Served! – How Do I Defend a Collection Lawsuit?

Collection agencies often refer delinquent accounts to a law firm when their own collection efforts are going nowhere with you. Many times a collection law firm owns or is associated with the collection agency, so from their point of view, a lawsuit is just another step in the collection process. From your point of view though, it’s a lot more serious than the never-ending phone calls and collection letters.

Being served with a summons and a complaint starts the clock on the court process that can eventually lead to a judgment against you. A judgment against you means that every asset you own could be at risk. The most at risk are things like your regular paycheck, your house, your car, or your bank account. The creditor can take up to 25% of each one of your paychecks to pay off the debt, take everything from your bank account to pay it off, or attach a lien to your house or car.
Additionally, if the creditor gets a judgment against you, it has the right to ask for specific information about what assets you own and where they are. This demand for information is part of the discovery process and you don’t have the option to ignore these requests. If you ignore them, you could be penalized by the court, or even imprisoned.
Needless to say, if you are served with a lawsuit, it is important that you take action immediately.
Here are some options:
1. Answer the lawsuit yourself – many creditors file dozens or even hundreds of lawsuits each week in the hope that most of them go to default judgment (that’s what happens when you don’t answer). Don’t be a statistic. Answering the lawsuit means you WRITE a response to the lawsuit and file it with the court. This should buy you an extra one to three months of time to negotiate the debt with the creditor or look into other options like bankruptcy. Here are some tips for your answer:
a. Make No Excuses – remember that a Complaint is a list of allegations, not proof. Don’t fall into the trap of agreeing to something without proof. An answer full of excuses for why you can’t pay isn’t a defense, it’s an admission that you owe the money for the amount they claim you owe.
b. Demand Proof – ask them to prove to you that they own the debt before you agree to anything. Collection accounts are bought and sold repeatedly, which sometimes means that a collector has no proof that they bought your account or whether they sold it again.
c. Make Sure It’s Legally Collectible – sometimes lawsuits are filed after the statute of limitations has passed. In Washington state, a credit card company can only file a lawsuit within 6 years since the last time any activity was done on the account (this includes making a payment). If they file after this time, it could be a violation of the FDCPA.
d. Check the Balance – you know you owe something, but do you owe what they say you owe? Without a breakdown of interest, fees, and other charges, you can’t be sure that the amount is correct. Demand to see an accounting of every penny claimed before you agree to pay even a cent.

2. Contact a lawyer – of course a lawyer’s blog would tell you this. However, I’m not recommending this one to you. Realize that a lawyer will expect to be paid for their time. Say that your credit card company XYZ sues you for $5,000 and you owe this money, does it really make sense to pay a lawyer $200 to $300 just to look at the lawsuit and then even more to answer it for you? Even if you have a valid reason to challenge it, such as improper notice, you may still have to pay legal fees to the lawyer up front to fight it. A majority of the time, collection lawsuits are demands for money that you actually do owe. You can pay a lawyer to delay the inevitable, but at some point, a judge will make a decision that may not be favorable to you. Through all that, you will have used up money that you did not have to waste.

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