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I Was Just Sued by a Debt Collector, What Should I do?

Sued by a debt collector

Being sued is an awful mix of feelings that immediately flood into your world the moment the process server hands you the paperwork and tells you that you've been served. Panic, anger, confusion, and helplessness are some of the most common feelings in the moments and days after being sued.


Now it's time to do something about the debt collection lawsuit though, but what?


We go over key information in this blog, such as the basics of the debt collection lawsuit, what you must do after being served by a debt collector, and what options are available to you. Feel free to review the entire blog or jump straight to the section you want:


Understanding the Papers You Were Served

There are three basic parts of the court papers most folks are served in a debt collection lawsuit:


  1. The Citation - This is an official notice from the court telling you that you've been sued. You can find the name of the party suing you, the court that you're being sued in, and the case number on the citation. The most important thing you'll find on the citation-and it's actually really important-is your deadline to file an answer to the petition. You have a specific amount of time to file your answer, so make sure you understand this deadline. Filing an answer is a must if you've been sued in a debt collection lawsuit in Texas, and it's discussed in more detail below.

  2. The Petition - This is where the debt collector or original creditor tells their version of events, provides necessary details such as their relationship to you or the original creditor, the nature and amount of the debt, and makes their formal request to the court. You'll also find the name of the lawyer suing you and their contact info, name of the creditor, the court you're being sued in, and the case number on the petition.

  3. Exhibits - Most, but not all, debt collection lawsuits will include exhibits. Common exhibits can include credit card or loan agreements, purchase and sale agreements, and payment histories.


These may go by different names depending on where you are, but this is what you can expect if you've been sued over a debt in Texas. You should never ignore the papers or assume they will simply go away. Ignoring a lawsuit can result in a default judgment being entered against you, which can have serious consequences. Instead, read the papers and make sure you understand when your deadline is for responding.


Who is Suing You?

There are at least two good reasons why you want to understand if you're being sued by an original creditor or a debt collector. An original creditor is the entity you initially owed the money to, such as a credit card company, bank, or a medical provider, while a collection agency (aka debt collector) is an entity that purchased the debt from someone else (the original creditor or another collection agency). Defferent creditors are subject to different debt collection laws, so understanding who is suing you can help you better navigate the legal process and determine the best course of action for your situation.


Can a Collection Agency Sue You?

Yes, absolutely. Debt collectors sue folks all the time, although some debt collectors are more likely to sue you than others. Even though you probably never had a direct relationship with the collection agency, they have the legal right to pursue collection efforts against you, including filing a lawsuit, as long as they purchased the debt from an entity who had those same rights.


However, every time debt is bought and sold there's an opportunity that something is done incorrectly and the legal right to pursue the debt doesn't actually pass to the buyer. This is the first reason why it's important to know who's suing you in a debt collection lawsuit. If you've been sued by a debt collector, you can attempt to attack a common key weakness in lawsuits brought by debt collectors, and if you're successful the debt collector will likely dismiss their lawsuit or you may win at trial.


Debt collectors, unlike original creditors, are subject to the Fair Debt Collection Practices Act (FDCPA). This is the second reason why it's important to know who's suing you in a debt collection lawsuit. This federal law sets limitations on how a collection company can communicate with you, what information they can share with others, and the actions they can take to collect the debt. Sometimes FDCPA violations are uncovered while defending against lawsuits filed by debt collectors, and this can lead to a settlement in the lawsuit and even a small payout of up to $1,000 per violation.


Lawsuits by an Original Creditor

The primary way lawsuits by original creditors differ from those filed by collection agencies is there isn't a question whether original creditors have a legal right to pursue the debt. This tends to drastically reduce legitimate defenses you can use to defeat debt collection lawsuits. The other key difference in lawsuits by original creditors is that original creditors aren't subject the federal Fair Debt Collection Practices Act, although they are subject to the Texas Debt Collection Act (TDCA). Again, this difference reduces the legitimate defenses you can use to defeat debt collection lawsuits by original creditors.


Consequences of Ignoring the Lawsuit

I can't understate just how important it is that you pay attention to the lawsuit if you're sued by a debt collector. Ignoring a debt collection lawsuit can lead to a default judgment being issued against you, which means that you lose and the party that sued you wins and they can begin attempting to collect on their judgment.


What Happens if You Lose?

When you lose a court case against a debt collector the creditor is given a judgment, which is a court order that says you're ordered to pay them an exact amount of money plus interest. The judgment allows the creditor to utilize certain tactics, such as garnishment and receivership, that they weren't authorized to use before getting the judgment. These post-judgment collection actions are intended to allow the creditor to collect from folks who wouldn't voluntarily pay otherwise.


This outcome is exactly the nightmare scenario most people want to avoid. Imagine waiting for payday only to learn that your bank account has been garnished and you can't access your money. How are you going to pay rent and utilities or buy groceries and gas? This is what can happen when you ignore a debt collection lawsuit.


What to do When You've Been Sued by a Debt Collector

Don't ignore the lawsuit if you've been sued by a debt collector or original creditor.


A significant number of lawsuits in the US are debt collection lawsuits, and the overwhelming majority of these lawsuits result in a default judgment. That means that the defendant never responded to the lawsuit and never showed up to court for a hearing. When that happens, the court gives the creditor the judgment they ask for. Most courts have a sort of expedited process for debt collection lawsuits that are going to result in default, and failure to respond on time can have devastating consequences.


So what do you do?


You need to respond to the debt collection lawsuit by filing an "answer." When you file an answer you're basically raising your hand so that everyone sees you and can hear you say that you want to participate in the lawsuit.  You only have a limited period of time to file your answer, so you need to make sure you do it right away. That helps protect you against the expedited process that can result in a default judgment in favor of the debt collector.


But filing an answer won't protect you forever. Instead, it gives you some time to explore your options and figure out how you're going to proceed.


What are my Options if I've Been Sued by a Debt Collector?

Most of the time you'll have four options for how to respond after being sued by a debt collector:



Do Nothing

Although this is a terrible option if you've been sued by a debt collector, you always have to option of doing nothing.


If you do nothing, then the debt collector or original creditor will get their judgment against you and can begin post-judgment collection efforts. In Texas, this typically means that they'll try finding one of your bank accounts so they can garnish it. The garnishment order remains in place for that bank account until the full judgment is satisfied. This is quite disruptive and can leave you with next to no money really fast.


Negotiate and Try Settling with the Creditor

Negotiating with the creditor may lead to a settlement that includes a payment plan and an agreement for you to pay reduced amount that's less than the full amount of the debt. This is option makes more sense in certain situations than others.


A situation where this option may make sense is when the debt collection lawsuit is brought by original creditor. Remember, original creditors aren't subject to the FDCPA and typically have no problem proving their legal right to collect the debt. This certainly doesn't mean that there aren't other good reasons to fight lawsuits brought by original creditors. There are, and if you're interested fighting a debt lawsuit filed by an original creditor then you should talk to an Austin debt lawyer who can review your options with you.


Trying to reach a settlement doesn't necessarily make sense if you're struggling with other debt too. If you're barely able to keep up with your debt then reaching a settlement in one lawsuit is only a temporary solution that may get rid of the lawsuit but not the actual problem - there's too much debt. This is a situation where you could benefit from the bankruptcy process (see below).


You can negotiate with the creditor on your own or you can hire a lawyer to do it for you. Hiring a lawyer can help you explore other options before deciding that a settlement is best for your, that way you can have piece of mind that you've made the right choice.


Fight the Debt Collection Lawsuit


Fair Debt Collection Practices Act

The key ways to fight a debt collection lawsuit are to prove that the debt collector doesn't have the legal right to collect the debt or to pursue the debt collector for violating the FDCPA, although these aren't the only ways to fight lawsuits brought by debt collectors.

Some common reasons for fighting debt collection lawsuits arise when debt collectors:


  • Sue on debt that's outside of the statute of limitations

  • provide false information about the debt

  • use obscene language when communicating with you

  • fail to provide the name of the original creditor

  • fail to provide proper verification of the debt upon request


Typically, you'll need to participate in the lawsuit and request discovery from the debt collector to determine whether you can successfully fight back. Our Austin FDCPA lawyer can help you develop a strategy to fight back while keeping your best interest and your financial future at the center of the case.


Filing Bankruptcy Because of a Debt Collection Lawsuit


Bankruptcy debt relief

Now that you're exploring your options after being sued by a debt collector, you're probably wondering if bankruptcy makes sense for you. We get it, we talk to a lot of folks who have been served with a debt lawsuit and we're always happy to help them fully explore how they can file bankruptcy after being sued by a debt collector.


Want to stop the lawsuit in its tracks and get out of debt in the process?

Bankruptcy is a swift and powerful debt relief option to help you get a fresh start and leave the stress and debt behind. The automatic stay goes into effect immediately after filing a Chapter 7 or Chapter 13 bankruptcy and immediately stops debt collection lawsuits.


Not sure if bankruptcy makes sense for you?

If you've been served by a debt collector and you have other debts that you're struggling to pay, then bankruptcy may make sense for you. A lot of times folks choose to struggle with their debt with sincere hopes that they'll catch up and things will improve. Then they get served by a debt collector and they're forced to face their debt head on. We frequently see two common examples of this.


First, we see folks who fell behind on their debt, usually due to the loss of a job, and are now working again and have the means to pay something toward their debt. The problem in this situation is that they're now so far behind on their debt, and it's grown so much, that they can't catch up so they keep falling behind. We often help these folks file Chapter 13 bankruptcy, which consists of a monthly payment plan for three to five years and at the end of the payment plan the debt that isn't repaid is discharged. Of course, we always help folks file Chapter 7 when they can pass the means test, but it's common for folks in this situation to earn to much to qualify for Chapter 7.


The second example of this is someone who has been stuck in the cycle of debt for too long and they're completely overwhelmed by debt. These folks are usually still paying some of their debt, but somewhere along the way they stopped paying one or two because they were just too high to afford. We're usually able to get these folks into a Chapter 7 bankruptcy, and we can get the majority, and often all of their debt eliminated with a bankruptcy discharge.


Benefits of Filing Bankruptcy After Being Sued by a Debt Collector

There are many benefits in choosing to file a bankruptcy petition in response to being sued by a debt collector. Everyone's bankruptcy is different, and there are countless benefits folks get from filing that are personal and unique to their situation, but these are some of the common benefits folks experience:


  • The automatic stay immediately stops the debt collection lawsuit, and it goes into effect as soon as you file a Chapter 7 or a Chapter 13 bankruptcy

  • Chapter 7 bankruptcy quickly discharges most if not all of your debt without the need to repay

  • Chapter 13 bankruptcy allows you pay what you can over three to five years, and then discharges what doesn't get repaid

  • You can get rid of debt from medical bills, credit card debt, business debts, and many unpaid debts

  • Bankruptcy gives you a fresh start and allows you to begin rebuilding your finances sooner than struggling to repay the debt over many years

  • Most debt collectors dismiss their lawsuits after you file Chapter 7 bankruptcy

  • Filing bankruptcy gives you assurance that none of your other creditors can serve you with a debt collection lawsuit


Conclusion

The first thing you need to do if you've been served by a debt collector is read the paperwork and find out when you need to file your answer. There are certain situations when it makes more sense to fight the lawsuit than others. Do you want to fight the lawsuit? Next, you need to evaluate your financial situation. Are you struggling with a lot of other debt? Does it make sense for you to file bankruptcy instead of fighting the lawsuit?


We provide a full range of legal assistance for folks who've been served by a debt collector. We can take legal action and sue debt collectors who violate the FDCPA, we defend folks in debt collection lawsuits, and we help folks file bankruptcy to help them get out of debt get rid of debt collection agencies all together. Get in touch with us today to schedule your free consultation.

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