How to Defend Yourself Against a Creditor Lawsuit

If you have unpaid debts that are severely delinquent, one tactic creditors can use to try to recover what's owed to them is to file a lawsuit against you in small claims court. Filing a lawsuit is often seen as a last resort after other attempts at collecting on the debt have failed and whether or not a creditor will sue often depends on a number of factors. If you have outstanding debts and are concerned that you may be sued, there are certain things you can and must do to defend yourself.

Read the Summons

When a creditor sues, they are required to serve you with a summons, notifying you of their actions. The summons may be delivered by a process server or by certified mail and it will contain pertinent information related to your case, i.e. who is bringing the suit, for what amount you are being sued, the date and time of your scheduled court appearance, as well as whether or not you are required to file a response. You must read over the summons carefully and if a response is required, you must file an answer with the court in a timely manner. Do not ignore the summons and skip the court date, as this will only result in a default judgment being entered against you.

Request Validation

Under the Fair Debt Collection Practices Act, when you receive notice of an outstanding debt you are allowed thirty days to request that the debt be validated by the creditor. What this means is that you must submit a written request to the creditor asking them to validate that you are the owner of the debt and that they have legal standing to collect on the debt. This request must be submitted within thirty days of the original notice or you waive your rights under the FDCPA. Once you've submitted your request, the creditor has to provide written documentation of the debt, such as a copy of the original contract, as well as proof that they own the debt. During this period, collection efforts against you must cease.

Check the Statute of Limitations

Each state has different regulations regarding debt collection practices and there are specific guidelines concerning the statute of limitations on different types of debt. From the initial date of default, usually the first missed payment, there is a timeframe for how long a creditor can attempt to collect on a debt. Depending on the state and type of debt, this may be anywhere from two to ten years. If you're sued by a creditor, you need to pull your credit report from each of the three major credit bureaus to verify when the date of default was for the account. Check your report carefully as some collection agencies will attempt to re-age your account in order to override the statute of limitations. If you can prove that the debt in question is time-barred, then the creditor will be unable to collect on it.

Propose a Settlement Offer

If the creditor is able to validate the debt and it is not yet time-barred, you may want to consider offering a settlement to avoid the possibility of a judgment being entered against you for the full amount. If you choose to make such an offer, be sure to document it in writing and if the creditor declines, then you can present it to the judge as a show of good faith in your intent to repay the debt.

Document Any Harassment by the Creditor

Creditors and collection agents are prohibited from engaging in certain activities, including harassment of you or your family, calling outside of specified times, contacting you after you've requested that they cease and desist, etc. If you feel you're being subjected to these or other types of harassment by a creditor, document each instance and present it in court. If a creditor has violated your rights under the FDCPA, you may be able to file a countersuit for damages up to $1,000.

If You Receive a Judgment

If a judgment is entered against you, be aware that it can remain on your credit report for up to ten years and in some instances, the debt can be reaffirmed once the initial period has expired. If the court rules against you, it means that you are deemed liable for the debt and the creditor is now legally able to pursue recovery of the debt in the form of wage garnishment, seizure of your bank account, or seizure of personal property. These steps require additional work on the part of the creditor and the availability of options will vary from state to state.

There is no foolproof defense against a creditor lawsuit but the better educated you are, the better your chances will be in court. While you may feel more comfortable enlisting the aid of an attorney to help you navigate the process, it is possible to defend yourself alone if you know what steps to take to fight back.