition,” in court. The complaint will explain why the collector is suing you and what it wants, usually, repayment of money you owe, plus interest, fees, and costs.
You’ll receive a copy of the complaint personally from a professional process server or a local sheriff, or the server might leave a copy with another adult at your address and then mail a copy to you. Sometimes, courts allow the plaintiff (the party that filed the suit) to mail you the complaint and summons (see below) and a form to sign acknowledging that you received the papers.
Along with the complaint, you'll also get a “summons.” The summons informs you that you’re being sued and gives you information about the case, like the deadline to file a formal response, called an “answer,” in court.
Filing an Answer to a Debt Collection Lawsuit
Generally, you’ll get around 20 to 30 days to file a written answer to the lawsuit with the court. You can respond to the allegations in the complaint and raise any defenses you have, like that the statute of limitations (the law that sets a time limit on the right to file a lawsuit) has expired or counterclaims against the collector, such as violations of the Fair Debt Collection Practices Act.
A lawyer can help you determine if you have any defenses, prepare and file the answer, and represent you in court. If you can’t afford to hire an attorney (or paying for a lawyer would cost more than the collector is seeking in the lawsuit), you can prepare an answer, file it, and represent yourself. You’ll have to do some legal research, raise all possible defenses, and learn about all the court rules. Otherwise, you could lose the opportunity to defend your case. If you raise an argument or defense at the wrong time, the court might not even consider it.
What Happens If You Don’t File an Answer to a Debt Collection Lawsuit
If you don’t respond to the suit, the collector will most likely ask the court to enter a default judgment, which means you automatically lose the case. The court might then simply award the collector the amount it requested, or it might scrutinize the documentation to make sure the amount is legitimate, or the court might require the collector to present evidence before awarding any money. The collector will probably be able to get attorneys’ fees, court costs, and interest in addition to the amount you owe.
Once the collector gets a money judgment against you, you might face wage garnishment, a bank account levy, or a lien on your property.
Should You File an Answer to a Debt Collection Lawsuit?
In some cases, such as if you’re judgment proof, you’re sure you owe the debt, don’t have any defenses, and the amount the collector requested accurately reflects the amount you owe, it might not be in your best interest to respond to the suit. But before you choose this route, be sure you have no defenses or counterclaims against the collector. Even if you don’t have much money available, it's a good idea to talk to a lawyer who can point out defenses or legal violations you didn’t notice. Usually, it’s best to answer the suit.
Also, you might want to consider settling the debt if you have some money. An attorney can also help you negotiate a settlement. Once a collector knows that a lawyer represents you, they're usually more willing to settle and less interested in trying to win in court.
What Kind of Notices You’ll Get in a Debt Collection Lawsuit
After you file your answer and serve it to the collector’s lawyer, you'll receive written notification of all further proceedings in your case, like any filed motions, notice of the trial date, and notice of a settlement conference, if applicable. Some courts require that the parties come together at least once before the trial to try to settle the case.
You must attend court hearings and respond to court notices, or the court might let the collector win by default.
Discovery Process in a Debt Collection Lawsuit
“Discovery” refers to the formal procedures that parties in a lawsuit use to get information and documents from each other to prepare for trial or settle the case. The collector probably won't engage in discovery if you don’t raise defenses or counterclaims.
But if you have a good defense or file a counterclaim, you and the collector might want to participate in discovery.
The Collector Might Move for Summary Judgment
After you file an answer, the collector might file a summary judgment motion to try to convince the court that none of the case's material facts are in dispute. For example, the collector might say that you signed a legal contract, failed to make the payments as the contract required, and didn’t have any valid defenses. If the judge grants the motion, the court will enter a judgment against you without a trial.
You’ll have to file paperwork opposing the motion to challenge a summary judgment motion. If you don’t, you’ll probably lose. Because the lawsuit's outcome is at stake, you should seriously consider consulting with a lawyer (if you haven't already) if the collector files this kind of motion.
How a Trial Works in a Debt Collection Lawsuit
Most debt collection cases don’t get to trial; they settle, or the collector gets a default or summary judgment. Most collectors win their cases by default without going to court.
If you go to trial, you (or your attorney, if you hire one) will have to present your case according to specific rules of procedure and evidence. At the end of the trial, the judge or jury, if applicable, will make a decision. The judge or jury’s decision is then entered in the court records as a judgment and becomes official.
Collectors Can Use a Judgment Against You
Again, if a debt collector receives a judgment against you, it may be used in several ways to collect the money you owe. The collector may send an order for garnishment to your employer, and your employer would then have to withhold a percentage of your pay each pay period and send it to the collector. Both state and federal laws limit the amount of the percentage.
The collector may also use a judgment to have a sheriff come to your home and collect your personal property for sale to satisfy your debt (subject to exemptions) or place a lien (ownership right) against your home or bank account.
Consider Talking to an Attorney If You're Facing a Debt Collection Lawsuit
This article gives an overview of what typically happens if a debt collector sues you. However, lawsuits are complicated, and court procedures vary. So, if you’re facing a collection lawsuit, it’s always best to talk to an experienced debt relief attorney.