What To Do When The Debt Collector Sues You

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Unsecured creditors can do very little to collect their debts outside of the legal system.  They can write letters and call you on the telephone to ask for payment.  They can report your defaults to the credit bureaus.  But by that time your credit score is probably already affected, and so reporting you will likely not change your situation.  To paraphrase Nancy Reagan, when the debt collector calls you to ask for payment “Just Say NO!”

To collect from your earnings and assets using the legal machinery of the law, unsecured creditors must first obtain a money judgment against you from the courts.  To obtain a money judgment, the creditor must file and serve a lawsuit against you, and if you answer the complaint the creditor must win the lawsuit.  As a debtor, your goal is to make it as difficult as possible for the creditor to obtain that money judgment.

Courts do not have uniform rules for filing and serving lawsuits, so this discussion will be based on broad principles rather than specific rules.  You can ask the court, a local law library, or a local legal aid organization for information on finding your states’ civil procedure rules and the local court’s rules.  Often the court will provide a packet of information to help you through the process.

In most jurisdictions there are four requirements for the filing of a lawsuit. 

  • First, the plaintiff (the party bringing the lawsuit) must file a complaint setting forth the legal basis for recovering a money judgment against the defendant. 
  • Second, the plaintiff must obtain a “summons” from the court, which will advise the defendant when the answer must be filed and often when an initial hearing will be held. 
  • Third, the plaintiff must pay a filing fee, which is often a few hundred dollars (small claims courts cost much less, but many creditors are ineligible to use it). 
  • Finally, the plaintiff must serve the summons and complaint on the defendant.

Although some small claims courts allow service by mail, in most cases the plaintiff must attempt to have the summons and complaint “personally served” on you, by having the sheriff or a process server deliver the complaint to you, usually at your place of residence. 

In most states, if you are not home, substitute service can be used.  Generally, substitute service involves delivering the complaint to someone else at your residence who answers the door, or leaving the complaint at your home, and mailing a copy to your address.  You will have to look up the rules for service in your state to see what is required.  After completing service, the plaintiff must file a proof or certificate of service with the court.

There has been a long history of what is known as “sewer service,” which is another name for the fraudulent act of filing false proofs or certificates of service against consumer debtors.  The courts, believing that service was effectuated, will have issued a default judgment since the defendant did not know about the lawsuit.  If you find out that a judgment was entered against you without proper service, you will need to promptly (after learning about the judgment) file a motion with the court to set aside the default.  It is often difficult to prove that the service was false, unless the process server has been found to have a history of illegal activities. 

Sometimes the false proof of service will contain some information which is inaccurate (for example, an old address, a description of you that is grossly inaccurate).  You will have to obtain the certificate of service and other records from the court to see if there are any discrepancies that you can use to prove that the service was false.  I have had several cases where I googled the name of the process server on the proof of service and found that they had been indicted for filing false certificates of service.

Once served, the summons will tell you what you must do to respond to the complaint.  Generally, you will have some period of time (20 or 30 days) to file and serve a response to the complaint.  The response can be (1) a motion to dismiss (called a “demurrer” in some states) showing that even if everything alleged in the complaint is true there is no basis for a judgment to be entered against you, or (2) an answer to the complaint.  Either the court or your local legal aid organization may be able to provide you with information to help you file an answer to the complaint.  You can also search on google for form answers that can get you started in preparing an answer to the complaint.  You will also need to mail a copy of your answer to the plaintiff’s attorney identified in the summons. 

If you do not answer the complaint timely, the court will enter a default judgment against you in the amount requested by the plaintiff.  Once that default judgment is entered, the plaintiff can enforce the judgment by garnishing your wages, garnishing your bank accounts, levying on your personal property, or obtaining judgment liens against your real property.  They can also force you to testify about the location of your assets so that they can levy and sell them.  The judgment will be hanging over your head for a long time.  For example, in New York judgments are good for 20 years[1], and can be renewed.

The judgment is the key which allows your creditor to use your state’s collection machinery to collect the judgment.  Your primary goal as a debtor is to make it as difficult as possible for your creditor to obtain that key.

The most important thing you can do is to timely respond to the complaint so that the creditor cannot obtain a default judgment.  In many collection cases you can file a “general denial” simply denying all of the allegations in the complaint, essentially saying to the creditor “prove it.”  In some cases, usually where the complaint is verified by a knowledgeable witness, you will have to file a “specific denial” indicating which parts of the complaint are true and which are disputed.  You will also need to assert in your answer any “affirmative defenses,” such as the running of the statute of limitations.  Affirmative defenses that are not asserted in the answer are waived.  Finally, if the plaintiff has violated the Fair Debt Collections Practices Act or any other laws, you might want to assert counterclaims against the plaintiff in your answer. 

The summons may also contain a date for you to attend an initial court hearing.  You will need to go to that hearing, stand up, and respond to any questions from the court.  If asked, you should request a jury trial which will make the process more expensive and difficult for the plaintiff.

It is scary for non-lawyers to have to defend themselves in court, which is why most people do not respond to the complaint.  But most courts will be sympathetic to your situation and help you through it.  If you have low income, you can seek help from your local legal aid organization.  A legal aid attorney may be willing to represent you in court, or at least provide you with help in formulating an answer and explaining the process.  If you cannot get any help, then you will have to handle it yourself. 

The most important thing to understand is that the debt collection industry depends on taking default judgments from consumers who do not respond to the complaint.  Lawyers file thousands of cases and rarely see anyone answer the complaint.  Often, the people filing these complaints have no ability to prove their claims.  Debt buyers often have nothing but a spreadsheet with your name, address and an amount owed.  They do not have the underlying documents to prove their claim, and they may not be able to get the underlying documents.  Even if they have everything they need to prove the case, it is expensive for them to respond to a consumer who is standing up for his or her rights, and they will often be willing to settle the case for a fraction of the amount demanded.  Plaintiffs often request fees and expenses in their complaint that are not justified.  Filing an answer will at least delay the creditor from obtaining the key to the state’s legal collection machinery, and will give you some leverage to negotiate a resolution for a lower amount.  I have seen many cases where the creditor lawyers let the case sit for years rather than pursue it after an answer is filed. 

Fighting with a creditor in court is not without risk.  If you lose, you will be liable for the creditor’s court costs, and you may be liable for the creditor’s attorney fees if there is an attorney fee clause in your contract.  If you will ultimately be able to pay, it makes good sense to try and work out a settlement with the creditor rather than running up the debt. I will discuss in a future article the importance of making a proper assessment of your financial situation so that you can make an intelligent decision on how to proceed.

My best advice is to file your answer on time.  If you have good defenses, pursue them.  If you do not have good defenses, you will benefit from some period of delay and can try to settle the case on the best terms available.  In my next article, I will discuss what you should do if a creditor obtains a money judgment against you.

About Gregory Germain

Professor Gregory GermainThis series of articles is written by guest columnist Gregory Germain, a lawyer who has practiced and taught bankruptcy law for 35 years.  He is a Professor of Law at Syracuse University College of Law, and has represented hundreds of consumers in bankruptcy cases as part of the Syracuse University Bankruptcy Clinic and Pro Bono Bankruptcy Program during the past decade.  Professor Germain will offer general guidance to consumers who are dealing with financial problems. Readers should understand that he is not providing individual legal advice.  Readers may have special needs or problems that will not be addressed in this series of articles.  Readers in need of specialized legal advice should consult a lawyer who can evaluate their individual needs and circumstances.

[1] New York CPLR 211(b).


Opinions & perspectives expressed in this article are those of the guest contributor and not necessarily Pocket Your Dollars.