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Responding to a Collection Lawsuit Before a Judgment Is Entered

This guide presents selected U.S. government consumer education from CFPB. References to “we” or “us” in the source material refer to the issuing agency. Source dates and links appear below.

What should I do if I’m sued by a debt collector or creditor?

If you’re sued for an unpaid debt, you should respond to the lawsuit, either personally or through a lawyer by the date specified in the court papers.

If you have been sued or “served” by a creditor or debt collector for an overdue debt, read the lawsuit carefully and respond by the required deadlines. By taking this step, you can protect yourself and help avoid additional financial difficulties.

Why it’s important to respond when sued by a debt collector

When you respond to the lawsuit, a debt collector has to prove to the court that the debt is valid. If you owe the debt, you may be able to work out a settlement or other resolution with the collector. Responding doesn’t mean you’re agreeing that you owe the debt or that it is valid.

If you don’t respond, the court could issue a judgment or court action against you, sometimes called a “default judgment.” For example, if you refuse to accept delivery or “service” of the lawsuit, the court could view this as ignoring a properly served lawsuit, and it’s unlikely that this tactic will be effective at defending yourself against the lawsuit.

As a result, it's likely that a judgment will be entered against you for the amount the creditor or debt collector claims you owe, as well as lawful additional fees to cover collections costs, interest, and attorney fees as allowed by the judgment.

Judgments also give debt collectors much stronger tools to collect the debt from you. You may lose the ability to dispute the debt, if you believe you don’t owe it or that the amount is wrong, and depending on your situation and your state’s laws, the creditor may be able to:

  • Garnish your wages
  • Place a lien against your property
  • Move to freeze funds in your bank account

A judgment is a court order, so it can be very difficult to get it changed or set aside once the case is over. You have a much better chance to fight a collection in court if you defend the case than if you wait until a judgment is entered against you. You may also be able to work out a compromise or settlement by negotiating with the debt collector before a court makes a judgment.

Consult an attorney to learn more about your debt collection rights

Attorneys can help you understand both your federal and state protections, if you’ve been sued or threatened with a lawsuit by a debt collector.

Some attorneys may offer free services or charge a reduced fee. You may also wish to find an attorney who has experience in the Fair Debt Collection Practices Act (FDCPA) and debt collection issues. There may also be legal aid offices or legal clinics in your area who will offer their services for free if you meet their criteria.

If you’re a servicemember, consult your local JAG office or use the JAG Legal Assistance Office locator to find help or ask your installation’s financial readiness office for information.

Learn more about how to find an attorney to advise you on your debt collection rights

When a debt collector can’t sue or threaten to sue

You have certain rights and protections when being contacted by a debt collector who is subject to the FDCPA. A debt collector can’t use the threat of a lawsuit to collect a debt if they do not intend to file a lawsuit. They also can’t sue or threaten to sue when the statute of limitations – or the period of time they have to file a lawsuit to collect a debt – has expired.

Learn more about what debt collectors can say or do

If you're having trouble with debt collection, you can submit a complaint with the CFPB.

What is a judgment?

In a debt collection lawsuit, a judgment is a court order that allows the debt collector to use stronger tools, like garnishment, to collect the debt.

A judgment is an official result of a lawsuit in court. If a debt collector sues you in court, the judge could award the creditor or debt collector a judgment against you.

Tip

Contact a lawyer if you are sued, or if someone has obtained a judgment against you. You might be able to work out a compromise or settlement by negotiating with the creditor or debt collector before a court makes a judgment. There are several ways to find a lawyer for a debt collection lawsuit.

What are behaviors that make it more likely for a judgment to be entered against me?

You are likely to have a judgment entered against you, requiring you to pay the amount claimed in the lawsuit, if you:

  • Ignore the lawsuit
  • Don’t respond to the lawsuit in a timely manner

The court can also order you to pay the costs of collecting the debt, interest charges, or attorney fees.

Important: Judgments give debt collectors much stronger tools to collect the debt from you, including wage or bank account garnishments, as well as putting on a lien on your home. A lien is a legal right to the value of your property, and generally liens must be paid off before you sell your home or refinance your mortgage.

Can a debt collector take or garnish my wages or benefits?

If a court issues a judgment saying that you owe a debt, it could allow the creditor to garnish your wages or certain benefits to pay it off. State and federal laws limit how much a creditor can garnish from your wages. They also limit how much a creditor can garnish from an account where your benefits are deposited, or protect a minimum amount in your bank account from levies even if you don’t receive federal benefits.

Most creditors can only garnish wages or benefits after a court issues a judgment saying that you owe the debt and that the creditor can garnish your wages or benefits to satisfy the debt. A garnishment order generally allows a creditor to garnish the amount in the judgment, as well as additional interest, fees, or costs of collection.

Exemptions protect wages, benefits, and money from garnishment

Federal and state laws set exemptions or limitations to protect your wages, benefits, or money in a bank account to make sure you have something left to live on.

Federal exemptions

Federal law generally protects some earned wages from garnishment. You can learn about this protection from the U.S. Department of Labor.

Banks must protect certain federal benefits from being frozen or garnished if they’re directly deposited into your banking account. The bank must review your account and protect two months’ worth of direct-deposited benefits before freezing or garnishing any money in the account. You may also claim this federal exemption for up to two months’ worth of federal benefits if you deposit them by check. Learn how to claim exemptions at LawHelp.org.

Federal benefits covered by this rule generally include:

  • Social Security
  • Supplemental Security Income
  • Veterans’ benefits
  • Federal Railroad payments for retirement, unemployment, and sickness
  • Civil Service Retirement (CSR) payments
  • Federal Employee Retirement System (FERS) payments

State exemptions

State exemptions may also protect some wages or property – such as money in a bank account – from garnishment. You can find out how much your state protects from garnishment and learn how to claim exemptions at LawHelp.org.

Exceptions for debt to federal or state government agencies

Federal and state agencies can sometimes garnish your paycheck, benefits, or money in a bank account without a court order. Here are some examples:

  • Federal agencies like the Internal Revenue Service or the Department of Education can take up to 15 percent of your Social Security or Social Security Disability Insurance (SSDI) benefits.
  • States can generally garnish wages or money in a bank account to pay child support.

How to get legal help

In some cases, people may become unaware that their wages or benefits have been garnished when funds are frozen or removed from their account. If you’ve had a lawsuit filed against you by a debt collector, it’s important not to ignore it because it could result in a judgment against you if you don’t appear in court.

An attorney experienced in consumer law or debt collection can help you understand your state and federal rights, and help you claim federal or state protections for your paycheck, benefits, or money in a bank account. Some consumer attorneys can represent you if a debt collector takes you to court for an unpaid debt. They may also help you negotiate a settlement or work out a repayment plan with the debt collector.

Here are several ways you can find a lawyer to help you with a debt:

If you're having trouble with a debt collector or believe your benefits or wages have been improperly garnished, you can submit a complaint with the CFPB.

Sources and publication details

The federal agency source text is U.S. government work in the public domain. Fynoptic selected, adapted, and formatted it for this guide. No agency endorsement is implied. Follow the linked sources for current program details and the rules applicable to your circumstances.

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