This information is provided for educational and informational purposes only. Such information or materials do not constitute and are not intended to provide legal, accounting, or tax advice and should not be relied on in that respect. We suggest that You consult an attorney, accountant, and/or financial advisor to answer any financial or legal questions.

Why do debt collectors sue?

The short answer is obviously: money. Debt collectors are in the business of recovering outstanding debts, and when traditional collection methods fail, they may resort to legal action as a means of compelling payment. Typically, debt collectors will opt to sue under the following circumstances:

• Sizable outstanding debt: If the amount owed is substantial, it may be worth the time and effort for the debt collector to pursue legal action.
• Unresponsive debtor: If a consumer consistently ignores collection attempts or fails to negotiate a reasonable payment plan, a lawsuit may be the next step.
• Statute of limitations: Debt collectors may choose to sue before the statute of limitations expires, which can vary by state and type of debt.
• Garnishment opportunities: A successful lawsuit may allow the debt collector to garnish a portion of the debtor’s wages or seize assets, making repayment more likely.

Regardless of the reason, it’s crucial to understand that a debt collection lawsuit is a serious matter that should not be ignored. So, what can you expect if this should happen to you?

The debt collection lawsuit process (in a nutshell)

If a debt collector decides to pursue legal action, the process typically unfolds as follows:

• Summons and complaint: The consumer will receive official court documents, including a summons and a complaint detailing the nature of the debt, the amount owed, and the legal basis for the lawsuit.
• Response deadline: The consumer will have a set period of time, typically 20-30 days, to respond to the lawsuit, either by contesting the debt or proposing a settlement.
• Negotiation or judgment: If the consumer fails to respond, the court may issue a default judgment in favor of the debt collector. If the consumer contests the debt, the case may proceed to trial or settlement negotiations.
• Wage garnishment or asset seizure: If the debt collector obtains a judgment, they may be able to garnish a portion of the consumer’s wages or seize assets to satisfy the debt.

Being proactive

While a debt collection lawsuit can be intimidating, take some comfort in knowing that consumers have legal rights and options available to them. Here are some steps you can take to protect yourself:

• Respond promptly: Missing the response deadline can lead to an automatic judgment against you. Promptly respond to the lawsuit, even if it’s to request more time or contest the validity of the debt.
• Verify the debt: Before acknowledging or paying a debt, ensure that you truly owe the amount claimed and that the debt collector has the legal right to collect it. Request validation of the debt in writing.
• Explore negotiation: If the debt is valid, consider negotiating a settlement with the debt collector, potentially for a reduced lump sum or manageable payment plan.
• Consult an attorney: If the situation becomes complex or you require legal representation, seek the advice of a consumer protection attorney who can guide you through the process and protect your rights.
• File for bankruptcy (if necessary): In some cases, filing for bankruptcy may be an option to discharge or restructure overwhelming debt, including debts subject to a lawsuit. However, this decision should be carefully considered with the assistance of a qualified professional.

Protecting your rights

Keep in mind, debt collectors are bound by the Fair Debt Collection Practices Act (FDCPA) and cannot engage in abusive, deceptive, or unfair collection practices. FDCPA provides important protections for consumers facing debt collection lawsuits, including:

• Limits on communication: The FDCPA prohibits debt collectors from contacting consumers at inconvenient times or places, like before 8am or after 9pm, or at their workplace if the collector knows the employer disapproves.
• Preventing harassment: Debt collectors cannot harass, oppress, or abuse consumers. This includes limits on the frequency of calls, prohibiting threats of violence or harm, and restricting the use of profane language.
• Ceasing communication: After Written Request Consumers can send a written letter telling the debt collector to stop all further communication, after which point the collector can only notify the consumer that they are terminating collection efforts or intend to take specific action like filing a lawsuit.
• Requirements for filing lawsuits: If a debt collector decides to sue, the FDCPA requires they provide the consumer with specific information like the amount of the debt, the creditor’s name, and statements about disputing the debt and demanding validation.
• Statute of limitations: The FDCPA prohibits collectors from suing or threatening to sue on time-barred “zombie” debts that are past the statute of limitations.
• Attorney representation: Statement In any communication, the collector must disclose that they are attempting to collect a debt and that any information obtained will be used for that purpose.

Violations of the FDCPA allow consumers to dispute the debt, fight the lawsuit, and potentially file a counterclaim against the collector for damages like emotional distress. If you believe a debt collector has violated your rights, you can file a complaint with the Consumer Financial Protection Bureau (CFPB) or your state’s attorney general’s office.