Sued for a debt? A step-by-step guide.

What happens

Most debt collection lawsuits start long before anyone goes to court. An account goes unpaid, the original lender charges it off, and the debt is either sent to a collection agency or sold to a debt buyer, often for a few cents on the dollar. The debt buyer then tries to collect the full balance, plus interest.

Within five days of first contacting you, a collector must send a written notice telling you the amount, who the original creditor was, and that you have 30 days to dispute the debt. If you dispute it in writing within those 30 days, the collector has to stop collecting until it sends you verification.

What you need to do

• Do not ignore the letters. Open them, date them, and keep every one.
• If you do not recognize the debt or the amount, send a written dispute within 30 days of the first notice. Keep a copy.
• Do not make a small payment to make them go away. In many states a payment can restart the clock on an old debt.
• Write down every call: date, time, who called, and what they said.

What happens

A lawsuit officially begins when you are served with a summons and a complaint. The summons tells you which court the case is in and how long you have to respond. The complaint tells you who is suing, how much they claim, and why.

Service usually means someone hands you the papers in person, leaves them with an adult at your home, or in some states mails them or posts them on your door. Rules differ by state, but the one thing that does not differ is this: the day you are served, a clock starts running, and when it runs out the other side can win without ever proving anything.

What you need to do

• Read the summons and find the response deadline. It is usually printed on the first page.
• Write down the date you were served. Keep the envelope and every page.
• Look at who is suing you. If it is a company you have never heard of, it is probably a debt buyer.
• Contact a consumer attorney right away. Many offer free consultations, and the deadline is short.

What happens

Depending on your state and the court, you typically have somewhere between 14 and 30 days from the date of service to respond. Some courts give you until a hearing date instead. The summons will tell you which applies to you.

You have three choices: file a written answer, file a motion asking the court to dismiss or fix the complaint, or do nothing. Doing nothing leads to a default judgment, which means the court enters judgment for whatever amount the plaintiff asked for, with no evidence required.

What you need to do

• Calendar the deadline the day you are served and treat it as fixed.
• If you cannot find the deadline, call the court clerk. Clerks cannot give legal advice, but they can tell you the response date.
• If an attorney is going to represent you, get them the papers at least a week before the deadline.
• If you miss the deadline, act immediately. Many courts allow a short window to set aside a default if you move fast.

What happens

An answer is a short written document that responds to each paragraph of the complaint. For each one, you admit it, deny it, or say you do not have enough information to know. You also list your defenses. Most courts have a fill-in-the-blank answer form, and most states allow you to file one on your own, though an attorney will know which defenses apply to you and how to prove them.

Common defenses in debt cases include: the lawsuit was filed after the statute of limitations ran, the plaintiff cannot prove it owns the debt, the amount is wrong, the debt was already paid or settled, the account is not yours, or you were not properly served.

What you need to do

• File your answer with the court and send a copy to the plaintiff's attorney before the deadline. Keep proof of both.
• Deny anything you are not sure about. The plaintiff has to prove what you deny.
• List every defense that might apply. In most courts a defense you leave out is lost for good.
• Ask for your attorney's fees and costs in the answer if your state or the contract allows it.

What happens

Once you answer, the case enters discovery. Each side can ask the other for documents and written answers under oath. This is where debt buyer cases are won and lost, because a debt buyer often bought a spreadsheet, not a file. It may not have the signed agreement, the complete statements, or a clean record of each sale of the debt from the original lender to the company suing you.

You will likely receive requests from the plaintiff too. One kind, called requests for admission, is dangerous: in most courts, if you do not respond in time, every statement is treated as admitted, and the plaintiff can win on those admissions alone.

What you need to do

• Ask the plaintiff for the signed contract, every monthly statement, and the bill of sale for each time the debt changed hands.
• Respond to every request you receive, on time, in writing. Never let requests for admission go unanswered.
• Pull your own records: old statements, payment history, and any letters you sent or received.
• Check the statute of limitations. If the last payment or charge was more than a few years ago, ask an attorney whether the case is too old.

What happens

Most debt collection lawsuits end in a settlement. Once you have answered and asked for proof, the plaintiff's math changes: litigating a contested case costs more than most accounts are worth. That is leverage you did not have before you responded.

A settlement can be a reduced lump sum, often well below the balance claimed, or a payment plan you can actually afford. Either way, the terms must be in writing, signed by the plaintiff, before you pay anything.

What you need to do

• Never agree to more than you can pay. A missed settlement payment usually means a judgment for the full amount.
• Get it in writing: the exact amount, the due dates, and a statement that the case will be dismissed with prejudice once you pay.
• Ask whether the plaintiff will report the account as settled or paid, and whether it will remove the tradeline.
• Keep proof of every payment. Keep the signed agreement forever.

What happens

If the case does not settle, it goes to a hearing or trial. In most consumer debt cases this is short, often under an hour, and it is in front of a judge rather than a jury. The plaintiff has to present admissible evidence of the account, the ownership of the debt, and the amount. You can object to records that are incomplete or that the plaintiff's witness has no personal knowledge of.

Before trial, either side may ask the court to decide the case without one, in a motion for summary judgment. If you receive one, you must respond with your own evidence by the deadline, or the judge may rule on the plaintiff's version of the facts.

What you need to do

• Show up. If you do not appear, you lose by default no matter how strong your defense is.
• Bring every document you have, organized by date, with copies for the judge and the other side.
• Dress neatly, arrive early, and speak only when it is your turn.
• If you are not represented, ask the court about free legal aid or a self-help center. Many courts have one.

What happens

If the judge rules against you, the court enters a judgment: a written order that you owe a specific amount, usually with court costs, interest, and sometimes attorney's fees added. In most states a judgment lasts somewhere between five and twenty years and can be renewed, and it collects interest the whole time.

If the judge rules for you, or the plaintiff dismisses the case, the lawsuit is over. A dismissal with prejudice means it is over for good. A dismissal without prejudice means the plaintiff could refile, so keep your records.

What you need to do

• Read the judgment carefully. Check the amount, the interest rate, and whether fees were added.
• If you believe the judgment is wrong, ask an attorney about an appeal or a motion to set it aside. The deadlines are short, often 10 to 30 days.
• If you never received the lawsuit papers and found out about the judgment later, tell an attorney immediately. A judgment entered without proper service can often be thrown out.
• If you won, save the dismissal order with your important papers.

What happens

A judgment is a piece of paper until the creditor enforces it. The main tools are wage garnishment, taking money from your bank account, and placing a lien on real estate you own. Each one requires a separate court process, and each one comes with protections.

Federal law caps wage garnishment at 25 percent of your take-home pay, or less if you earn close to minimum wage, and many states cap it lower. Social Security, VA, and most retirement and disability benefits cannot be garnished at all, and banks must automatically protect two months of directly deposited federal benefits. Every state also protects some amount of home equity, a vehicle, and household goods.

What you need to do

• If you receive a garnishment notice, respond to it. There is usually a short deadline to claim your exemptions, and you lose them if you do not.
• Keep federal benefits in a separate account with nothing else in it, so the protection is easy to show.
• If the judgment is more than you could ever pay, talk to a bankruptcy attorney. A Chapter 7 wipes out most judgment debt and stops garnishment the day it is filed.
• Once a judgment is paid, get a satisfaction of judgment filed with the court and keep a copy.