What to Do if You Are Sued Over a Debt

As most debtors know first-hand, debt collection agencies can be incredibly persistent.  Avoid making repayments for too long, and you could even find yourself facing a creditor lawsuit.  What should you do if you’ve been sued over an unpaid debt? In this post, our New Jersey bankruptcy attorneys weigh some of the legal options.

Step 1: Seek Legal Representation

You may have a strong affirmative defense against the allegations without even knowing it, or there could be an issue with the allegations themselves.  For example:

  • Are you absolutely positive that the debt is in the correct amount?  Even prominent and well-respected financial institutions make errors, with one eight-year-long study by the Federal Trade Commission uncovering 40 million mistakes on credit reports across the country.
  • Does the person or entity actually have standing?  Standing is a legal term that describes a plaintiff’s legal right to bring a lawsuit.  In order to demonstrate standing, the burden of proof falls on the collector to prove ownership of the debt.  Even if the plaintiff has the legal right to sue, in some cases the defendant is a victim of identity theft and is not actually liable for the debt.
  • Has the statute of limitations expired?  The statute of limitations is a law which places a very strict time limit on how long plaintiffs have to file specific types of lawsuits.  The Pennsylvania statute of limitations on most consumer debt is four years, pursuant to 42 Pa. C.S. 5525(a).  In New Jersey, the deadline is slightly longer at six years in accordance with N.J.S.A. 2A:14-1.

Of course, even if the statute of limitations has expired or there’s some other issue with the lawsuit, you should still…

Step 2: Respond – Or Risk a Default Judgment

When a creditor sues you, the first thing that happens is that you will be served with a complaint and summons.  The complaint describes the nature of the allegations, while the summons serves as notice that legal proceedings have been initiated and that you, the defendant, must appear in court.

All too many debtors who find themselves in this situation avoid responding in hopes that the debt collector will forget and the case will slip through the cracks.  It may sound tempting, but this is never the right thing to do.  You should always respond to the summons before the deadline passes, even if you wish to dispute the debt.  If you ignore the summons and fail to respond, you may find yourself faced with a default judgment.

Default judgment is something you want to avoid.  When a default judgment is entered, it means the judge is issuing a court order for you to pay the amount specified, though in some cases the judge may wish to review additional evidence first.  In addition to your original debt, default judgments also court fees and interest while simultaneously opening up the possibility of wage garnishment or freezing your bank account.

In short, default judgments can be extremely expensive.  Don’t take the risk.

woman holding open empty wallet

Step 3: Should You File an FDCPA Counterclaim?

In an effort to crack down on creditor harassment and aggressive collection tactics, Congress passed the FDCPA in 1977. The FDCPA, or Fair Debt Collection Practices Act, is like a manual describing what creditors and debt agencies are and are not allowed to do and say in their collection attempts.  To give just a few examples, the FDCPA prohibits behaviors like calling after 9:00 P.M., using abusive language, threatening legal action it cannot or will not follow up on, and contacting a debtor instead of his or her attorney.

If a debt collector seriously violates the provisions of the FDCPA, you may have grounds for filing a counterclaim in response to the original lawsuit.  If a debt collector is found guilty of violating the FDCPA, you can be reimbursed for up to $1,000 per violation, plus expenses directly related to the creditor harassment (e.g. changing your phone service).

On a final note, always try to remember these two simple words: don’t panic.  We know that’s often easier said than done, but keeping a cool head will help you respond rationally and avoid doing anything you regret.

Pennsylvania Bankruptcy Attorneys Putting Experience to Work for You

If your debts have gotten out of control, bankruptcy may be the right solution.  To set up a private legal consultation, call the Pennsylvania bankruptcy lawyers of Young, Marr & Associates at (609) 755-3115 in New Jersey or (215) 701-6519 in Pennsylvania today.  Your first consultation is free, and your information will always be kept confidential.

Have You:

Been paying credit card balances that seem to never go down?

Lost your job and are now having trouble keeping up?

Attempted to work out a payment arrangement to no avail?

Been notified of a mortgage foreclosure action?

Been denied for a mortgage or other line of credit?

If the answer to any of these questions is “yes” then bankruptcy may be an option that you should consider.

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