What Happens If a Debt Collector Sues Me?

Guest Post by Lyle Solomon

It is common for people struggling with debt to receive notices and calls about overdue payments on their debt. It is advisable not to ignore them because they can become more stressful than managing your debt. Debt collectors try to contact the debtor multiple times before filing a lawsuit against them. 

Having a debt collector file a lawsuit against you can be stressful, and most people don't know how to address situations like this. The most crucial thing to do here is to respond to that lawsuit. Although you think you do not owe the debt you were sued for, you have to respond by either sending a letter or appearing in court by the deadline.

Yes, debt collectors can take you to court

Many people don't know that debt collectors can file a lawsuit to get their money back if they haven't paid off their debts. When people don't pay the debt they agreed to, collection agencies often file a lawsuit against them for breach of contract. To file a lawsuit, debt collectors must prove that they are the legal owners of the account in question. 

In most cases, debt collectors acquire ownership rights to unpaid balances when they purchase the accounts from the original credit card companies or other unsecured creditors. Many creditors will sell a debt overdue for 90 days or more to debt collectors for a small fraction of what they are owed. If this occurs, the affected person's credit report will include a "charge off" notation for the account in question. 

If a creditor "charges off" an account, the debtor has stopped making payments on the balance owed. When a debt is charged off, many people wrongly assume they are no longer responsible for paying it. Even if the original debt collector has sold your account to a new company, you are still responsible for making the required payments. 

What happens when a debt collector sues you?

You should understand the debt collection process when you're being sued by a debt collector, even though timelines vary from person to person. However, if your timeline does not match the timeline stated below, you should verify the debt to ensure it is legitimate to avoid debt collection scammers. 

• The debt collector contacts you by phone or sends you a written notice of their intent to collect the debt. The debt collector usually tries to contact you after a debt has been overdue for 180 days.
• A debt collector has only five days from the time they first contact you to send you a debt validation letter detailing the amount you owe, the name of the creditor, and the steps to challenge the debt if you believe it is not yours.
• Debt collectors are legally required to provide verification letters if you dispute the validity of the claimed debt. The debt collector has to send the verification letter within 30 days of the validation notice.
• If you owe money and the debt is valid, you must cooperate with the collector and work out a payment plan. The debt could be settled in full, partly, or through another arrangement. You can take the help of debt settlement services that can help negotiate your debt settlement.
• Your debt collector can file suit against you if you fail to settle the debt or make payments. You will have received a court date for your appearance by this time.
• The judge will probably side with the debt collector if you don't show up for your court date.
• The court will probably issue a default judgement or order against you in this case. As a result, a lien could be placed on your property, or the debt collector could garnish your wages. On average, a default judgement is entered 20 days after the lawsuit was served.

Make sure you check the statutes of limitations on your debt

The statute of limitations regulates how long a creditor or debt collector must file a lawsuit in court to get money from you for a debt. The statute of limitations is a time limit set by each state. Thus, the statute of limitations during which a creditor can attempt to collect from you varies. A creditor cannot file suit against you after the statute of limitations has expired. 

Many people wrongly believe their debt is no longer an issue just because they haven't heard from collectors in a long time. Contrary to popular belief, this is not accurate. Inactive debt, also known as "ghost debt" or "zombie debt," cannot be "resurrected" after the statute of limitations period has passed. 

However, in recent years, many collection agencies have started pursuing ghost debts. Debt buyers try to collect on debts no longer legally collectible by the original creditor by purchasing debts past the statute of limitations. Debt collectors often use threats and intimidation to coax people into paying debts they are not obligated to by law. 

Statutes of limitations are highly discretionary and vary significantly from one state to the next. The typical statute of limitations period is between three and ten years. When a person stops making payments, the statute of limitation usually begins to run. 

Individuals should exercise caution when communicating with debt collectors. If the debtor makes a payment, the clock resets to the last payment date. A debtor can ask a creditor to stop contacting them about an old debt by formally requesting it in writing after the statute of limitations has passed. 

There are options available to people harassed by debt collectors, whether they are scammers or legal entities. Any collection agency that resorts to abusive or harassing tactics to get at a debtor can be held responsible under the Fair Debt Collection Practices Act. The FDCPA is a federal law that shields consumers from collection agencies that engage in harassing behaviour. Individuals may initially file complaints with the Consumer Financial Protection Bureau and the Federal Trade Commission. 

The bottom line

When a debt collector sues you, you should ensure the debt is valid. If it is legitimate, respond within the given time frame, or challenge the lawsuit if you feel the debt is not valid. If needed, seek the help of an attorney who can help you understand your rights. 

If you are asked to pay off your debt, you can enlist the help of debt settlement or debt consolidation services to help you pay off your debt efficiently. You should never forget your rights, and remember that the FDCPA is in place to protect consumers from fraudulent and harassing debt collection agencies. 

Lyle Solomon has extensive legal experience, in-depth knowledge, and experience in consumer finance and writing. He has been a member of the California State Bar since 2003. He graduated from the University of the Pacific’s McGeorge School of Law in Sacramento, California, in 1998 and currently works for the Oak View Law Group in California as a principal attorney.