Fighting Back Against Collection Lawsuits

It is important to respond quickly to any lawsuit filed against you. You can take several steps to fight back against a collections lawsuit, including trying to negotiate with the company before a court case and getting qualified legal advice. You can also potentially prolong the case to possibly get it dismissed. Learn more about how collections lawsuits work and what you can do during the process.

Key Takeaways

  • Respond quickly to any lawsuit filed against you.
  • You can try to negotiate with creditors for a debt settlement to try to avoid a collections lawsuit.
  • Hire a reputable attorney to help you through the legal processes.
  • A creditor cannot take control of your wages unless they have a court judgment.
  • Some creditors may be more willing to negotiate if you tell them you are considering filing for bankruptcy.

How Debt Collections Works

A collection lawsuit occurs when a creditor files a petition with the court to begin a lawsuit against a consumer who owes them money. Collection lawsuits can be expensive and time-consuming. Most creditors will try to avoid this route when trying to collect a debt repayment. If there are other options available, creditors will tend to go with another method.

For example, a creditor may try to collect on collateral by, for example, repossessing your car, home, or terminating your utilities. Collection lawsuits are rarely issued for debts under $1,000. In cases where a customer is making small payments, even if these payments are below the minimum requirement of the creditor, the creditor will not issue a lawsuit.

Aggressive collection agencies will threaten to garnish employee wages as payment for a debt. However, the creditor cannot take control of your wages unless they have obtained a court judgment.

A credit counselor can help clarify credit issues before a lawsuit issue arises. Make sure you connect with qualified counselors. If your problem is housing debt, look for Department of Housing and Urban Development (HUD)-approved agencies. The Consumer Credit Counseling Service (CCCS) is a good choice for credit card issues and other debt problems.

What You Can Do Before a Lawsuit

Never ignore a lawsuit. If a collections lawsuit is filed against you, it is important that either you or your attorney respond quickly by the deadlines.

If you are struggling with debt, you may try to work with the creditor on resolutions like a debt settlement that would allow you to pay a reduced amount of what you owe in a lump sum.

Trying to negotiate an agreement with the creditor might be a challenge, says Robert J. Hobbs from the National Consumer Law Center and lead author of Fair Debt Collection.

"To negotiate, the consumer needs something to give up. The consumer could offer a lump sum settlement if they have savings," Hobbs says.

You can hire a debt settlement company or debt relief company to help you better negotiate a debt settlement.

What You Can Do During a Collections Lawsuit

First, make sure the information the collector has about the debt you owe is correct, and ask for documentation backing up the claim. A debt collector is required to provide key information to you like the amount debt you owe and how you can dispute it.

Once a lawsuit has been issued against you, read and follow the summons instructions carefully, appear in all required court appearances. Provide all the documentation that can help defend you. In some cases, a creditor will drop a lawsuit if it appears that you are just not giving up.

If you plan to file for bankruptcy, you may want to tell your creditors. While there is no guarantee, they may be more willing to negotiate with you if they risk not recouping all the funds you owe them.

If you've hired an attorney, consult with them on the appropriate steps you need to take in defending your specific case. Each case is different and the laws that apply to consumers and creditors in each state also vary.

If you need a lawyer for legal advice on how to handle your particular case, there are resources available for those with limited income. The Legal Services Corp. (LSC) provides programs in each state that can help.

Local organizations such as your library, community center, or senior citizens center might provide information for free or low-cost legal advice. Your state or county bar association can be another option. They often provide referrals for free lawyers who deal with consumer credit issues. Organizations like the National Association of Consumer Bankruptcy Attorneys (NACBA) or the National Association of Consumer Advocates (NACA) can also provide assistance.

Avoid Debt Collection Scammers

Some debt collection efforts are scams. A debt collector must provide information like the amount of debt you owe, as well as the current and original creditor. Warning signs that debt collection company may be a scam include them withholding information from you or threatening you with jail time. A scammer may also say they will tell your friends and family about your debt or ask you to pay them with a prepaid card.

What Happens If I Don't Respond to a Lawsuit?

If you don't respond to a lawsuit, the court can rule without hearing your side. A lawsuit will not go away just because you ignore it or refuse to accept paperwork. A debt collector suing you may be able to garnish your wages or get the court to charge you for collections fees.

Can You Take Action Against a Debt Collector?

You can report a debt collector to the Federal Trade Commission if you believe they are breaking the law. You can also report them to the Consumer Financial Protection Bureau or your State's Attorney General's Office.

Can a Debt Collector Take Your Federal Benefits?

Usually, a debt collector cannot take your federal benefits such as your Social Security income, federal student aid, or veteran's benefits.

The Bottom Line

When a collection lawsuit has been launched against you, it is crucial that you respond by the lawsuit deadlines. You should hire an attorney and use several resources to help you navigate the process. The most important thing to remember is not to ignore a collections lawsuit, because it will not go away. Instead, be proactive in negotiating and communicating with creditors to resolve your debt.

Article Sources
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  1. Federal Trade Commission. "What To Do if a Debt Collector Sues You."

  2. Consumer Financial Protection Bureau. "What's the Difference Between a Credit Counselor and a Debt Settlement Company?"

  3. Federal Trade Commission. "Debt Collection FAQs."

  4. Legal Services Corporation. "Get Legal Help."

  5. Consumer Financial Protection Bureau. "Warning Signs of Debt Collection Scams."