How to Settle a Debt Collection Lawsuit

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How to Settle a Debt Collection Lawsuit

If you owe money to a creditor for a debt such as student loans, medical bills, or other expenses, it's important to pay it as soon as possible. If you don't or can't, the creditor might assign or sell your debt to a collection agency. From there, if your debt continues to be outstanding, you could end up in a lawsuit.

Facing a debt collection lawsuit can be an upsetting and anxiety-inducing experience. However, as scary as it can be to face liens, wage garnishment, and the loss of income such as taxes and stimulus checks, the consequences of a collection lawsuit do not need to be as severe as these. If you're being taken to court for an outstanding debt and do not know where to turn, DoNotPay can help show you how to .

How to Respond to Debt Collectors

A lot of the time, people end up with worsening debt because they don't know how to deal with debt collectors in the first place. Having a debt collection agency calling or sending letters can be overwhelming, so people ignore them. Some people think they can solve the problem without communication, but this couldn't be further from the truth.

In reality, ignoring debt collectors does more harm than good. If a collection agency contacts you, you should respond to them immediately, even if you don't owe the debt. If you fail to do so, the collector may continue to try to collect the debt, negatively impact your credit, and sue you. However, there are some guidelines for replying to debt collectors that will help you avoid any scams or unscrupulous collectors.

When a debt collector contacts you, you must find out the following information:

  • The identity of the company, including name, address, phone number, and the name of the agent contacting you if applicable
  • The amount of the debt, including fees, interest, or other expenses
  • The original creditor of the debt
  • Whether you or someone else owes the debt

If the first time a debt collector contacts you is in writing, a notice verifying the debt should come with the letter. If a debt collector contacts you for the first time over the phone, you should insist that they send you a notice in writing. This way, you can have physical evidence of information about your debt.

What to Do if You Are Facing a Debt Collection Lawsuit

A debt collection lawsuit comes about when a debt collection agency, usually a third-party company that was assigned your debt, files a complaint in court. You receive a copy of the complaint either from a professional process server, a local sheriff, or sometimes from the debt collection company directly. You will also receive a "summons," which gives you information about the case and a formal deadline to answer and appear in court.

From there, these are the steps for defending against a debt collection lawsuit:

  1. Respond to the complaint and the summons. Generally, you will have 30 days to file a response to the summons.
  2. Challenge the company's right to sue.
  3. Push back on the company's burden of proof that you owe the amount of money that they claim you owe.
  4. Raise any defense you may have, such as an expiration of the statute of limitations on your debt, false information regarding your debt, or a counterclaim such as a violation of the Fair Debt Collection Practices Act (FDCPA).
  5. Hire a debt collection lawyer to go over your documents to see if there's anything you've missed, and to prepare your defense. Alternatively, you can file an answer on your own and represent yourself.
  6. File a countersuit if it turns out that the debt collection company violated regulations.

What Happens if You Don’t File an Answer to the Lawsuit?

Failure to file an answer to the suit will most likely result in the court entering a default judgment. This outcome means that you will automatically lose your case, and the court will award the debt collector whatever amount they requested in the complaint. In addition, you may be held responsible for paying court costs, attorney fees, and interest along with the amount you owe for your debt.

Receiving a default judgment in their case means that debt collectors will be allowed to garnish your wages, take money directly from your financial accounts, or even place a lien on your property. So, even if you cannot pay the amount you owe, it would be in your best interest to file an answer to the suit. A debt collection lawyer might be able to help you prepare a defense, including pointing out FDCPA violations that you might not have noticed on your own.

How to Settle a Debt Collection Lawsuit

If you have some money to put towards your debt, another option is negotiating a settlement. An attorney can help you negotiate terms with a debt collector and make a fair offer for settlement. When they see that you've acquired legal aid, most debt collection agencies would rather settle with you than go through with legal fees and court proceedings, especially when the debt is below a certain amount.

You can also negotiate terms with the debt collection agency yourself. However, before doing so, you should plan a realistic repayment or settlement proposal. Study your finances and decide how best to balance paying your bills and handling other obligations with managing your debt.

Some companies will offer to settle your debt for you. However, be wary of any company that charges you in advance for debt settlement. Most of the time, debt collection agencies will refuse to work with these companies, meaning these companies wouldn't be able to settle your debt even if they were effective at doing so.

What to Do When You Feel You Are Being Harassed by Debt Collectors?

Collection agencies will work their hardest to collect money because that is their primary goal. If you feel that collectors are already out of line, it would be best to seek help from the CFPB or Consumer Financial Protection Bureau. Below are their contact details:

CompanyConsumer Financial Protection Bureau
Mailing AddressConsumer Financial Protection Bureau

PO Box 27170

Washington, DC 20038

Phone Number(855) 411-2372
Email or Contact FormAsk CFPB
FaxNot Available

DoNotPay Can Help You Reach A Settlement With One Click Of A Button

Often, settling your debt is a much better alternative to going through with a debt collection lawsuit. However, doing so requires you to negotiate your terms with the debt collection company. You could also miss details that might tip the balance of the suit in your favor, such as violations of federal debt collection regulations.

Thankfully, DoNotPay is here to help make the process hassle-free. All you need to do is follow these simple steps:

  1. Search "debt collection" on DoNotPay.
  2. Answer a series of questions about the debt collectors, including when you were contacted and how you were contacted, so we can determine if they have violated any debt collection laws.
  3. Decide which course of action you want to take based on our guidance, such as filing a debt verification request, demanding for the collectors to stop contacting you, or reporting them to the CFPB.

And that's all you have to do! Once you've entered the necessary information, DoNotPay will take care of the rest.

What Else Can DoNotPay Do For You?

As the world's first robot lawyer, DoNotPay helps even the legal playing field. We can help make it easier to fight corporations, beat bureaucracy, find hidden money and sue anyone you need to. Aside from helping you settle debt collection lawsuits, we offer multiple services, with the ability to:

We are here to help you. So if you have a problem and don't know where to turn, don't hesitate. with DoNotPay today.

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