If you have been served with a lawsuit over a debt, you are not alone and you have rights. Whether the suit was filed by an original creditor, a debt buyer, or a collection agency, the law provides protections and options that many consumers are unaware of. This guide explains what to do, what not to do, and when to contact an attorney.
Do Not Ignore the Lawsuit
The single most important thing you can do when you are served with a debt lawsuit is to respond. Ignoring the lawsuit does not make it go away -- in fact, it virtually guarantees the worst possible outcome.
When you fail to respond within the required timeframe, the court will enter a default judgment against you. A default judgment means the plaintiff wins automatically -- not because they proved their case, but because you did not show up to contest it. The court does not evaluate whether the debt is valid, whether the amount is correct, or whether the plaintiff even has the right to sue you.
The consequences of a default judgment are serious and can follow you for years:
- Wage garnishment: The creditor can seek a court order to take a portion of your paycheck directly from your employer.
- Bank levies: The creditor can freeze and seize funds from your bank account.
- Property liens: The creditor can place a lien on your home or other real property, which must be satisfied before you can sell or refinance.
- Damage to your credit: A judgment on your record can further harm your credit and your ability to obtain housing, financing, or employment.
In most courts, you have 20 to 30 days to file a response after being served, though the exact deadline varies by state and court. Check the documents you received carefully, because the deadline is firm and missing it can result in the loss of important rights.
Even if you believe you owe the debt in full, responding preserves your ability to negotiate, raise defenses, and control the outcome.
Never ignore a debt lawsuit. Responding -- even if you owe the debt -- preserves your rights and keeps your options open. A default judgment is almost always worse than any negotiated outcome.
Common Defenses Available to You
Many consumers assume that if they owe money, they have no defense. This is a misconception. There are a number of legal defenses that may apply in a debt lawsuit, depending on the specific facts of your case. Below are some of the most common.
The statute of limitations has expired. Every state sets a time limit on how long a creditor has to file a lawsuit to collect a debt. Once that period expires, the debt is "time-barred." In New York, the statute of limitations for most consumer debts -- including credit cards, medical debts, and personal loans -- is six years. The clock generally starts from the date of your last payment or the date of default. If the statute of limitations has expired, this can be a complete defense.
The plaintiff cannot prove they own the debt. This defense is especially common in cases involving debt buyers. When a creditor charges off a debt, it may sell the account to a debt buyer, who may resell it again. By the time a lawsuit is filed, the company suing you may be several steps removed from the original creditor. To prevail, the plaintiff must demonstrate an unbroken chain of ownership. Many debt buyers cannot produce the necessary documentation, and this failure can be a valid defense.
The amount claimed is wrong. Creditors and debt buyers sometimes inflate the amount owed by adding unauthorized fees, interest, or charges not permitted under the original agreement. If the amount in the lawsuit does not match what you actually owe, you have the right to challenge it.
The debt has already been paid or settled. If you previously paid the debt in full, made a settlement arrangement, or received a discharge in bankruptcy, the creditor may have no right to continue pursuing collection. This is more common than many people realize, particularly with debts that have been sold multiple times.
You were not properly served. The law requires that you be served with the lawsuit in a specific manner. If the plaintiff did not follow proper service procedures, you may have a defense based on improper service that can result in the case being dismissed.
Identity error. Sometimes a lawsuit is filed against the wrong person due to name similarity, identity theft, or inaccurate records. If the debt does not belong to you, this is a complete defense.
Whether any of these defenses apply depends on the specific facts of your case. The existence of a potential defense does not guarantee a particular outcome. An attorney can help you evaluate which defenses, if any, are available to you based on the details of your situation.
Know Your Rights Even When You're Being Sued
Being sued does not mean your consumer protection rights disappear. In fact, several important federal laws continue to protect you throughout the litigation process.
The Fair Debt Collection Practices Act (15 U.S.C. § 1692) still applies. If the entity suing you is a third-party debt collector or debt buyer, the FDCPA governs their conduct even during litigation. The collector cannot harass you, use abusive language, misrepresent the debt, or threaten actions they cannot legally take. A lawsuit does not give a debt collector a license to engage in illegal conduct.
If a collector violates the FDCPA in connection with the lawsuit -- for example, by making false representations in court filings or engaging in harassing communications -- you may have counterclaims that can sometimes be raised in the same lawsuit, potentially reducing or offsetting the amount sought from you.
The Fair Credit Reporting Act (15 U.S.C. § 1681) also provides protections. If the debt is being reported to the credit bureaus during litigation, the information must be accurate. If the creditor or collector is furnishing inaccurate information -- such as the wrong balance, wrong date of default, or failing to note that the debt is disputed -- you may have separate FCRA claims that exist independently of the debt lawsuit itself.
What a Debt Lawsuit Actually Looks Like
Here is a plain-language overview of how most debt lawsuits proceed.
The Summons and Complaint. The lawsuit begins when you are served with two documents: a summons and a complaint. The summons tells you a lawsuit has been filed and that you must respond by a certain date. The complaint lays out the plaintiff's claims -- who they are, what they say you owe, and why. Together, these documents tell you who is suing you, what they want, and what you need to do.
The Answer. Your response is called an answer. In it, you respond to each allegation -- admitting what is true, denying what is false, and stating what you lack information to admit or deny. You also raise any affirmative defenses, such as the statute of limitations or improper service. Filing your answer on time is essential to avoiding a default judgment.
Discovery. Both sides may then engage in discovery -- exchanging information and documents relevant to the case. This might include requests for the original credit agreement, account statements, and documentation of the chain of ownership. Discovery is a valuable tool for consumers because it forces the plaintiff to produce evidence. In many cases, debt buyers cannot produce adequate documentation.
Settlement Negotiations. Most debt lawsuits settle before reaching trial. Settlement can happen at any point. You and the plaintiff agree to resolve the dispute on mutually acceptable terms -- typically payment of a reduced amount, sometimes with a payment plan. Settlement provides certainty, avoids the cost of trial, and often results in a better outcome than a judgment.
Trial. If the case does not settle, it goes to trial. In practice, trials in debt collection cases are rare. The plaintiff must prove the debt exists, that they have the right to collect it, and that the amount is correct. You have the right to challenge their evidence and present your own.
After a Judgment. If a judgment is entered in the plaintiff's favor, they become a judgment creditor with access to wage garnishment, bank levies, and property liens. Judgments in New York are enforceable for up to 20 years and accrue interest. Certain income and assets are protected from collection under federal and state law.
When to Contact an Attorney
If you have been served with a debt lawsuit, time is limited and the sooner you understand your options, the better positioned you will be. Consider contacting an attorney in any of the following situations:
- As soon as you are served. The deadline to respond is strict, and an attorney can help you understand what you need to do and by when.
- If you believe the debt is not yours. Whether due to identity theft, a data entry error, or confusion with another person's account, you should not have to pay a debt that does not belong to you.
- If you believe the amount is wrong. An attorney can review the plaintiff's claims and determine whether the amount being sought is accurate and properly documented.
- If the statute of limitations may have expired. Determining whether a debt is time-barred requires careful analysis of the applicable law, the type of debt, and the relevant dates. An attorney can help you evaluate this defense.
- If the collector has violated the FDCPA or FCRA in connection with the lawsuit. If the collector engaged in harassment, made false statements, or is reporting inaccurate information to the credit bureaus, you may have counterclaims or separate legal claims.
- If you received a settlement offer and want to understand it. Before agreeing to any settlement, it is important to understand the terms, the tax implications, and whether the offer is reasonable in light of the facts.
An initial consultation can help you understand your options, even if we are not the right firm for your particular matter. If we cannot assist you directly, we can help connect you with qualified counsel. The goal is to make sure you have the information you need to make informed decisions about your situation.
Frequently Asked Questions
I was sued but I already settled this debt. What do I do?
If you have documentation of the settlement -- such as a settlement letter, proof of payment, or a release -- you may have a strong defense. Additionally, if a debt collector filed the lawsuit knowing the debt was already resolved, their conduct may violate the FDCPA, potentially giving you counterclaims. Gather all documentation and consult with an attorney as soon as possible.
Can I be sued for a debt that is 10 years old?
Possibly, but the statute of limitations may bar collection. In New York, the statute of limitations for most consumer debts is six years. If more than six years have passed since your last payment or date of default, the debt may be time-barred. Some creditors file lawsuits on time-barred debts hoping the consumer will not raise the defense. If you believe a debt may be past the statute of limitations, consult an attorney to evaluate your situation.
What happens if I ignore the lawsuit?
The court will enter a default judgment against you, meaning the plaintiff wins without proving their case. A default judgment gives the creditor the ability to garnish your wages, levy your bank account, and place liens on your property. Default judgments in New York are enforceable for up to 20 years. Ignoring a lawsuit is almost always the worst option.
Can I negotiate a settlement after being sued?
Yes. Most debt lawsuits are resolved through settlement rather than trial. Settlement can occur at any stage of the case. In many cases, debt buyers purchased the account for a fraction of the original balance and may be willing to accept a reduced amount. A settlement can end the litigation, prevent a judgment, and provide certainty. It is generally advisable to have an attorney review any settlement offer before you agree to it.
Do I need a lawyer to respond to a debt lawsuit?
You have the right to respond on your own, which is called proceeding pro se. However, an attorney can identify defenses and potential counterclaims you may not be aware of, ensure your answer is filed correctly and on time, and negotiate on your behalf. An initial consultation can help you decide whether legal representation makes sense for your situation.