Receiving a notice of claim from a collection agency can be terrifying and confusing.
You may think you are about to lose everything you worked so hard for because you cannot settle your debt. The feeling is understandable because the type of language some debt collectors use can spark fear.
At this point, the urge to ignore the notice and hope it miraculously goes away can be so strong. But that shouldn’t be the case. Understanding what to do when you are sued for collections can help you handle the situation correctly.
Make sure you understand your right in such a situation and work towards defending yourself against the collection agency lawsuit. Here are some of the things you can do to ensure the situation doesn’t get worse.
1. Don’t ignore the letters or notice of claim
The biggest mistake many borrowers make when they are sued for collections is failing to respond to the notice of claim or warning letters. If you owe the debt and you are not in a position to pay it, you may assume that there is nothing you can do.
However, if you fail to respond to the notice of claim, the collection agency will automatically get a default judgment against you. That opens up a wide range of new avenues of collection, including the ability to withdraw money from your bank account, depending on the laws in your state.
In the worst-case scenario, the debt collector may decide to add the attorney fees and court costs to your debt balance.
Therefore, it is critical to respond to the notice of claim. Remember the fact that once the collection agency files a lawsuit against you; the matter is now before the court. This means you can no longer submit your responses via phone or letters.
You must respond via legal briefs referred to as “Answer.” Take time to file your “Answer” with the Clerk of Court and send the stamped copy of your answer to the collections agency.
2. Do not accept liability
If you are a good and honest person, you might feel hesitant to file an official response denying liability for money you owe. However, you must remember that denying liability is the key to fighting your collections agency lawsuit to the end.
If you accept liability, then you are simply admitting responsibility, and you won’t have much luck in a court. Keep in mind that you are only challenging the lawsuit and not denying the fact that you borrowed money.
In fact, denying liability isn’t a challenge to the debt itself but a challenge to the collection agency’s right to sue you. Technically, you are trying to tell the court you have been wrongly sued. You may be surprised to learn that the agency actually violated your rights while filing the lawsuit.
Debt collectors know it, and they understand the fact that battling out with you in a court may not be in their best interest. Therefore, you might end up with a much more favorable settlement, or the agency may choose to drop the lawsuit altogether.
3. Push back on the proof of burden
Once you are served with the court paper, the burden of proof rests heavily with the collection agency. It is their responsibility to prove you are responsible for the said debt, they have a legal right to sue you, and that you owe a specified amount of money.
Requiring a proof of the exact amount you owe can be one way to defend yourself against the lawsuit.
For instance, if the debt collector is suing you for $5,000 related to your credit card account, be sure to ask for documentation that starts from when you open your account to the last activity on the account. The primary objective here is to demand an account for every dollar they say you owe them.
Since acquiring such information may take a lot of time, don’t be surprised if the lawsuit is dismissed or an agreement for a debt settlement at a much lower total is struck.
4. Consult an attorney
If you are sued for collections, you could benefit from consulting a bankruptcy or consumer law attorney. Many attorneys offer a free consultation, or they may help you prepare a strong defense against the collection agency at a reduced fee.
An attorney understands what might happen if the collection agency gets a judgment against you, and they will do anything to stop it. An attorney will also help you understand the consequences of failing to respond to the lawsuit and how it will affect you.
Have you been served with a Notice of Claim and don’t know what to do next? Talk to one of our bankruptcy lawyers and let us help you fight the lawsuit.