Editorial Policy

6 steps to take if you are sued by a collector

Allie Johnson

February 8, 2016

Getting slapped with a lawsuit over debt can be scary. But even with a court date looming, you may be able to resolve the problem and prevent more damage to your credit.

Many consumers, though, take a head-in-the-sand approach, pretending the lawsuit doesn’t exist and fail to show up in court. That’s always a bad idea, says Ira Rheingold, executive director of the National Association of Consumer Advocates (NACA), a nonprofit association of consumer attorneys and advocates.

“Ignoring the problem is the worst thing you can do,” Rheingold says. Instead, he says: “Be proactive.”

If you face a lawsuit head-on, you might be able to prevail in court, get the suit dismissed or work out an agreement to settle the debt for less, says Steve Rhode, an expert on consumer debt, who offers advice at GetOutofDebt.org.

“Rather than looking at it as the worst day of your life, look at it as an opportunity,” Rhode says of going to court.



So how does a debt lawsuit typically happen? In many cases, the trouble starts when a consumer fails to pay a debt. After about six months of delinquency on a credit card debt, for example, the creditor may charge off the debt, which means they don’t expect to collect — but not that they’ll stop trying.

The creditor then might hire a third-party collection agency to go after the money, or sell the debt to a debt buyer. A consumer can be sued by the original creditor, a third-party debt collector or a debt buyer, says Ira Rheingold, executive director of the National Association of Consumer Advocates.

But partly because of the way bad debts are bought and sold — in bulk, possibly changing hands many times –- consumers also can get hit with lawsuits for debts they either already paid or simply don’t owe, says Rhode.

6 steps to deal with a lawsuit from a creditor
Facing a lawsuit over debt? Know your rights. Here are six steps you can take to deal with a lawsuit from a creditor or debt collector:

1. Read the documents. During years as an attorney, Rheingold noticed that some consumers toss aside mail about their debt without even opening the envelope, he says. “They say, ‘I know I owe it. Why do I need to read this?’” he says. But that’s a mistake. If you get served, read the documents thoroughly and take note of details about the debt and the date you’re supposed to appear in court, Rheingold says.

2. Ask for validation. If you don’t believe you owe the debt, or the amount the creditor claims you owe, ask for proof. Write a polite letter that says something like: “I look forward to working this out in court, but I will ask you to bring proof to court that I owe this debt,” Rhode says. Because original creditors often don’t provide complete information to debt buyers who purchase debt from them, the lawyer for a debt buyer suing you might have almost no information about your original debt, Rheingold says. The debt buyer might have nothing but “a data sheet saying that John Smith owes this amount, and Bill Jones owes this amount,” he says. If the creditor can’t provide proof you owe the debt, the suit might get dismissed, Rhode says. However, the creditor may produce an affidavit stating you owe the debt, and you might need to provide evidence you don’t owe, Rheingold says.



When you’re being sued, you should get written notice of the lawsuit delivered to you. In some states, the documents must be sent by certified mail, according to a guide from the Consumer Financial Protection Bureau (CFPB) on getting sued over debt. In other cases, the papers might get delivered in person by a process server or even tacked to your front door, Rheingold says.

If this happens, don’t make the mistake of thinking you can wriggle out of the lawsuit by refusing to accept or sign for the letter, the CFPB warns.

Doing so would amount to ignoring the lawsuit — and going that route is likely to lead to a judgment, along with possible freezing of funds in your bank account or garnishment of your wages, according the CFPB. Also, once a judgment is entered against you, you may lose your ability to dispute that you owe the debt.

3. Get legal help. If possible, consult an attorney, especially if you believe you don’t owe the debt. Contact your local legal aid office or call a local consumer attorney who handles debt collection cases, Rheingold says. On its website, NACA offers an attorney finder. A consumer lawyer also can check for violations of federal laws such as the Fair Debt Collection Practices Act, or the Fair Credit Reporting Act, which might give you a reason to bring your own lawsuit against the debt collector suing you, he says. In that case, you might not have to pay lawyer fees because the attorney will be paid by the defendant if you win.

4. Consider bankruptcy. If you’re getting sued over one debt, chances are that’s not your only financial problem, Rhode says. If you’re overwhelmed by debt, consider meeting with a bankruptcy attorney to find out whether filing a Chapter 7 bankruptcy might solve your legal troubles, Rhode says. “The minute you file, all collections stop, and the lawsuit stops,” he says.

5. Gather your records. Dig through your financial records to unearth anything related to the original debt, Rheingold says. If you’ve already paid off the debt, look for proof, such as a canceled check. Set these records aside so you can take them to court, he says.

6. Get your day in court. Sadly, most consumers never show up in court, Rhode says. Even if it’s tough to get the day off work, it’s in your best interest to go to court, Rheingold says. If you show up on your own, the lawyer for the creditor or debt collector will likely pull you aside and ask if you would be willing to work out a payment plan or settlement, he says. If you show up with a lawyer, there’s a good chance the case will just be dismissed almost immediately, he adds. And if you don’t show up? “Ninety percent of the time, the judge simply rubber-stamps the complaint,” he says.

If you do succeed in getting the lawsuit dismissed, you’ll need to keep an eye on your credit to make sure the debt drops off, and stays off, your credit report. “It could pop back up again,” Rheingold says.

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