Sued by Debt Collectors? Here’s What to Do — And What to Avoid (2023)

When you are months past due on debt, your creditor may assign or sell the debt to a third-party debt collection agency, which will attempt to collect it. In extreme cases of nonrepayment, you may find yourself sued by the debt collector.

If you’re confused about the call and aren’t sure how to respond, follow the guidelines outlined below. Whether the lawsuit is legitimate or a scam, here’s what you need to know if you’re being sued by a debt collector.

In this guide:

  • What to do if a debt collector sues you
  • What NOT to do when being sued by a debt collector
  • Debt collection lawsuit FAQs

What to do if a debt collector sues you

Here’s a list of actions to take:

  • Verify the timeline of events
  • Respond
  • Challenge the lawsuit
  • Decide whether to accept the judgment

Verify the timeline of events

If you’re being sued by a debt collector, you should understand what the process generally looks like – though the exact timeline varies from person to person. If your experience doesn’t match at all what’s below, you’ll want to verify the debt and the legitimacy of the debt collector to avoid a debt collection scam.

  1. You receive a phone call or letter in the mail from the debt collector notifying you of the debt collection. This typically occurs when a debt is 180 days past due.
  2. Within five days of contacting you, the debt collector must send you a debt validation letter stating how much you owe, the name of the creditor and how to dispute the debt if you believe it’s not yours.
  3. If you don’t think you owe the debt in question, you can ask the debt collector for a verification letter. They must send this letter within 30 days of the validation notice.
  4. If your debt is legitimate, you must respond to the debt collector and create a plan for paying off the debt. This could mean paying in full, setting up a payment plan or negotiating the debt.
  5. If you don’t repay or settle the debt, the debt collector can sue you. At this point, you will receive a notice from the court regarding your appearance date.
  6. If you fail to show up for your court date, the court will likely rule in favor of the debt collector.
  7. If this happens, a default judgment or court order will be placed against you. This means you could have your wages garnished or a lien placed against your property. A default judgment typically occurs 20 days after service of a lawsuit.

Respond

If you have verified the legitimacy of the debt in collections, the most important thing you can do now is respond to the debt collection lawsuit. Over the past decade, about 70% of such lawsuits end in a default judgement for plaintiffs (creditors) because defendants (borrowers) fail to respond, according to research by The Pew Charitable Trusts.

Although it can be scary to first receive notice of a lawsuit, ignoring it and hoping the debt collector won’t call again can get you in trouble.

(Video) How to Answer a Debt Collection Lawsuit (2020 Update)

Debt collectors aren’t going to drop a lawsuit just because you ignore it. Instead, if you miss the deadlines to appear in court, it will be significantly harder for a debt collection defense attorney to help you.

Challenge the lawsuit

Debt collectors are often third-party agencies hired by the original creditor after you default. You can challenge the lawsuit if you think the debt is illegitimate.

Reasons why people challenge debt collection lawsuits
The wrong person is being sued.Getting served papers for the wrong person is actually quite common. This can happen when two people have a similar name, or when there are multiple generations in one family with the same name (for example: Bill Smith Jr. and Bill Smith Sr.).
You already paid the debt.Sometimes, debt collection agencies are sold information with incorrect payment records, which means you could be facing a lawsuit for a debt you already paid.
The debt amount is incorrect.It’s possible that even if you owe the debt in question, the amount is incorrect.
The statute of limitations has passed.The statute of limitations is the amount of time that a debt collector can legally collect a debt from you. It can be anywhere from three to 20 years. The time frame depends on the state in which you’re being sued and the type of debt you owe.

If you’re being sued by a debt collector and you disagree with any or all of the information in the debt collection lawsuit, you will want to file a response to the lawsuit in court. You will then have the opportunity to contest what’s in the lawsuit or ask the court to dismiss it altogether.

If you’re disputing the lawsuit, bring documentation such as the validation letter to show:

  • Who the creditor is
  • Whether the debt has been paid
  • Whether the amount on the debt is accurate
  • Whether the debt is past the statute of limitations

Bring evidence of violated collection rules (if applicable)

If your rights have been violated by a debt collector, you should bring evidence to court. Check the Fair Debt Collection Practices Act (FDCPA), Fair Credit Reporting Act and Truth in Lending Act for specific violations. Under the FDCPA, for example, debt collectors may not:

  • Contact you outside the hours of 8 a.m. to 9 p.m.
  • Engage in harassment, which could include anything from using profanity to threatening harm.
  • Partake in unfair practices like threatening to take your property when they don’t have the legal right to or depositing a postdated check early.
  • Contact you once you’re already represented by an attorney.
  • Make fraudulent claims, such as misrepresenting who they are or how much you owe.

Decide whether to accept the judgment

There are several ways you can proceed when it comes time to decide whether or not to accept a debt collection lawsuit.

If …You should consider …
You decide to accept the judgmentHiring an attorney
You decide to accept the judgment but don’t want to go to courtNegotiating an out-of-court settlement
You have limited wages and assetsChecking to see if you’re “judgment proof,” meaning your wages can’t be garnished
Your debt is so significant it’s unmanageableFiling for bankruptcy

Hiring a lawyer

If you accepted a judgment and you’re wondering how to win a debt collection lawsuit, your best bet is consulting a debt collection attorney. Most consumer law attorneys will offer a free consultation in which they’ll discuss your options with you.

Consider consulting a licensed debt collection lawyer, as they specialize in debt defenses and will likely give you more detailed legal advice.

Even if you don’t believe you can afford to hire an attorney, you should ask around, as many debt collection lawyers will take your case for a low or contingent fee.

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Where to get low-cost legal assistance if you’re being sued by a debt collector

Settling the debt

Someone whose debt is legitimate can try to negotiate a debt settlement in exchange for having the lawsuit dropped.

“It’s a good option for consumers if they know they owe the debt, they agree with the amount and they can afford to pay something,” said Barry Coleman, vice president of counseling and education programs for the National Foundation for Credit Counseling (NFCC). “They might be able to work out some sort of settlement and not go to court.”

Coleman added that there’s incentive for the collection agency to do this, too, because the hassle and expense of court proceedings is also expensive for them.

Threatening to file for bankruptcy can also help if you decide to settle. This doesn’t mean you have to actually file bankruptcy, but qualifying for bankruptcy can give you leverage during a settlement negotiation.

Finding out if you’re exempt

Depending on the state and the amount you owe, people with limited wages and assets might be exempt from wage garnishment, meaning they’re “judgment proof.” Consult a credit counselor, lawyer or other expert in your area to figure out if you fit these criteria.

Filing for bankruptcy

Another option, depending on your financial situation and the size of your debt, is to file bankruptcy.

  • Chapter 7 bankruptcy: If you file, all of your debts will be forgiven and the debt collector will not be able to collect from you.
  • Chapter 13 bankruptcy: You might be able to negotiate a significantly lower amount to pay the debt collector, depending on your situation. Once you pay the agreed-upon amount, you can no longer be pursued by or sued by a debt collector.

Filing for bankruptcy is a major financial move with damaging effects. Speak with a counselor, financial advisor or other qualified professional before you seek out this option.

What NOT to do when being sued by a debt collector

Now, let’s examine what to avoid when dealing with this situation.

  • Don’t act impulsively
  • Don’t ignore the debt collection lawsuit
  • Don’t accept liability
  • Never give access to your bank accounts
  • Beware debt settlement services
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Don’t act impulsively

If a debt collector on the phone insists you must pay immediately, take a deep breath and count to 10. Don’t agree to anything or share too much information. Ask for a debt validation letter or proof of the lawsuit in writing before anything else.

Don’t be fazed by a debt collector who demands you make a payment today over the phone. Any legitimate deal should be available in several days once you’ve had time to verify that the debt collector is legitimate.

If you’d like to minimize your risk of a debt collection scam, you should wait to verify information before continuing any conversations. For example, you can hang up the phone and call back using contact information you find online or information you get from the local Secretary of State to ensure you’re speaking with a legitimate company.

Other warning signs of a scam include:

  • Summons that arrive via email. These typically arrive in the mail.
  • Emails from general domain accounts, such as @gmail.com, @yahoo.com, etc.
  • Anything that seems unusual or unbelievable, such as a debt collector who says immigration or the police are coming for you.
  • The debt collector is pressuring you to pay through an unconventional method, such as a prepaid credit card or money transfer.

Don’t ignore the debt collection lawsuit

Even though there are scams out there, it’s important to treat everything as legitimate from the outset. You will be able to figure out if a lawsuit is a scam once you do your due diligence.

If you ignore a debt collection lawsuit and the debt collector’s attorney shows up, the court will likely rule in favor of the debt collector by default. If the court orders a default judgment against you, the debt collector can:

  • Collect the amount you owe by garnishing your wages;
  • Place a lien against your property;
  • Freeze the funds in your bank account; or
  • Garnish the funds in your bank account.

Don’t accept liability

In general, avoid giving out too much information. A legitimate debt collector might ask for a few details to verify who you are, but you should be cautious about sharing more than a few personal details.

Don’t apologize or explain yourself, as you might make confessions that could be used against you in court. Plus, if you begin rambling or apologizing, you might end up talking about a different debt than the one they called about, and could potentially talk yourself into a worse situation.

Never give access to your bank accounts

Never, under any circumstances, give a debt collector access to your bank accounts.

(Video) 5 steps you must take when sued by a debt collector

Coleman said providing bank account information can be taken as authorization to withdraw funds.

“Once they have that information, they could certainly debit the account and take an amount that wasn’t agreed upon, which would have all sorts of consequences,” he said.

Beware debt settlement services

If you’ve decided to pay off your debt once and for all, you might come across debt settlement companies when researching how to pay off your debt in collections. Be cautious and avoid them if possible. They often leave consumers in a worse position than when they started out. Plus, debt settlement hurts your credit.

If you choose to work with a debt settlement firm, it’s crucial you understand what you’re getting into. Not all creditors will work with debt settlement companies, and you will have to pay the company a fee for managing the settlement.

A safer and potentially more affordable alternative to debt settlement is a debt management plan offered by a nonprofit organization. With this type of plan, you could work with a certified credit counselor who can help you repay your debt, as well as negotiate with creditors and debt collectors on your behalf to reduce or reverse fees and lower your monthly payments.

Being sued by a debt collector: FAQs

Can a debt collector sue you?

Yes, it’s possible to be sued by a debt collector, typically when you’re at least 180 days delinquent on your account. When this happens, it’s important to act carefully but proactively.

What happens if you’re sued by a debt collector?

The first step in this process is to set a date for your initial court appearance. If you don’t appear in court, you could suffer serious consequences, such as wage garnishment. To avoid such penalties, consider options like hiring a debt collection attorney, negotiating a settlement or even filing for bankruptcy.

Can you settle a debt after being served?

Going to court is costly for both you and your creditor, so negotiating an out-of-court settlement could be a win-win even after you’ve been served. Consider hiring a debt collection attorney with a track record of successful settlements. Qualifying (but not filing) for bankruptcy can also give you a slight advantage during debt settlement discussions because the creditor will want to recoup at least a portion of your outstanding debt.

FAQs

Can debt collectors look into your bank account? ›

To find out if you've got savings or are expecting a pay out, your creditor can get details of your bank accounts and other financial circumstances. To do this they can apply to the court for an order to obtain information. You'll have to go to court to give this information on oath.

What is the most common violation of the Fdcpa? ›

Harassment of the debtor by the creditor – More than 40 percent of all reported FDCPA violations involved incessant phone calls in an attempt to harass the debtor.

How do I stop a debt collection letter? ›

You should write to the creditor who is harassing you asking them to stop. Tell them how you want to be contacted in future and ask them to confirm this in writing. You should point out in the letter that harassment is a criminal offence and you can take further action if your creditor doesn't stop.

Can debt collectors track your phone? ›

Because of cellphones' mobile nature, when a collector calls you on your cellphone, the collector doesn't know where you are. If you're at a place where it's inconvenient for you to receive collection calls, then the collector has violated the FDCPA.

What should you not say to debt collectors? ›

What Not to Do When a Debt Collector Calls
  • Don't Give a Collector Your Personal Financial Information. ...
  • Don't Make a "Good Faith" Payment. ...
  • Don't Make Promises or Admit the Debt is Valid. ...
  • Don't Lose Your Temper.

What is unfair debt collection practices? ›

Using insults or profane language which results in the abuse of a borrower and/or which amounts to a criminal offence or act under law; Public disclosure or publication of the name or other personal information of a borrower who is allegedly refusing to pay a debt (see list of exceptions below);

What are two things prohibited by the Fair Debt Collection Practices Act? ›

5 Things Debt Collectors Are Forbidden to Do
  • Pretend to Work for a Government Agency. The FDCPA prohibits debt collectors from pretending to work for any government agency, including law enforcement. ...
  • Threaten to Have You Arrested. ...
  • Publicly Shame You. ...
  • Try to Collect Debt You Don't Owe. ...
  • Harass You.

What are the new debt collection rules? ›

In late 2021, new rules from the CFPB around how debt collectors can disclose information about a debt and when they can mark a debt on a consumer's credit report went into effect. There are also new limits on actions around "time-barred debt," which is debt past the statute of limitations for suing over the debt.

How long before a debt becomes uncollectible? ›

In California, the statute of limitations for consumer debt is four years. This means a creditor can't prevail in court after four years have passed, making the debt essentially uncollectable.

What happens if I ignore debt collection letters? ›

Ignoring or avoiding the debt collector may cause the debt collector to use other methods to try to collect the debt, including a lawsuit against you. If you are unable to come to an agreement with a debt collector, you may want to contact an attorney who can provide you with legal advice about your situation.

How do I get myself out of collections? ›

You can write a letter asking the creditor or collector to remove this information as a goodwill deletion. Your goodwill letter doesn't need to have a lot of information or details. Simply identify the debt, and point out that it has been paid and that you'd like them to remove it.

Can debt collectors garnish Social Security? ›

Generally no, debt collectors can't take your Social Security or VA benefits directly out of your bank account or prepaid card. After a debt collector sues you for the debt and wins a judgment, it can get a court order for your bank or credit union to turn over money from your account or prepaid card.

Can debt collectors contact family? ›

Can debt collectors tell other people, like family, friends, or my employer, about my debt? No. Under federal law, a debt collector may contact other people but generally only to find out how to contact you.

Can debt collectors find you on social media? ›

Social media messages must be private, so a debt collector can't post on your page or comment. When sending a message, the debt collector must identify themselves and wait at least 14 days after messaging to tell the credit bureaus a consumer defaulted on a debt.

What is the 11 word phrase to stop debt collectors? ›

Summary: “Please cease and desist all calls and contact with me, immediately.” These are 11 words that can stop debt collectors in their tracks. If you're being sued by a debt collector, SoloSuit can help you respond and win in court.

Why you should not pay collections? ›

On the other hand, paying the collection account may stop the creditor or collector from suing you, and a judgment on your credit report could hurt your credit report even more. Additionally, some mortgage lenders may require you to pay or settle collection accounts before giving you a loan.

Do debt collectors use scare tactics? ›

Although debt collectors may use scare tactics in an attempt to make you pay your debt, their scare tactics are not always legal. Always refer to the FDCPA and report a debt collector using unfair scare tactics to retrieve your debt.

What is debt shaming? ›

Threatening debtors with death and physical injuries if they fail to settle their account balances; Using profane language through text messages directly sent to the debtors and to the debtors' references for purposes of shaming them.

What actions by a debt collector are considered harassment? ›

Harassment by a debt collector can come in different forms but examples include repetitious phone calls intended to annoy or abuse, obscene language, and threats of violence.

Can I challenge a debt collector? ›

If you're responsible for a debt it's called 'being liable'. It means you'll have a legal duty to pay it. If you're not liable you should be able to challenge the creditor. A creditor is any person or organisation you owe money to.

What are the five federal laws that affect credit and collection? ›

Federal credit laws include the Truth in Lending Act (TILA), the Fair Credit Billing Act (FCBA), the Equal Credit Opportunity Act, the Fair Credit Reporting Act (FCRA), and the Fair Debt Collection Practices Act (FDCPA).

How do you get out of collections without paying? ›

There are 3 ways you can remove collections from your credit report without paying. 1) sending a Goodwill letter asking for forgiveness 2) disputing the collections yourself 3) working with a credit repair company like Credit Glory that can dispute it for you.

What power do debt collectors have? ›

What can a debt collector do? Debt collection agencies don't have any special legal powers. They can't do anything different to the original creditor. Collection agencies will use letters and phone calls to contact you.

What percentage should I offer to settle debt with collection agency? ›

Start by offering cents on every dollar you owe, say around 20 to 25 cents, then 50 cents on every dollar, then 75. The debt collector may still demand to collect the full amount that you owe, but in some cases they may also be willing to take a slightly lower amount that you propose.

What will most debt collectors settle for? ›

According to the American Fair Credit Council, the average settlement amount is 48% of the balance owed. So yes, if you owed a dollar, you'd get out of debt for fifty cents. But the average amount of debt enrolled is $4,210 and the median amount is $25,250.

What happens if you refuse to pay a collection? ›

If you refuse to pay a debt collection agency, they may file a lawsuit against you. Debt collection lawsuits are no joke. You can't just ignore them in the hopes that they'll go away. If you receive a Complaint from a debt collector, you must respond within a time frame determined by your jurisdiction.

Do debt collectors give up? ›

Do debt collection agencies ever give up? Debt collectors will chase you for a long time to get payment for what you owe. At the end of the day, it is their job to make sure the debt is paid, so they will do whatever they can to collect the balance.

Can a debt collector restart the clock on my old debt? ›

Debt collectors can restart the clock on old debt if you: Admit the debt is yours. Make a partial payment. Agree to make a payment (even if you can't) or accept a settlement.

Are you responsible for debt sold to collection agency? ›

Unpaid debt doesn't go away. Until the debt is either paid or forgiven, you still owe the money. This is true even if it's a credit card debt that is sold to a collection agency and even if you think it's unfair.

Can you get away with not paying a debt collector? ›

If the creditor has established their legal right to collect on your debt, then your inability to pay up means they can sue you to get what they're owed.

Why you should ignore debt collectors? ›

You might get sued.

The debt collector might file a lawsuit and get a money judgment. A creditor with a money judgment can garnish a debtor's wages, go after the funds in a debtor's bank account, and seize property that isn't protected by an exemption. Learn about lawsuits stopped by bankruptcy.

What do you say to debt collectors? ›

Hang Up if Necessary
  • “This is not a good time. Please call back at 6:00.”
  • “I don't believe I owe this debt. Can you send information on it?”
  • “I prefer to pay the original creditor. Give me your address so I can send you a cease and desist letter.”
  • “My employer does not allow me to take these calls at work.”
16 Jan 2022

What is a goodwill letter to creditors? ›

In a goodwill letter, you ask the creditor that reported your late payments to remove the derogatory mark from your credit reports. Maybe you had an unexpected change of circumstances or financial hardship.

What is a goodwill deletion? ›

A goodwill letter is a request sent to creditors to remove a negative mark they reported from your credit report. Creditors may not honor goodwill adjustment requests. Making on-time payments can help build up your credit score and payment history on credit reports.

Do goodwill deletion letters work? ›

Do Goodwill Letters Work? Yes, goodwill letters still work in 2022. Many people have successfully had late payments and other issues removed from their credit reports even though they were reported properly by creditors.

Do creditors know your bank account? ›

Can debt collectors see your bank account balance? A judgment creditor cannot see your online account balances. But a creditor can ascertain account balances using post-judgment discovery. The judgment creditor can subpoena a bank for bank statements or other records which reveal a typical balance in the account.

Who can see my bank account information? ›

Can Anyone Check My Bank Statement? No. Unless you give out your account number, banks do not release information regarding your bank statement to unknown third parties without your consent.

Do debt collectors ask for bank information? ›

Bank account information

Then the debt collector asks for your bank account and routing numbers. Do not provide this information. Fraud isn't a guarantee, but it's certainly possible. Once that information is in the collector's hands, "mistakes" can happen.

What type of bank accounts Cannot be garnished? ›

In many states, some IRS-designated trust accounts may be exempt from creditor garnishment. This includes individual retirement accounts (IRAs), pension accounts and annuity accounts. Assets (including bank accounts) held in what's known as an irrevocable living trust cannot be accessed by creditors.

What happens after a Judgement is entered against you? ›

Does someone have a judgment against you? You cannot be sent to jail for failing to pay a debt or for having a judgment against you; however, a judgment can greatly affect your financial position. A judgment allows a creditor to garnish wages, garnish bank accounts, or take a lien against property in your name.

What do most creditors look at? ›

Lenders need to determine whether you can comfortably afford your payments. Your income and employment history are good indicators of your ability to repay outstanding debt. Income amount, stability, and type of income may all be considered.

What is a good amount of money to keep in your checking account? ›

The general rule of thumb is to try to have one or two months' of living expenses in it at all times. Some experts recommend adding 30 percent to this number as an extra cushion. To determine your exact living expenses, track your spending over several months, including all bills and discretionary spending.

Can bank tellers see how much money you have? ›

Yes. Bank tellers have access to your account balance. They can tell how much money is in your account.

How do I know if my bank account is being monitored? ›

5 Ways You Can Tell If Your Bank Account Has Been Hacked
  • Small unexplained payments.
  • Unexpected notifications from your bank.
  • A call claiming to be your bank demands information.
  • Large transactions empty your bank account.
  • You learn your account has been closed.
11 Dec 2020

Can a debt collector trick you? ›

We've already stated many times that debt collectors have to be transparent, and they must disclose who they are. They cannot call a debtor and pretend to be someone such as an attorney or legal specialist. That practice is a violation of the FDCPA indeed, but it's also against the law.

Can a debt collector take your Social Security? ›

Generally no, debt collectors can't take your Social Security or VA benefits directly out of your bank account or prepaid card. After a debt collector sues you for the debt and wins a judgment, it can get a court order for your bank or credit union to turn over money from your account or prepaid card.

Can debt collectors tell your family? ›

No. Under federal law, a debt collector may contact other people but generally only to find out how to contact you. The CFPB's Debt Collection Rule clarifying certain provisions of the Fair Debt Collection Practices Act (FDCPA) became effective on November 30, 2021.

What debt Cannot be erased? ›

Domestic support obligations are non-dischargeable in Chapter 7 and Chapter 13 bankruptcies. This includes any missed alimony and child support payments. During the bankruptcy process, you are required to continue to pay domestic support obligations as they become due.

How Can I Stop debt collectors Harassment? ›

You have a right to ask a debt collector to stop contacting you. If you are contacted or sued by a debt collector, you may want to contact a lawyer who represents consumers in debt collection matters. If you're having an issue with debt collection, you can submit a complaint online or by calling (855) 411-CFPB (2372).

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