I just got served with a debt collection lawsuit. What now?

What the lawsuit means

A creditor or, more often, a debt buyer who purchased the account for pennies, is asking a court to turn the debt into a judgment. The debt itself can’t touch your paycheck. A judgment can: it’s the key that unlocks wage garnishment, bank levies, and liens. That’s the whole game, and it’s why the suit deserves a response even when the debt is real.

The one fatal mistake

Most collection lawsuits are won by silence. If you don’t respond by the deadline (commonly around 21 days, but it varies by state and court; the papers say), the plaintiff gets a default judgment for everything it asked for: balance, interest, fees, costs. No trial, no proof, no negotiation. Whatever else you do, don’t let the clock run out while you decide.

Your realistic options

Answer and make them prove it. Debt buyers frequently can’t. Accounts get sold in bulk with thin records, and a demand for proof of the chain of ownership and the balance ends a surprising number of these cases. If the debt is old, the statute of limitations may have expired, which is a complete defense, but usually only if you show up and raise it. Answering buys time and leverage even when you ultimately owe the money.

Negotiate. A plaintiff facing a contested case will often settle for less, in writing, sometimes on payments. Get every agreement in writing before paying anything.

Zoom out. One lawsuit is rarely the whole picture. If this suit sits on top of other debts you also can’t pay, winning or settling this one case may just be bailing one bucket from a sinking boat. That’s the situation bankruptcy exists for: filing stops this lawsuit immediately under the automatic stay, and the debt behind it is usually the dischargeable kind. Even an existing judgment is typically dischargeable, though a judgment that has already become a lien on your property is a wrinkle an attorney should look at, and one more reason not to wait until after you’ve lost.

If the judgment already happened

You’re not out of moves. Default judgments can sometimes be set aside if service was bad or you act quickly. Garnishments and levies flowing from the judgment stop the moment a bankruptcy is filed. And a garnishment that took a meaningful amount from you in the 90 days before filing can sometimes be recovered in the bankruptcy. Speed matters at this stage more than any other.

The bottom line

Respond to the suit, on time, no matter what else you decide. Then decide with the whole board in view: one debt problem is a lawsuit problem; several is a situation the Checkup was built to help you sort.