Can a Debt Collector Sue You

JohnnyGreig/E+ via Getty Images

If you have unpaid bills in collections, a debt collector could file a lawsuit against you to collect the debt. This will hurt your credit score, but it could also lead to seized wages or a lien on your home.

If you're facing a debt collection lawsuit, don't ignore it. Take action quickly to minimize damage to your credit or financial situation.

What happens if you don't pay a debt in collections?

When the original creditor sells your debt to a collections agency, it can show up as a "charge off" on your credit report. This means the creditor has closed the account because of nonpayment. But you still can be responsible for paying the debt.

If you don't pay debt in collections, the following might occur:

• Multiple phone calls: The agency will try to collect the money, usually through verbal or written requests. The Fair Debt Collection Practices Act (FDCPA) protects consumers from harassment by limiting when and how often you can be contacted.

• Damaged credit score: Having an account in collections can hurt your credit score. The negative item can remain on your credit report for up to 7 years - even after you pay it off.

• Additional fees: The unpaid debt could accrue interest charges or other fees if they're part of the original agreement.

• Debt collection lawsuit: Debt collectors may sue you and try to obtain a court order to seize your wages or place a lien on your property.

What should you do if you are being sued by a debt collector?

If you're being sued by a debt collector, you need to take action and respond. That's because most debt collectors have lawyers to pursue the case against you. Since borrowers routinely fail to respond, this results in default judgments for the debt collectors in more than 70% of cases reviewed during a Pew Charitable Trusts analysis - whether they have legitimate, well-documented lawsuits or not.

Here's what you can do:

1. Verify the debt is yours. Debt collectors are required to send a debt validation notice when they contact you. If you don't receive this notice, send a debt verification letter to request one. A debt could be in the wrong amount, in the wrong name, or under the wrong account number, or it could have been paid already.

2. Don't accept responsibility up front. Whether the debt is legitimate or not, don't immediately accept responsibility verbally or in writing. And try not to provide extra information or details that could be used against you in court.

3. Check the statute of limitations. Even if your debt is beyond the statute of limitations, some debt collectors will still try to sue you. In that case, you can use this as a defense in court.

4. Know your rights. You are protected under the FDCPA, the Fair Credit Reporting Act, and the Truth in Lending Act. If the debt collector has violated your rights, you may be able to use this as a defense in court.

5. Make sure you aren't being scammed. Never give your bank account information because even a legitimate collector could pull money prematurely if they have this information. Any suspected scams should be reported to the Federal Trade Commission and your state's attorney general.

6. Hire an attorney. Work with a lawyer to review the lawsuit and help you respond. If you have an attorney, the debt collector must communicate with them, except under certain circumstances.

7. Respond to the lawsuit. You can do this in writing, via a court appearance, or both - whatever is required. If you don't respond, the debt collector could receive a default judgment allowing them to seize your wages or put a lien on your property.

8. Attempt to settle. If you're facing a legitimate debt collection lawsuit, you could try to settle out of court. This is less expensive than going to court and may benefit both you and the debt collector.

Is it legal for a debt collector to sue you?

A debt collector can sue you if all of the following are true:

• They own the debt. The original creditor may transfer or sell the unpaid bills to a collection agency, which then has the right to try to collect.

• The debt is legitimate and belongs to you. A debt collector can sue you for a valid debt, but you aren't responsible for a debt that isn't yours.

• The statute of limitations has not expired. The statute of limitations is the amount of time a debt collector has to file a lawsuit against you. This time frame varies by state and debt type, but it's usually 3 to 6 years.

A debt collector must notify you before taking legal action. Typically, they will make several attempts to collect the debt - usually via phone and mail - before taking you to court.

How likely is it that you will be sued for a debt?

A Pew analysis of civil court filings in 16 states found that about 1 out of every 20 people with debts in collections were sued in 2021. Debt-collection cases are also a rising share of civil court cases, according to the same report.

According to a Consumer Financial Protection Bureau report, you have a higher chance of being sued in a debt-collection lawsuit if:

• The statute of limitations hasn't expired or the debt is new.

• You have unprotected income or assets (like home equity) and are not judgment-proof (meaning a court could seize your wages or bank account or place a lien on your property).

• You have multiple debts in collection.

• The account is several months past due.

• The debt collector has the appropriate paperwork.

• You have good credit.

• State filing fees for debt lawsuits are low.

Debt collectors will determine if a lawsuit is worth filing. If they think they can recover the amount owed or enough to cover legal fees, they may pursue the debt in court. Otherwise, they may set up a payment plan with you to collect the money.

Can I sue a debt collector?

You can sue a debt collector if it has broken a law or violated your rights as a consumer under federal or state law. You have 1 year to do this.

In the debt collection process, you have a legal right to:

• Debt validation, which is the creditor sending you information that verifies the amount owed is properly assigned to you

• Freedom from deceptive tactics

• Limits to the time of day and number of times you're contacted about the debt

• A statute of limitations - the date when you can no longer be sued for a debt - which varies by state

Can I refuse to pay a debt?

You are still responsible for paying a debt even if you can no longer be sued legally.

Paying medical debt can be especially beneficial for your credit report. Starting in 2022, the three consumer credit bureaus stopped reporting paid medical debts and agreed to wait 1 year before reporting unpaid medical debt.

Medical debt that is less than $500 is no longer added to credit reports. Paid medical debt should not appear on medical reports.

Frequently asked questions

Public link

Please use the above public link if you want to share this noodl on another website.