Being sued for debt is one of the most stressful experiences anyone can face. Whether you’re dealing with credit card debt, medical bills, or personal loans, receiving a lawsuit notice triggers anxiety and fear. The good news? You have rights, options, and concrete steps you can take to protect yourself when sued for debt.
According to the Pew Charitable Trusts, debt collection lawsuits make up over 25% of all civil court cases in the United States. Even more alarming, more than 70% of people sued for debt never respond to the lawsuit, which almost always results in automatic default judgments against them.
If you’ve been sued for debt, don’t panic and don’t ignore it. This comprehensive guide walks you through exactly what to do when sued for debt collection, from understanding the legal documents to protecting your assets and exploring settlement options. Taking action quickly when sued for debt can mean the difference between a manageable resolution and years of wage garnishment.
Understanding What Happens When You’re Sued for Debt
When creditors or debt collectors decide to sue you, they initiate a legal process designed to force you to pay what they claim you owe. Understanding this process is the first step in protecting yourself when sued for debt.
Who Can Sue You for Debt?
Original Creditors
- The company you originally borrowed from (credit card company, hospital, bank)
- They have original account records and documentation
- Often more willing to negotiate settlements
Third-Party Debt Collectors
- Companies that buy old debts for pennies on the dollar
- May have limited documentation about your original debt
- Often more aggressive in collection tactics
- Must follow the Fair Debt Collection Practices Act (FDCPA)
Debt Buyers
- Purchase charged-off debts in bulk
- May not have complete documentation
- Sometimes sue based on incomplete or inaccurate information
The Timeline After Being Sued for Debt
Week 1-2: Service of Process You’ll receive legal documents either by certified mail, process server, or sometimes by publication if you can’t be located. This is when you’re officially sued for debt.
Week 3-4: Response Deadline Most states give you 20-30 days to file a written response called an “Answer.” Missing this deadline is the biggest mistake people make when sued for debt.
Month 2-4: Discovery Period If you respond, both sides exchange information and evidence. This is where debt collectors must prove you actually owe the debt.
Month 4-8: Settlement Negotiations or Trial Many cases settle before trial. If not, you’ll go to court where a judge decides the outcome.
Step 1: Don’t Panic—Read the Court Documents Carefully
The moment you’re served with a lawsuit, you’ll receive critical legal documents. When sued for debt, reading these carefully is essential.
Key Documents You’ll Receive
Summons
- Official notice that you’re being sued
- Lists the court where the case was filed
- States your deadline to respond (typically 20-30 days)
- Explains what happens if you don’t respond (default judgment)
Complaint
- Details who is suing you (plaintiff)
- States how much money they claim you owe
- Lists the legal basis for the lawsuit
- May include copies of account statements or contracts
What to Look for Immediately
Verify the plaintiff’s identity: Is it your original creditor or a third-party debt collector? If you’re sued for debt by a collector, they must prove they own your debt.
Check the amount claimed: Does the amount seem accurate? Debt collectors often add inflated fees and interest that may not be legally owed.
Note your response deadline: Mark this date on your calendar and set multiple reminders. Missing this deadline when sued for debt almost guarantees you’ll lose.
Review supporting documents: Are there contracts, account statements, or proof attached? Many debt buyers have limited documentation.
Identify the attorney: Look up their contact information. You’ll need it for your response and potential settlement negotiations.
The Consumer Financial Protection Bureau provides detailed information about debt collection rights at https://www.consumerfinance.gov/ask-cfpb/what-is-a-debt-collector-and-why-are-they-contacting-me-en-1655/, which is essential reading when sued for debt.
Critical Warning: Ignoring the lawsuit will not make it go away. If you don’t respond when sued for debt, the court will likely issue a default judgment, giving the creditor legal authority to garnish your wages, levy your bank accounts, or place liens on your property.
Step 2: Verify the Debt is Legitimate and Legally Enforceable
Before you decide how to respond when sued for debt, you need to determine if the debt is actually yours and if it’s legally collectible.
Is the Debt Beyond the Statute of Limitations?
Every state has a statute of limitations on debt collection—a time limit after which creditors can no longer sue you. When sued for debt that’s too old, you have a powerful defense.
Typical Statute of Limitations by Debt Type:
- Credit card debt: 3-6 years (varies by state)
- Medical debt: 3-6 years
- Personal loans: 3-6 years
- Written contracts: 3-15 years
- Oral agreements: 2-6 years
The statute of limitations starts from your last payment or your last activity on the account. If you make even a small payment on an old debt, you may restart the clock.
Important: If the statute of limitations has expired, you can use this as an affirmative defense when sued for debt. However, you must raise this defense in your Answer—the court won’t automatically dismiss the case.
Is the Debt Actually Yours?
When sued for debt, verify that you actually owe it. Common issues include:
Identity Theft Someone may have opened accounts in your name without your knowledge or permission.
Wrong Person Debt collectors sometimes sue people with similar names or outdated information.
Already Paid You may have already paid the debt, but the records weren’t updated properly.
Incorrect Amount The amount claimed may include illegal fees, excessive interest, or mathematical errors.
Request Debt Validation
Under the Fair Debt Collection Practices Act (FDCPA), you have the right to request validation of the debt. When sued for debt by a third-party collector, send a debt validation letter within 30 days of first contact requesting:
- Copy of the original signed contract or agreement
- Complete payment history showing all charges and payments
- Proof that the collector has legal authority to collect the debt
- Documentation showing they own the debt (if purchased from original creditor)
Many debt buyers can’t provide complete documentation, which can weaken their case significantly when you’re sued for debt.
The Federal Trade Commission provides templates and guidance for debt validation at https://www.ftc.gov/articles/debt-collection-faqs, which can be invaluable when sued for debt.
Step 3: File an Answer to the Lawsuit Before the Deadline
Filing an Answer is the single most important action you can take when sued for debt. This legal document is your formal response to the lawsuit and preserves your right to defend yourself.
What is an Answer?
An Answer is a written document filed with the court that responds to each allegation in the complaint. When sued for debt, your Answer should address every numbered paragraph in the complaint with one of three responses:
Admit: You agree the statement is true Deny: You disagree or don’t have enough information to agree Lack Sufficient Knowledge: You don’t have enough information to admit or deny
How to File an Answer When Sued for Debt
1. Obtain the Correct Form Many courts have Answer forms available on their website. Some states have specific forms for debt collection cases.
2. Respond to Each Allegation Go through the complaint paragraph by paragraph. When sued for debt, be specific:
- “Admitted” if you agree
- “Denied” if you disagree or don’t know
- “Denied for lack of sufficient knowledge” if unsure
3. Assert Affirmative Defenses These are legal reasons why you shouldn’t be held liable even if the debt is valid:
Common Affirmative Defenses When Sued for Debt:
- Statute of limitations has expired
- Debt was discharged in bankruptcy
- You already paid the debt
- Plaintiff lacks standing to sue (can’t prove they own the debt)
- Violation of Fair Debt Collection Practices Act
- Identity theft
- Lack of documentation to prove the debt
4. File with the Court
- Make multiple copies of your Answer
- File the original with the court clerk (may have filing fee, typically $50-$150)
- Some courts allow electronic filing
- Keep copies for your records
5. Serve the Plaintiff You must send a copy of your Answer to the plaintiff’s attorney by certified mail. This is called “service of process.”
6. File Proof of Service After mailing your Answer to the plaintiff, file a proof of service form with the court showing you sent it.
Timeline is Critical
Most states require your Answer within 20-30 days of being served. If you’re sued for debt and miss this deadline, the court will likely issue a default judgment against you without hearing your side.
Can’t afford an attorney? You can file an Answer yourself (called appearing “pro se”). While not ideal, filing something is always better than filing nothing when sued for debt.
Step 4: Seek Legal Help—It’s More Accessible Than You Think
While you can represent yourself when sued for debt, having legal assistance significantly improves your chances of a favorable outcome.
Why Legal Help Matters When Sued for Debt
Attorneys who specialize in debt defense understand:
- Technical defenses that can get cases dismissed
- How to challenge incomplete documentation
- Settlement negotiation strategies
- Court procedures and filing requirements
- Your rights under consumer protection laws
If the debt collector violated the Fair Debt Collection Practices Act when attempting to collect the debt, you may be able to countersue—and your attorney’s fees could be covered by the collector.
Affordable Legal Help Options
Consumer Rights Attorneys Many attorneys take debt defense cases on contingency or for flat fees. Some offer free consultations.
Legal Aid Organizations Provide free legal services based on income. When sued for debt, contact your local legal aid office immediately.
Law School Clinics Law students supervised by experienced attorneys offer free or low-cost representation.
State Bar Referral Services Can connect you with attorneys who offer reduced initial consultation fees.
Pro Bono Programs Some attorneys provide free services for qualifying individuals sued for debt.
The Legal Services Corporation helps connect people to free legal aid at https://www.lsc.gov/what-legal-aid/find-legal-aid, which can be invaluable when sued for debt and unable to afford private counsel.
Consultation Questions to Ask:
- Have you handled debt collection defense cases?
- What are my realistic options given my situation?
- What are your fees or payment options?
- What defenses might apply to my case?
- Should I try to settle or fight the case?
Even if you ultimately represent yourself, a one-hour consultation when sued for debt can provide invaluable guidance on your specific situation.
Step 5: Gather Evidence and Documentation
If your case proceeds after filing your Answer, preparation is key. When sued for debt, strong documentation can make or break your defense.
Documents to Collect
Financial Records
- Bank statements showing payments you made
- Credit card statements
- Payment confirmations or receipts
- Budgets showing financial hardship
Communication Records
- Letters from creditors or collectors
- Email correspondence
- Text messages
- Recorded phone calls (if you kept any)
- Notes about phone conversations (dates, times, what was said)
Debt Validation Materials
- Your debt validation letter
- Their response (or lack thereof)
- Any documentation they provided
- Any documentation they failed to provide
Proof of Defenses
- Bankruptcy discharge papers (if applicable)
- Identity theft reports
- Proof of payment
- Evidence the statute of limitations has expired
FDCPA Violations If the collector violated your rights, document:
- Calls before 8 AM or after 9 PM
- Contact at your workplace after you asked them to stop
- Threats or harassment
- False statements about the debt
- Disclosure of your debt to third parties
Create a Timeline
Document the history of the debt from original borrowing through being sued for debt:
- When you opened the account
- When you last made a payment
- When you first fell behind
- When the account was charged off
- When it was sold to a debt buyer (if applicable)
- All collection attempts
- When you were served with the lawsuit
This timeline helps identify defenses like statute of limitations violations or gaps in the chain of ownership when sued for debt.
Step 6: Consider Settlement Before Trial
Many people sued for debt can reach settlements that are more favorable than going to trial. Creditors and debt collectors often prefer settlement because trials are expensive and time-consuming for them too.
Why Settle When Sued for Debt?
Benefits of Settlement:
- Potentially pay less than the full amount
- Avoid the stress and uncertainty of trial
- Resolve the matter faster
- Prevent wage garnishment or bank levies
- Get the lawsuit dismissed
When Settlement Makes Sense:
- The debt is legitimate and you can afford monthly payments
- You can pay a lump sum of 30-60% of the balance
- The statute of limitations hasn’t expired (if it has, you should fight)
- You don’t have strong defenses to the debt
How to Negotiate When Sued for Debt
1. Contact the Plaintiff’s Attorney Don’t wait for them to contact you. Being proactive shows you’re serious about resolving the matter.
2. Make a Realistic Offer Debt collectors often accept 30-60% of the claimed amount as a lump sum settlement. For payment plans, you may need to pay more but spread over time.
Example offers when sued for debt:
- “I can pay $3,000 as full settlement of the $8,000 claimed”
- “I can pay $200 per month for 24 months ($4,800 total)”
- “I can pay $5,000 within 30 days if you dismiss the lawsuit and delete the tradeline from my credit report”
3. Get Everything in Writing Never pay until you have a written settlement agreement signed by both parties stating:
- The exact amount you’ll pay
- The payment terms and deadlines
- That payment constitutes full settlement of the debt
- That the lawsuit will be dismissed with prejudice
- Any credit reporting agreements
4. Protect Your Payment Method When sued for debt and settling, never give direct bank account access. Use:
- Money order
- Cashier’s check
- One-time ACH payment
- Attorney trust account
5. Get Proof of Dismissal After paying, ensure the lawsuit is officially dismissed and you receive a stamped copy of the dismissal order.
Negotiation Leverage Points When Sued for Debt:
- Limited documentation (they may not be able to prove the debt)
- Statute of limitations issues
- Your inability to pay the full amount
- FDCPA violations they committed
- The cost and time of going to trial
Important: If you settle for less than the full amount, the creditor may issue a 1099-C form for forgiven debt, which could be taxable income. Consult a tax professional about this consequence when sued for debt.
Step 7: Understand What Happens If You Lose the Case
Despite your best efforts, you may lose when sued for debt. Understanding the consequences and your remaining options is crucial.
Default Judgment vs. Judgment After Trial
Default Judgment Issued when you don’t respond to the lawsuit. The creditor wins automatically, often for the full amount plus court costs and attorney fees.
Judgment After Trial Issued after the judge hears both sides and rules in favor of the creditor. The amount may be less than initially claimed if the judge finds some charges improper.
Post-Judgment Collection Methods
Once a creditor has a judgment from being sued for debt, they can use various collection methods:
Wage Garnishment
- Takes a portion of your paycheck before you receive it
- Federal law limits garnishment to 25% of disposable income
- Some states have lower limits or broader exemptions
- Certain income sources are exempt (Social Security, disability, unemployment)
Bank Account Levy
- Freezes your bank account
- Creditor can take funds up to the judgment amount
- Some funds may be exempt (Social Security deposits, etc.)
- You typically have 10-30 days to claim exemptions
Property Liens
- Placed on real estate you own
- Must be paid when you sell or refinance
- Can make it impossible to sell your property
Asset Seizure
- Rare, but possible for valuable personal property
- Primary residence, vehicle (up to certain value), and personal belongings are often exempt
Income and Assets Protected When Sued for Debt
Federal and state laws protect certain income and assets from collection:
Protected Income:
- Social Security benefits
- SSI (Supplemental Security Income)
- Veterans’ benefits
- Unemployment compensation
- Workers’ compensation
- Disability benefits
- Public assistance
- Child support (in most cases)
Protected Assets (vary by state):
- Primary residence (homestead exemption, amount varies)
- One vehicle (up to a certain value)
- Basic household goods and clothing
- Tools needed for your profession
- Retirement accounts (401k, IRA)
The National Consumer Law Center provides information about exemptions at https://www.nclc.org/, which is essential knowledge when sued for debt.
Options After Losing When Sued for Debt
1. File an Appeal Must be done quickly (typically 30 days). Appeals are expensive and difficult without an attorney. Usually only succeed if the judge made a legal error.
2. Negotiate Post-Judgment Settlement You can still negotiate even after losing when sued for debt. Creditors may accept less than the judgment amount to avoid collection costs.
3. Request a Payment Plan Ask the court for a payment plan you can afford. This prevents wage garnishment while you pay the judgment gradually.
4. File for Bankruptcy If you have multiple debts and limited income, bankruptcy may eliminate the judgment. Consult a bankruptcy attorney to evaluate this option.
5. Wait Out the Judgment Judgments expire after a certain period (typically 5-20 years depending on state). However, creditors can often renew them, and they damage your credit for seven years.
Step 8: Protect Yourself From Future Debt Lawsuits
After dealing with being sued for debt, take steps to prevent it from happening again.
Build Financial Stability
Create an Emergency Fund Even $500-$1,000 can prevent future debt emergencies. Start small and build gradually.
Develop a Realistic Budget Track income and expenses. Use budgeting apps or simple spreadsheets to monitor where money goes.
Prioritize Debt Payments Pay at least minimums on all debts. Focus extra payments on highest-interest debt first.
Communicate with Creditors If you’re struggling, contact creditors before you fall behind. Many offer hardship programs with reduced payments.
Know Your Rights
Fair Debt Collection Practices Act (FDCPA) Protects you from abusive collection practices when sued for debt:
- Collectors can’t call before 8 AM or after 9 PM
- They can’t contact you at work if you tell them not to
- They can’t harass, threaten, or lie to you
- They can’t discuss your debt with others
- They must stop contacting you if you request it in writing
Violations of the FDCPA If collectors violate these rules, you can sue them and recover up to $1,000 in damages plus attorney fees. This can provide leverage when sued for debt.
Monitor Your Credit
Check your credit reports regularly (free at AnnualCreditReport.com). When sued for debt, verify:
- All debts listed are actually yours
- Amounts are accurate
- Old debts aren’t being re-reported illegally
- Settled debts are marked correctly
Dispute any inaccuracies immediately. Credit bureaus must investigate disputes within 30 days.
Seek Financial Counseling
Nonprofit credit counseling agencies can help you:
- Create a realistic budget
- Develop a debt management plan
- Negotiate with creditors
- Avoid future problems that lead to being sued for debt
Look for agencies certified by the National Foundation for Credit Counseling or the Financial Counseling Association of America.
Final Thoughts: Take Action When Sued for Debt
Being sued for debt is frightening, but it’s not the end of the world. Thousands of people face debt lawsuits every day, and many successfully resolve them through proper legal responses, settlements, or court defenses.
The worst thing you can do when sued for debt is nothing. Ignoring the lawsuit guarantees you’ll lose and face wage garnishment, bank levies, and other collection actions.
Your Action Plan When Sued for Debt
Immediately (Days 1-3):
- Read all court documents carefully
- Note your response deadline
- Gather any documentation about the debt
- Contact a consumer rights attorney for consultation
Within Two Weeks:
- Verify the debt is legitimate and within statute of limitations
- Request debt validation if you haven’t already
- Start drafting your Answer to the lawsuit
Before the Deadline:
- File your Answer with the court
- Serve a copy on the plaintiff’s attorney
- File proof of service with the court
After Filing:
- Gather all evidence supporting your defenses
- Consider settlement negotiations
- Prepare for court if necessary
Remember: You have rights, and you have options. Don’t let fear or embarrassment prevent you from taking action when sued for debt. The steps you take in the first 30 days can determine whether you face years of collection actions or reach a manageable resolution.
If you’re overwhelmed, seek help. Legal aid organizations, consumer rights attorneys, and credit counseling agencies exist specifically to help people in your situation. You don’t have to face being sued for debt alone.
Frequently Asked Questions About Being Sued for Debt
Can I go to jail for not paying my debts?
No. Debts like credit cards, medical bills, and personal loans are civil matters, not criminal. You cannot be jailed for failing to pay them. However, if you’re sued for debt and ignore a court order to appear or provide financial information, you could face contempt of court charges in rare cases.
What happens if I ignore the lawsuit when sued for debt?
The creditor will receive a default judgment, allowing them to garnish wages, levy bank accounts, or place liens on property without your participation. Approximately 70% of people sued for debt never respond, and they almost always lose by default.
Can I still settle after being sued for debt?
Yes. Settlement is possible at any stage—after being served, after filing an Answer, even after a judgment. Earlier negotiation generally gives you more leverage, but creditors often prefer settlement over lengthy collection efforts even after winning when you’re sued for debt.
How do I know if my debt is too old to collect?
Check your state’s statute of limitations for the type of debt involved (typically 3-6 years for credit cards and medical debt). The clock usually starts from your last payment or last account activity. If you’re sued for debt beyond the statute of limitations, you can use this as an affirmative defense in your Answer.
What if I don’t recognize the debt when sued for debt?
Send a debt validation letter requesting proof of the debt, including the original contract, payment history, and documentation showing the collector owns the debt. Under the Fair Debt Collection Practices Act, collectors must provide this verification. If they can’t, their case may be dismissed.
Do I need a lawyer if I’m sued for debt?
While not legally required, having an attorney significantly improves your chances of a favorable outcome. If you can’t afford one, look for legal aid organizations, law school clinics, or consumer rights attorneys who work on contingency. At minimum, get a consultation to understand your options when sued for debt.
How much of my wages can be garnished after being sued for debt?
Federal law limits wage garnishment to 25% of disposable income or the amount by which weekly earnings exceed 30 times the federal minimum wage, whichever is less. Some states have lower limits. Certain income like Social Security, disability, and unemployment is generally exempt from garnishment when sued for debt.
Will settling a debt lawsuit affect my credit score?
Yes, but less than losing in court. A settled debt is better than a judgment on your credit report. Ideally, negotiate credit reporting as part of the settlement—some creditors will agree to delete the tradeline entirely. When sued for debt, address credit reporting in your settlement negotiations.
Can debt collectors sue me for very old debts?
They can try, but if the debt is beyond your state’s statute of limitations, you have a strong defense. Many debt buyers purchase old debts cheaply and sue hoping people won’t respond. If you’re sued for debt that’s time-barred, raise the statute of limitations as an affirmative defense in your Answer.
What should I do if the debt was from identity theft?
File a police report and report the identity theft to the Federal Trade Commission at IdentityTheft.gov. Send copies to the creditor and credit bureaus. If sued for debt resulting from identity theft, include this as a defense in your Answer and provide documentation proving you’re a victim of fraud.