How to Fight and Win a Debt Lawsuit
Last Updated: July 13, 2017
The New York Times ran a story about the recent surge of credit card debt lawsuits being filed and compared this epidemic to the "robo-signing" fiasco which plagued the mortgage industry. Now it seems the debt collection industry has taken up "robo-lawsuits" and are filing hundreds of lawsuits A DAY, assuming that 99 percent of the Defendants will not answer.
If you are being routinely hounded by a debt collector, chances are you are going to be slapped with a lawsuit at any time. So, what can you do if you are being sued by a collection agency? We have some tips for you to fight and defend yourself against a debt lawsuit.
Answer the Debt Lawsuit
If you were served a Summons and Complaint, you MUST respond to it. The number one mistake people make when they are sued is failing to respond to the notice. If you owe the debt or even if you think you are being sued in error, you have to respond to these allegations in the form of an Answer. Failing to do so will give the debt collector the opportunity to file a default judgment against you, which will open up an entirely new can of worms. The collector can now try to garnish your wages, take money out of your bank account, try to collect attorney's fees and court costs, and/or collect interest charges.
Even if you owe this debt, a two-sentence response denying liability to the lawsuit filed in court will likely lead to a negotiated settlement and save you money in the long run. When you do respond to them, it will force the debt collector to either back down or offer a settlement. The debt collector is betting you will not file an Answer to his Summons and Complaint so when you do, they are actually surprised and not really wanting to spend much money on collecting from you. This is why if you deny liability they will pretty quickly try to settle the debt lawsuit with you.
866.785.9884 Call for a FREE credit repair consultation & FICO® score from Lexington Law
Challenge the Debt Lawsuit
Challenge the debt collector's, or Plaintiff's, ability to file this lawsuit against you in the first place. Credit card debt is almost always bought for pennies on the dollar by a collection agency who in turn is going to try to sue you to collect the money owed. Bottom line, the collection agency needs to prove they have the right to collect this debt as evidence by a transfer of the signed credit card agreement. We can bet 99.9 percent of the credit card debt is not properly transferred to the collection agency in this manner.
So, you are going to ask the court to dismiss the case because the Plaintiff does not have the "chain of custody" paperwork giving them the right to collect this debt from you. A lot of judges will look at the paperwork that debt collectors provide and tell the Plaintiff they must be kidding - and dismiss the case.
Make the Plaintiff Prove What You Owe
More often than not, your debt has changed hands multiple times before the current collection agency purchased it and is now suing you for it. So, you will want the Plaintiff to provide the ORIGINAL signed agreement and a balance on the account from zero to the present. We are going to bet doughnuts to dollars the collection agency will only have a portion of the statements and they most certainly will not have the original signed agreement.
It will be this lack of documentation from the Plaintiff that can get your case dismissed. If the Plaintiff can not prove what you owe, the judge will not be able to make a ruling and will throw the case out.
Use the Statute of Limitations as a Defense
As we mentioned before, a collection agency is betting the borrower will not respond to their lawsuit and they will be awarded a default judgment. Therefore, creditors don't always stop to see if they can actually legally sue you for this debt, i.e., if the Statute of Limitations has run out on this debt. In most states, creditors have a maximum amount of years they can legally sue you for this debt. After that, the Statute of Limitations expires and the collector will lose.
If the Statute of Limitations has expired, you can use this a defense and get your lawsuit dismissed. Every state's statute on debt is different, so see our page which lists out each state's limits on debt collection.
Sue Your Creditor
This is an idea we talk about very often on our website. If a debt collector has violated any of the provisions in the Fair Debt Collection Practices Act (FDCPA), you may be able to sue them and be awarded damages. Consumers can successfully sue for violations of the debt collections practices act and are entitled to statutory damages of $1,000, plus punitive and economic damages. To read more on this topic, you can purchase our eBook entitled How to Sue Your Creditors.
File For Bankruptcy
We are not advocating to file bankruptcy, as this type of decision should be at the very least, talked over with a qualified bankruptcy attorney. But, if the debt you are being sued for is so large or if it is just one of many debts you owe, it may make sense to file bankruptcy. When you do, you will be protected by the automatic stay, which will halt any and all debt collection efforts being made against you. If you are thinking about filing bankruptcy, talk to an attorney as soon as you are served with a Summons and Complaint. Don't wait until the day you are suppose to be in court!
Hopefully these tips have given you the confidence you need to stand up to a debt collector's lawsuit. Being served with a lawsuit is not the end of the world and more often than not, you can beat the debt collectors at their own game. Being an informed consumer is the one thing the debt collectors did not count on, so do your homework and you will be victorious.