Being Sued for Debt Problems? Know Your Rights

We often get questions from readers who are being sued for debt, either by the original creditor or the collection agency who took on the account. The first question they usually ask is, Can I really be sued for this? So let's start by answering this common question:

Yes, you can be sued for debt in a court of law. The most common suits involve credit card debt or unpaid medical bills. Generally, one of two parties will file the lawsuit -- it will either be the original creditor (such as a credit card company or a medical clinic) or a collection agency that took over the account.

So that answers the first question people ask. Yes, this kind of thing happens all the time, and it's a perfectly legitimate type of lawsuit. Now let's move on to the real crux of this article. Let's talk about your legal rights and protections when being sued for debt issues.

The Fair Debt Collections Act

This is one of the first laws you should get acquainted with, if you are being sued by creditors or collection agencies. This federal law is enforced by the Federal Trade Commission (FTC). It regulates the actions of debt collectors and provides a number of protections for consumers. You can find an overview of this act, in the form of a fact sheet, on the FTC's website.

Among other things, this act states that debt collectors cannot threaten to sue you as a way of eliciting payment. In other words, they cannot use the threat of a lawsuit to scare you into paying a debt. That doesn't mean they can't sue you (they can), it just means they can't use it for intimidation purposes.

Collection agencies are notorious for calling debtors day and night, at work and at home. But there are laws that regulate this as well. You can submit a written request to the debt collector, asking that they no longer contact you. By law, they must honor this request. Keep in mind, however, that you could still find yourself being sued for debt even though you've told the collectors not to contact you.

What to Do If You Are Being Sued

What you should do in this situation partially depends on the amount of money involved. If you are being sued for a debt under $5,000, then your case will probably be tried in small claims court. You cannot have legal representation in small claims, but you can get legal counsel beforehand if you want.

If you are being sued for a larger amount, your case will probably be tried in a higher court. In such cases, it's usually a good idea to have a lawyer on your side. There are attorneys and law firms who specialize in this kind of case (debt, bankruptcy, etc.), so you might want to consider such an expert.

In nearly all cases, the debtor who is being sued will receive a court summons. The worst thing you can do is ignore the summons, which is something a lot of people choose to do. If you ignore the summons, you will be tried in your absence and you will lose the case.

Even though you are being sued for a certain debt, there are still ways to resolve the dispute outside of court. In many cases, this is what a debt lawyer will do for you. If he or she feels that you have no case (because the debt is legitimate), your lawyer may work with the attorney on the opposing side to come to some kind of agreement. This might include a repayment plan of some kind.