Sued for a debt? A step-by-step guide.

What a debt lawsuit is

Every year millions of Americans are sued over credit cards, medical bills, personal loans, money still owed after a car was taken back, and old accounts bought by debt buyers. Most of those cases are won by the company suing for one reason: the person being sued never responded.

Timing varies by state and court. The one date that matters most is the response deadline printed on your summons.

Step 1

Before the lawsuit: calls and letters

What happens

Most debt lawsuits start long before anyone goes to court. An account goes unpaid, the original lender charges it off, and the debt is either sent to a collection agency or sold to a debt buyer, often for a few cents on the dollar. The debt buyer then tries to collect the full balance, plus interest.

Within five days of first contacting you, a collector must send a written notice telling you the amount, who the original creditor was, and that you have 30 days to dispute the debt. If you dispute it in writing within those 30 days, the collector has to stop collecting until it sends you proof of the debt.

What you need to do

• Do not ignore the letters. Open them, date them, and keep every one.
• If you do not recognize the debt or the amount, send a written dispute within 30 days of the first notice. Keep a copy.
• Do not make a small payment to make them go away. In many states a payment can restart the clock on an old debt.
• Write down every call: date, time, who called, and what they said.

Step 2

You are served

What happens

A lawsuit officially begins when you are served with a summons and a complaint. The summons tells you which court the case is in and how long you have to respond. The complaint tells you who is suing, how much they claim, and why.

Service usually means someone hands you the papers in person, leaves them with an adult at your home, or in some states mails them or posts them on your door. Rules differ by state, but one thing does not: the day you are served, a clock starts running. When it runs out, the company suing you can win without ever proving anything.

What you need to do

• Read the summons and find the response deadline. It is usually printed on the first page.
• Write down the date you were served. Keep the envelope and every page.
• Look at who is suing you. If it is a company you have never heard of, it is probably a debt buyer.
• Decide how you will respond: on your own with a self-help tool, through a legal aid office, or with an attorney. Do not let the decision eat up your deadline.

Look up the company suing you →

Step 3

Your deadline and your three choices

What happens

Depending on your state and the court, you usually have somewhere between 14 and 30 days from the date you were served to respond. Some courts give you until a hearing date instead. The summons will tell you which applies to you.

You have three choices: file a written Answer, file a motion asking the court to dismiss or fix the complaint, or do nothing. Doing nothing leads to a default judgment. That means the court rules for the company suing you, for whatever amount it asked for, with no evidence required.

What you need to do

• Put the deadline on your calendar the day you are served, and treat it as fixed.
• If you cannot find the deadline, call the court clerk. Clerks cannot give legal advice, but they can tell you the response date.
• Not sure of your date? The free deadline calculator works out an estimated date from your service date and your state.
• If you miss the deadline, act right away. Many courts allow a short window to undo a default if you move fast.

Estimate your deadline for free →

Step 4

Filing your Answer

What happens

An Answer is a short written document that responds to each numbered paragraph of the complaint. For each one, you say it is true, say it is not, or say you do not know enough to tell. You also list your defenses. You have the right to file one yourself. Many courts offer a basic form, and with CaseDefender you build a complete Answer with your court, case number, and defenses filled in, plus filing instructions.

Common defenses in debt cases include: the lawsuit was filed after the statute of limitations ran out, the company suing you cannot prove it owns the debt, the amount is wrong, the debt was already paid or settled, the account is not yours, or you were not properly served.

What you need to do

• File your Answer with the court and send a copy to the lawyer for the company suing you before the deadline. Keep proof of both.
• Do not agree to anything you are not sure about. The company suing you has to prove whatever you do not agree with.
• List every defense that might apply. In most courts a defense you leave out is lost for good.
• If your credit card or loan agreement has an arbitration clause, consider asking the court to move the case to arbitration. The collector has to pay the arbitration fees, and many drop the case instead.

Build my Answer →

Step 5

Discovery: they have to prove it

What happens

Once you answer, the case enters discovery. Each side can ask the other for documents and written answers under oath. This is where debt buyer cases are won and lost, because a debt buyer often bought a spreadsheet, not a file. It may not have the signed agreement, the complete statements, or a clean record of each sale of the debt from the original lender to the company suing you.

You will likely get requests from the company suing you too. One kind, called requests for admission, is dangerous. In most courts, if you do not respond in time, every statement is treated as true, and the company can win on that alone.

What you need to do

• Ask the company suing you for the signed contract, every monthly statement, and the bill of sale for each time the debt changed hands.
• Respond to every request you get, on time, in writing. Never let requests for admission go unanswered.
• Pull your own records: old statements, payment history, and any letters you sent or got.
• Check the statute of limitations. If the last payment or charge was more than a few years ago, the case may be too old to bring, but only if you raise it.

Step 6

Settlement

What happens

Most debt lawsuits end in a settlement. Once you have answered and asked for proof, the math changes for the company suing you: fighting a contested case costs more than most accounts are worth. That is leverage you did not have before you responded.

A settlement can be a reduced lump sum, often well below the balance claimed, or a payment plan you can actually afford. Either way, the terms must be in writing, signed by the company suing you, before you pay anything.

What you need to do

• Never agree to more than you can pay. A missed settlement payment usually means a judgment for the full amount.
• Get it in writing: the exact amount, the due dates, and a statement that the case will be dismissed with prejudice (for good) once you pay. A written offer, sent by you, starts the talks on your terms.
• Ask whether the account will be reported as settled or paid, and whether it will be removed from your credit report.
• Keep proof of every payment. Keep the signed agreement forever.

Step 7

The hearing or trial

What happens

If the case does not settle, it goes to a hearing or trial. In most consumer debt cases this is short, often under an hour, and it is in front of a judge, not a jury. The company suing you has to show records the court will accept for the account, who owns the debt, and the amount. You can object to records that are incomplete, or that the company's witness has no personal knowledge of.

Before trial, either side may ask the court to decide the case without one. This is called a motion for summary judgment. If you get one, you must respond with your own evidence by the deadline, or the judge may decide the case on the company's version of the facts.

What you need to do

• Show up. If you do not, you lose by default no matter how strong your defense is.
• Bring every document you have, organized by date, with copies for the judge and the other side.
• Dress neatly, arrive early, and speak only when it is your turn.
• Ask the court about its self-help center or local legal aid. Many courts have one, and it is free.

Step 8

The judgment

What happens

If the judge rules against you, the court enters a judgment: a written order that you owe a specific amount, usually with court costs, interest, and sometimes attorney's fees added. In most states a judgment lasts somewhere between five and twenty years, can be renewed, and builds interest the whole time.

If the judge rules for you, or the company suing you drops the case, the lawsuit is over. A dismissal with prejudice means it is over for good. A dismissal without prejudice means the company could file again, so keep your records.

What you need to do

• Read the judgment carefully. Check the amount, the interest rate, and whether fees were added.
• If you believe the judgment is wrong, look into an appeal or a motion to set it aside right away. The deadlines are short, often 10 to 30 days.
• If you never got the lawsuit papers and found out about the judgment later, act right away. A judgment entered without proper service can often be thrown out.
• If you won, save the dismissal order with your important papers.

Step 9

After a judgment: collection and your protections

What happens

A judgment is a piece of paper until the creditor enforces it. The main tools are wage garnishment, taking money from your bank account, and placing a lien on real estate you own. Each one requires a separate court process, and each one comes with protections.

Federal law caps wage garnishment at 25 percent of your take-home pay, or less if you earn close to minimum wage, and many states cap it lower. Social Security, VA, and most retirement and disability benefits cannot be garnished at all, and banks must automatically protect two months of directly deposited federal benefits. Every state also protects some amount of home equity, a vehicle, and household goods.

What you need to do

• If you get a garnishment notice, respond to it. There is usually a short deadline to claim your exemptions (the money and property the law protects), and you lose them if you do not.
• Keep federal benefits in a separate account with nothing else in it, so the protection is easy to show.
• If the judgment is more than you could ever pay, talk to a bankruptcy attorney. A Chapter 7 wipes out most judgment debt and stops garnishment the day it is filed.
• Once a judgment is paid, get a satisfaction of judgment filed with the court and keep a copy.

Common questions

How a case gets off track

Every one of these can be avoided, and every one has cost someone a case they could have won. If any of them is happening to you, act today. Most can still be fixed if you move quickly.

• Not opening the mail, and finding out about the lawsuit after the deadline passed.
• Calling the other side's lawyer to explain instead of filing a written Answer.
• Missing the response deadline by a few days and assuming it is too late to do anything. It often is not.
• Ignoring requests for admission, which are then treated as true.
• Making a small payment on an old debt and restarting the statute of limitations.
• Agreeing to a payment plan you cannot keep, then missing a payment.
• Not showing up to the hearing.
• Ignoring a garnishment notice and losing protections you were entitled to claim.