Key Takeaways
- There are 7,060 debt collection agencies operating in the USA with a $13 billion market size in 2020.
- Filing bankruptcy can trigger an automatic stay that immediately stops all debt collection activities and lawsuits.
- Statute of limitations provides a time limit beyond which collectors cannot legally sue for unpaid debts.
- You can make a countersuit if debt collectors violate FDCPA laws regarding contact frequency and timing.
Have you recently received any official court letter? Has a debt collector recently threatened you to sue in the court with a debt collector lawsuit? This article depicts ways about what to do when you are being sued by a debt collector.
First of All: What is a Debt Collector?
Debt collectors work for a debt collection agency. They are assigned with the duty of collecting due outstanding balance from borrowers and then sending the collection to the original creditor.
Some debt collectors even buy unpaid debts at a discount from creditors and try to collect the debts by their own methods. The more they can collect, the more is their profit. That is why the FDCPA (Fair Debt Collection Practices Act) has stipulated the ways a debt collector can collect debt from a borrower.
The Debt Collection Industry Statistics:
The IBISWorld Report says there are about 7,060 debt collection agencies operating in the USA presently.
The IBISWorld Report has said that the debt collection market is continuously ballooning. The current market size in 2020 is about $13 billion.
A CFPB (Consumer Financial Protection Bureau) report says that one-third of the total complaints they receive is against debt collectors.
You can easily guess from these 3 statements how active the debt collection agencies are in the US market. You can guess too about the desperateness of debt collectors to recover the due amount.
File a Bankruptcy Case as an Answer to Their Lawsuit
Bankruptcy may be the right option for you if you are not in the position to pay off the debt. The benefit of appealing for bankruptcy is that an automatic stay will occur when you file the petition. All the debt collection activities will be ceased and desisted after you receive the stay order from the court.
Automatic Stay Protection
When you file for bankruptcy, the court issues an automatic stay that provides immediate protection from collection activities:
- • All debt collection lawsuits are halted immediately
- • Collectors must stop all phone calls and harassment
- • Wage garnishments are suspended
- • Bank account levies are stopped
- • Foreclosure and repossession proceedings are paused
Use the Statute of Limitations (SOL) Strategy
The Statute of Limitations is your other weapon to fight against the debt collectors after being sued by a collection agency. The SOL or Statute of Limitations is nothing but a time limit beyond which no debt collector will be able to collect the unpaid loan due from you.
How to Use SOL as Your Defense:
- Verify the SOL limit: Check the statute of limitations period for your type of debt in your state.
- Review the case: Examine when the debt went delinquent and calculate if the time limit has expired.
- Present your defense: At the time of trial, present your SOL defense before the jury.
- Get legal help: You can take a lawyer's help regarding the right way to use the SOL law in your favor.
You Have the Right to Ignore the Lawsuit If Not Properly Served
The debt collection lawyer must serve you with a summons and a copy of whatever complaint or petition that was filed against you. You have the complete right to ignore the creditor's lawsuit if it is not properly served. The complaint against you cannot be proceeded forward by the debt collectors.
Proper Service Requirements:
For a lawsuit to be valid, you must be properly served with:
- • An official summons from the court
- • A complete copy of the complaint or petition filed against you
- • Service delivered according to your state's legal requirements (in-person, certified mail, etc.)
- • Proof of service documentation filed with the court
Important: If service was improper, document the error and raise it as a defense in court.
Make a Countersuit If They Violate the Stipulated Law
The FTC or Federal Trade Commission has stipulated the law for third-party debt collectors. The law explains how many times a debt collection agency can call a borrower per day, and the FDCPA law also stipulates the time when debt collectors can call the borrower for the unpaid balance. There are many other FDCPA laws which debt collectors have to follow.
Common FDCPA Violations:
- • Calling before 8 AM or after 9 PM
- • Calling repeatedly with intent to harass
- • Contacting you at work after being told your employer prohibits such calls
- • Discussing your debt with third parties (like family or neighbors)
- • Using threatening, abusive, or obscene language
- • Falsely claiming to be an attorney or law enforcement
- • Threatening arrest or legal action they don't intend to take
The FTC has given you every scope to defend your rights if creditors do not obey the FDCPA act. If you can prove violations, you may be able to file a countersuit and potentially recover damages.
Adopt the Wait and Watch Policy
Usually, when debt collectors purchase a due debt, it has already changed a few desks and hands. So, it won't be very unusual if the debt collection agency cannot produce the original agreement paper to you.
The Wait and Watch Strategy
Make the debt collectors prove they are claiming everything right in the case. They must provide:
- • The original signed agreement or contract
- • Complete chain of custody showing ownership of the debt
- • Detailed account statements proving the amount owed
- • Documentation verifying all fees and interest charges
If the debt collector cannot produce all the original documents of your due debt, the judge will decide in favor of you and against the debt collection lawsuit. So, you can adopt the wait and watch policy when sued by a collection agency in such a case—it is the opinion of financial experts.
Claim in Court If You're a Victim of Credit Card Fraud
The credit card fraud statistics report by SHIFT claims that the USA is the most credit card fraud-prone country all over the world. It observes nearly 40% of credit card fraud cases every year.
USA: 40% of Global Credit Card Fraud
If you are sued in a credit card unpaid debt payment case and you believe you are the victim of fraudulent identity theft or stolen credit card, you have the right to claim this defense in court.
Types of Credit Card Fraud Defense:
- • Identity theft: Someone used your personal information to open accounts
- • Stolen card: Your physical card was stolen and used without authorization
- • Unauthorized charges: Charges you didn't make or approve
- • Account takeover: Someone gained access to your existing account
Important: You'll need to provide evidence such as police reports, fraud affidavits, and documentation showing you disputed the charges with the card issuer.
Hire an Attorney to Defend the Lawsuit
Usually, lawyers who deal in consumer cases take either a flat fee or an hourly fee. Have a look at what kind of benefits you are going to get from them:
Benefits of Hiring an Attorney:
SOL Cases
You may know every state has its SOL or Statute of Limitations period. It is only the attorney who can fight for you if the SOL is over.
Credit Card Fraud Cases
You may be a real victim of a credit card fraud case like identity theft or stolen card. But proving your plea in court is not as easy as you think. That is why you need a lawyer who will defend you against the debt collector harassment lawsuit to prove you are a victim.
Settlement Negotiation
A debt settlement attorney can help you negotiate favorable terms and potentially reduce the total amount owed.
Some people feel distressed and think day and night: "Oh, I received a summons from a debt collector, so what to do now?" Do not worry, just keep calm and face the situation bravely. You can take the help of a debt settlement attorney too if such a situation arises before you.
Need Help Defending a Debt Lawsuit?
Don't face debt collectors alone. Our expert team can help you understand your rights, verify debt validity, and negotiate favorable settlements.
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Sanders Patricia
Debt Defense Writer & Consumer Advocate
Sanders Patricia is a debt defense writer specializing in consumer rights protection, FDCPA compliance, and legal strategies for defending against debt collection lawsuits. With extensive knowledge of bankruptcy law, statute of limitations defenses, and credit card fraud cases, she helps consumers understand their options when facing legal action from debt collectors. Her work focuses on empowering individuals to stand up for their rights, navigate the court system, and achieve favorable outcomes against aggressive collection tactics.