You received a mailer from a bankruptcy attorney or you were recently served a summons at your door notifying you of a debt collection lawsuit.
The papers may be from a firm you have never heard of such as Midland Funding, CACH LLC, or Portfolio Recovery. You may be wondering what your next steps are and your options.
The purpose of this article is to concisely explain what you can do when facing a debt collection lawsuit.
You are most likely being sued because of an outstanding debt that is past due. The original creditor (Ex: American Express, Bank of America, Capital One) may have sold the debt to a debt buyer (Midland Funding, CACH LLC, Portfolio Recovery), and now these companies' sole purpose is to get more money back on the debt they purchased than what they paid.
You may see on the court summons exactly how much you are being sued for or you should be able to pull a credit report to see the debt. If you pull a credit report, you may want to find the government-issued credit report to avoid having to pay.
A debt collection lawsuit is a legal action to collect a debt. Some creditors may sue for as little as $1,000. The creditor files a complaint with the court asking the court to enforce the terms of your agreement to repay a debt. The creditor may also ask for fees and costs of collection, such as interest, late payments, attorneys’ fees, costs of service, and court fees.
The first step when you are being sued is to determine whether you are going to respond to the lawsuit. Each state has different timelines to file a response, so be sure to read the paperwork closely.
For example, the example below shows a Portfolio Recovery Associates, LLC Lawsuit in Santa Ana, California where the defendant has “30 calendar days after the summons and legal papers are served on you to file a written response at the court”.
Make sure to read the fine writing to know exactly how many days you have from when the file was served. For example, in California, this is how it works, “You have 30 days AFTER the date you are served to file a response with the court. The 30 days include weekend days and court holidays. If the last day falls on a day that the court is closed, you have until the next day that the court is open.”
There are a number of ways to respond to a lawsuit. Generally, the easiest way is to provide a few points of information that is added to a template legal form that is mailed to the same courthouse where the lawsuit was filed. Ascend helps by making things simpler for you to respond to a lawsuit. Feel out the information below, and someone will reach out to provide information on how to respond in your state and court jurisdiction.
When you default on a debt, the creditor can take several actions to collect the debt. Some actions are governed by state law. Other actions may be governed by the contract terms, loan note, mortgage, or debt agreement. One common way creditors collect bad debts is to file a debt collection lawsuit.
You will be the person to know whether to respond to the debt collection lawsuit. One of the state court websites gives some helpful information related to responding. This is not legal advice, but hopefully, it’s directionally helpful.
Some people may file a response:
Some people may NOT respond:
You also force the creditor to prove the amount you owe to the creditor by responding to the lawsuit.
Fighting a debt collection lawsuit can be a complicated process. The consequences of losing the lawsuit can be costly. It is worth your time to consult a bankruptcy lawyer regarding the lawsuit.
However, if you decide to respond to the debt collection lawsuit without an attorney, the steps for responding to a debt collection lawsuit include:
Read the entire document served on you. Note who is filing the lawsuit. Is it the original creditors, or did another party purchase the debt? Note the deadly for filing an answer or other response to the lawsuit. The summons should state how many days you have to file a response. Depending on your state laws, you could have between 15 to 30 days to file an answer.
An answer is a response to the allegations of the lawsuit. You can admit or deny each of the allegations claimed in the lawsuit. You may also state that you do not have sufficient knowledge to respond to an allegation.
Never admit an allegation if you have any doubt of its validity. If you do not know precisely how much you owe the creditor, state that you lack information to admit or deny the allegation.
You can also demand that the creditor provide proof of the debt and the amount owed if the creditor did not attach evidence of the debt to the complaint.
After responding to each allegation, you can assert any affirmative defenses you want the court to consider. Affirmative defenses might include:
It is best to type your answer if possible. Then, file the answer with the court and serve a copy on the creditor and its attorney.
You may need to appear in court to provide proof you paid the debt or other evidence of an affirmative defense. If you do not have proof of payment or a legal reason for not paying the debt, the judge will likely rule in favor of the creditor.
Fighting a debt collection lawsuit is much easier when an attorney handles the case. An attorney understands contract law and debt collection law. Your lawyer can review the original contract to determine if it is legally enforceable. A lawyer also explores other defenses.
Failing to respond to the lawsuit by the deadline generally results in a default judgment. The court enters a personal judgment against you in the amount claimed by the creditor.
Depending on the laws in your state, the creditor may take several actions to collect the judgment debt. Collection efforts could include:
If possible, you want to avoid a default judgment. Collection efforts could result in property and income loss.
You generally have 3 different options to resolve the debt before receiving a judgment. We explain the issues below but feel free to take our debt relief calculator if you’d like insights and costs specific to your situation.
Settling the debt before judgment is common when sued. If you are considering this option, please consider reading our article on how to settle a debt after receiving a court summons.
You will want to take a look at your entire debt picture before settling your account. If you have a lot of outstanding unpaid debt, will another creditor follow suit if you settle this debt?
Filing Chapter 7 or Chapter 13 stops debt-collection efforts, including debt-collection lawsuits. Creditors cannot file new lawsuits or continue with a pending lawsuit without court permission.
When the debt is dischargeable in bankruptcy, the creditor cannot resume the debt collection lawsuit. The bankruptcy case discharges the debt, so you never need to worry about repaying the debt.
Chapter 7 discharges debts without any additional payment. Examples of debts discharged in Chapter 7 include:
Most no-asset Chapter 7 cases are discharged and closed within four to six months after filing a bankruptcy petition.
If you do not meet the Chapter 7 income requirements or need to protect assets, you may file under Chapter 13. A Chapter 13 repayment plan can help you save your home, pay off your car loan, and get out of debt for pennies on the dollar.
This option is often much easier said than done. Most people do not have thousands of dollars available to easily pay the debt in full, so this option may not be viable for you.
If your debt is small, you have the cash, and this is one of the only debts you have, you may be able to pay in full, but this is often not realistic for most people.
Ascend helps you understand and implement your desired option when sued for a debt collection lawsuit. We help you understand your options, so you can make the most informed decision.
If you have questions about debt collection lawsuits, contact Ascend. We can help you locate a bankruptcy lawyer in your area who offers free bankruptcy consultations. Let’s work together to find the best solution to your debt problems.
