Debt collectors sue you? Here’s what to do and what to stay away from
If you haven’t paid back a debt for months, your creditor may give or sell it to a third-party debt collection agency, which will try to get it back from you. In the worst cases of not paying back what you owe, the debt collector may sue you.
Follow the guidelines below if you don’t understand the call and don’t know how to respond. If a debt collector is suing you, here’s what you need to know, whether the lawsuit is real or a scam.
What to do if someone sues you for a debt
Check the order of events.
If a debt collector sues you, you should know the process, even if the timetable will vary.
To avoid getting scammed, check the debt and collector’s credentials if your case isn’t like the below.
- The debt collector calls you or sends you a letter to let you know about the debt collection. Most of the time, this happens when a debt is 180 days late.
- The debt collector must send you a debt validation letter within five days of contacting you. This letter must tell you how much you owe, who you owe it to, and how to dispute the debt if you don’t think it’s yours.
- You can ask the debt collector for a verification letter if you don’t think you owe the debt in question. They have 30 days from the date of the validation notice to send this letter.
- If your debt is real, you need to talk to the debt collector and come up with a way to pay it off. This could mean paying off the debt in full, setting up a payment plan, or talking with the creditor.
- The debt collector can sue you if you don’t pay or settle the debt. At this point, the court will send you a notice about when you need to show up.
- If you don’t show up to court, the judge will probably side with the debt collector.
- If this happens, you will get a default judgment or court order. This means that your wages could be taken from you or a lien could be put on your property. Most of the time, a default judgment happens 20 days after a lawsuit is served.
You should verify the debt you’re being sued for.
the most important thing you can do now is answer the lawsuit. According to research by The Pew Charitable Trusts, about 70% of these lawsuits end in a default judgement for the plaintiffs (the creditors) because the defendants (the borrowers) don’t respond.
Even though it can be scary to get a notice of a lawsuit for the first time, you can get in trouble if you ignore it and hope the debt collector won’t call you again.
Debt collectors won’t drop a lawsuit against you just because you don’t pay attention to it. Instead, if you don’t show up in court when you were supposed to, it will be much harder for a lawyer to help you.
Object to the lawsuit
Debt collectors are usually third-party companies hired by the creditor who gave you the loan after you stopped paying. You can fight the lawsuit if you don’t agree with the debt.
|Reasons why people challenge debt collection lawsuits|
|The wrong person is being sued.||It happens a lot that papers are sent to the wrong person. This can happen when two people have names that sound alike or when the same name has been passed down from generation to generation in the same family (for example: Bill Smith Jr. and Bill Smith Sr.).|
|You already paid the debt.||Sometimes, debt collection agencies are given wrong payment records. This means that you could be sued for a debt you’ve already paid off.|
|The debt amount is incorrect.||Even if you do owe the debt in question, it’s possible that the amount is wrong.|
|The statute of limitations has passed.||The statute of limitations is how long a debt collector has to legally try to get you to pay back a debt. It could be between three and twenty years. How long it takes depends on where you live and what kind of debt you owe.|
If a debt collector sues you and you don’t agree with any or all of the information in the lawsuit, you will need to respond to the lawsuit in court. Then you’ll be able to argue about what’s in the lawsuit or ask the court to throw it out.
If you want to fight the lawsuit, you should bring proof, like the validation letter, to show:
- Who is owed money
- If the debt has been paid or not
- if the amount on the debt is correct
- Whether the deadline for paying the debt has passed
- Bring proof that the collection rules were broken (if applicable)
If a debt collector has broken your rights, you should go to court with proof. Look for violations of the Fair Debt Collection Practices Act (FDCPA), the Fair Credit Reporting Act, and the Truth in Lending Act. Under the FDCPA, debt collectors may not, among other things:
- We’ll get in touch with you outside of 8 a.m. and 9 p.m.
- Harass someone, which could mean anything from using bad language to threatening to hurt someone.
- Do things that aren’t fair, like threatening to take your property when they don’t have the right to or cashing a check before it’s due date.
- Once you have a lawyer, we’ll get in touch with you.
- Make false claims, like lying about who they are or how much money you owe.
- Choose whether or not to accept the verdict.
When it’s time to decide whether or not to accept a debt collection lawsuit, you have a few options.
|If …||You should consider …|
|You decide to accept the judgment||Hiring an attorney|
|You decide to accept the judgment but don’t want to go to court||Negotiating an out-of-court settlement|
|You have limited wages and assets||Checking to see if you can’t have your wages taken because of a court order.|
|Your debt is so significant it’s unmanageable||Filing for bankruptcy|
Hiring a lawyer
If you already agreed to a judgment and want to know how to win a debt collection lawsuit, you should talk to a debt collection attorney. Most lawyers who specialize in consumer law will meet with you for free to talk about your options.
Think about talking to a licensed debt collection lawyer. They are experts in defending against debt and will likely be able to give you more detailed legal advice.
Even if you don’t think you can afford a lawyer, you should ask around because many debt collection lawyers will take your case for a low fee or a fee based on the outcome.
Payment of the debt
If the debt is real, the person who owes the money can try to work out a deal to pay off the debt in exchange for the lawsuit being dropped.
Barry Coleman, vice president of counseling and education programs at the National Foundation for Credit Counseling, said, “It’s a good option for consumers if they know they owe the debt, agree with the amount, and can afford to pay something” (NFCC). “They might be able to reach a deal and not have to go to court.”
Coleman also said that the collection agency has a reason to do this because the trouble and cost of going to court is also expensive for them.
If you decide to settle, threatening to file for bankruptcy can also help. This doesn’t mean you have to file for bankruptcy, but being able to do so can give you more power when negotiating a settlement.
Checking to see if you are exempt
Depending on the state and how much you owe, people with low wages and few assets might not have to have their wages garnished. This makes them “judgment proof.” Talk to a credit counselor, an attorney, or someone else who is an expert in your area to find out if you meet these requirements.
Filing for bankruptcy
You could also file for bankruptcy, but this depends on how much debt you have and how much money you have.
If you file for Chapter 7 bankruptcy, all of your debts will be forgiven and the debt collector won’t be able to come after you.
Chapter 13 bankruptcy: Depending on your situation, you might be able to talk to the debt collector about a much lower amount to pay. Once you pay the agreed-upon amount, a debt collector can no longer go after you or sue you.
Filing for bankruptcy is a big financial move that can hurt you in the long run. Before you decide to go this route, you should talk to a counselor, a financial advisor, or another qualified professional.
What NOT to do if a debt collector sues you
Now, let’s look at what you shouldn’t do in this situation.
Don’t act on a whim.
Take a deep breath and count to 10 if a debt collector on the phone says you have to pay right away. Don’t give out too much information or agree to anything. Before you do anything else, you should ask for a letter confirming the debt or written proof of the lawsuit.
Don’t be scared if a debt collector calls you and says you have to pay right away. Once you’ve had time to make sure the debt collector is real, you should be able to get a good deal in a few days.
If you want to avoid becoming a victim of a debt collection scam, you should wait until you’ve checked the information before continuing to talk. For example, you can hang up the phone and call back using contact information you find online or from the local Secretary of State to make sure you’re talking to a real company.
There are also other signs of a scam, such as:
- Notices that are sent to you by email. Most of the time, these come in the mail.
- Emails from accounts with a general domain, like @gmail.com, @yahoo.com, etc.
- Anything that seems strange or impossible, like a debt collector telling you that immigration or the police are coming to get you.
- The debt collector is putting pressure on you to pay in an unusual way, like with a prepaid credit card or a money transfer.
- Don’t just ignore the lawsuit to collect a debt.
Even though there are scams out there, it’s important to treat everything as real from the start. Doing your research will help you figure out if a lawsuit is a scam.
If you ignore a debt collection lawsuit and the debt collector’s lawyer shows up, the court will probably rule in favor of the debt collector by default. If the court gives you a default judgment, the debt collector can do the following:
- Get the money you owe by taking it out of your paycheck;
- Put a claim on your property;
- Stop the money in your bank account from moving; or
- Take the money out of your bank account.
- Don’t accept liability
You should only offer a few data to a legitimate debt collector to verify your identity.
Saying sorry or explaining could be used against you in court.
If you say too much or apologize, you may talk about a different debt than they phoned about, worsening things.
Don’t let anyone else into your bank accounts.
Under no circumstances should you ever let a debt collector into your bank account.
Coleman said that giving out information about a bank account can be seen as permission to take out money.
“Once they have that information, they could definitely charge the account and take an amount that wasn’t agreed upon,” he said. “This could lead to all kinds of problems.”
Don’t use services that settle debts.
If you’ve decided to pay off your debt for good, you might look up how to pay off your debt in collections and come across debt settlement companies. Be careful and try to avoid them if you can. They usually hurt individuals. . Plus, debt settlement hurts your credit.
If you decide to work with a debt settlement company, it’s important to know what to expect.Debt settlement companies charge fees and don’t cooperate with all creditors.
A non-profit debt management strategy may be safer and cheaper than debt settlement.
This plan lets you engage with a qualified credit counselor to pay off debt and negotiate lower fees and monthly payments with creditors and debt collectors