Sued by a debt collector: The first step that decides the case

File a written answer with the court before the deadline on your summons, even if you plan to settle and even if you think the debt isn’t yours. The deadline is set by your state’s court rules (14 days in Texas justice courts, 30 days in California, often something in between elsewhere), and if you miss it, the plaintiff can ask for a default judgment without ever proving its case. Once your answer is in, you have time to check the debt, raise defenses and negotiate.

Read the summons and the complaint first

The summons tells you which court has the case, the deadline to respond and how to respond. Some courts want a written answer; some small claims and justice courts instead set a hearing date you must attend. Write the deadline down today.

The complaint is the plaintiff’s version of the story. Check:

• Who is suing. Is it the original creditor or a company that bought the debt? A buyer has to show it owns your account.
• The amount. Does it match your records, and does it include interest or fees you never agreed to?
• The dates. When did you last pay? Compare that with your state’s statute of limitations.
• The account. Is it yours at all? Mixed-up identities and debts already paid or discharged in bankruptcy do end up in court.

File an answer, and list your defenses

The answer responds to each numbered paragraph of the complaint: admit it, deny it, or say you lack enough information to admit or deny it. Deny what isn’t accurate. Then list your affirmative defenses, because many of them are lost if you leave them out. Common ones in debt cases:

• Statute of limitations. If the time to sue has run, say so; courts usually won’t apply it unless you raise it.
• Lack of standing. A debt buyer must prove it owns your specific account. Ask for the card agreement or terms that applied, and the chain of sale from the original creditor down to the plaintiff. Card accounts rarely have a signed contract, so “produce the signed contract” is the wrong request.
• Wrong amount, payment or discharge. You paid, settled or discharged the debt in bankruptcy, or the balance is inflated.
• Identity theft or mistaken identity.

File the answer with the court clerk and send a copy to the plaintiff’s lawyer, whose address is on the summons. There may be a filing fee; most courts have a fee waiver form if you can’t afford it, and many post fill-in answer forms online. The CFPB’s guide to being sued by a debt collector covers the same steps.

Check one more document: your cardholder agreement. Many contain an arbitration clause that lets either side move the dispute out of court. Whether choosing arbitration helps you depends on the clause and your state, so it is a question for a lawyer before your answer is due.

Getting help, and what a counterclaim is worth

You can represent yourself, but the plaintiff’s lawyer is in that courtroom every week. Legal aid offices, law school clinics and some courts’ volunteer lawyer programs help people in debt cases for free. The National Association of Consumer Advocates has a directory of private consumer lawyers.

Collection law firms that regularly sue consumers are covered by the FDCPA, and so are most debt buyers. If the collector broke that law, for example by suing on a time-barred debt or misstating the amount, you may have a counterclaim. Be realistic about the size: actual damages, additional damages of up to $1,000 and attorney’s fees if you win. That can offset part of what you owe and makes a lawyer more willing to take the case, but it rarely wipes out the whole debt. The claim must be brought within one year of the violation.

On your court date

• Arrive early, check in with the clerk and bring two copies of your answer, the summons, your payment records and every letter from the collector.
• The plaintiff’s lawyer may approach you in the hallway with a deal. Listening is fine. Don’t sign an agreed judgment or stipulation you don’t fully understand, since it can carry the same consequences as losing.
• If the case goes forward, the plaintiff has to prove that it owns the debt and that the amount is right. You can point out missing documents, a gap in the chain of sale or a witness with no personal knowledge of the account. Evidence rules vary by state, so this is where help from a lawyer or clinic pays off.
• If you missed the deadline and a default judgment was entered, ask the clerk right away how to file a motion to set it aside. The window is short, and you will need a reason, such as improper service.

Settling the case

You can settle at any point, before or after filing your answer. Negotiate with the plaintiff’s lawyer, in writing where possible, and offer a lump sum or a payment plan you can actually keep. Before you pay anything, get a signed agreement that states:

1. The total amount that resolves the debt.
2. That the case will be dismissed with prejudice, so it can’t be filed again.
3. How the account will be reported: deleted, or reported as paid or settled. If you pay less than the full balance, “paid in full” would be inaccurate, and a careful plaintiff won’t agree to it.

Forgiven debt is generally taxable. If $600 or more is canceled, the creditor will file a Form 1099-C, but you may be able to exclude it if you were insolvent just before the cancellation, using IRS Form 982.

If a judgment is entered

A judgment lets the plaintiff use court tools to collect, within limits set by federal and state law.

Wage garnishment. Title III of the Consumer Credit Protection Act caps it at the lesser of 25% of your weekly disposable earnings or the amount by which those earnings exceed 30 times the federal minimum wage ($217.50 a week at $7.25 an hour). At $600 a week of disposable pay, the most that can be taken is $150. At $250 a week, it is $32.50. Some states go much further: Texas’s constitution bars garnishing current wages except for court-ordered child support and spousal maintenance, Pennsylvania exempts wages from attachment except for a short list of debts such as support, and South Carolina bars wage garnishment for consumer credit debts.

Bank levies. The plaintiff can ask to freeze and take money in your bank account. When federal benefits such as Social Security or VA payments are directly deposited, the bank must protect the lesser of your balance or two months of those deposits, under Treasury rules at 31 CFR part 212. Money beyond that may require you to file an exemption claim with the court.

Your credit reports. Equifax, Experian and TransUnion stopped including civil judgments in 2017, so the judgment itself won’t appear. The collection account behind it can, for up to about seven and a half years from the first missed payment, and the judgment remains a public court record that in many states can be renewed for years.

If several judgments or lawsuits are stacking up, talk to a lawyer about whether Chapter 7 or Chapter 13 bankruptcy fits, since filing stops most collection, including garnishment, while the case is open. The CFPB’s debt collection pages also list your rights before and after judgment.