Debt Collection Lawsuits

For any number of reasons a person can become the target of a debt collector.  There are a handful of national debt collection companies that buy (or are assigned) massive amounts of past due accounts from various sources.  Many such collections are for credit cards, past due accounts or overdue medical billing.  Once the debt collection company owns the debt (or is assigned the debt from the original debtor), it will normally retain one of a handful of national law firms that only handle debt collections.  A common method for debt collectors to obtain payment is to file a lawsuit against the alleged debtors.  On any given day, there are thousands of these lawsuits filed across the state of Texas, and the trend is growing.

I’ve Been Sued – What Next?

If a process server hands you a lawsuit, you receive a summons in the mail and/or a notice of a lawsuit is posted on your front door, you have time to take action.  If you ignore the notice, you can anticipate that a judgment will be entered against you by the Court, whether in a matter of weeks or sometimes months (depending on how aggressive the debt collection firm is, or the availability of the Court).  The lawsuit you were served with will provide instructions on the amount of time you have to respond in writing to the lawsuit.  The deadline varies based upon the Court involved.

Just like being sued in any lawsuit, I recommend you reach out to an attorney to understand fully your rights and responsibilities.  However, if you choose to not contact an attorney and/or simply cannot afford it, there are steps you can take.

First, I recommend that you educate yourself before contacting the debt collector directly.  There are a number of resources available, including TexasLawHelp.Org, a non-profit free online resource for various legal issues.  By educating yourself first, you can approach the debt collector about trying to resolve the matter without the necessity and expense of going to trial.

Second, ask yourself, “Do I have any defense to the lawsuit?”  There are a vast array of defenses that may apply when you are sued by a debt collector.  For example, a debt collector in Texas generally has four years to sue you from the last activity on the account (i.e., a payment or charge to the account).  If they have not done so, you can file a written response to the Court urging that the Plaintiff (the debt collector) failed to bring the lawsuit timely.  Likewise, confirm that the debt is actually your debt. If a credit card was used fraudulently in your name, you should contact the original debtor and claim the account was used without authorization in addition to filing a written response to the Court stating the same.  The Court will generally take up the defenses at the time of trial, or you can try to file a motion to dismiss earlier in the process.  Keep in mind the burden will be on you to prove your defense applies.

Next, contact the debt collection attorney/firm to discuss resolution of the claim.  Communication with these firms can be difficult because they handle thousands of claims and getting someone with any knowledge on the phone can take some patience and perseverance.  Most of these firms would much rather settle a claim and either take a lump sum payment (for a reduced amount) or put you on a payment plan to get the debt paid over time.  Depending on how much of a reduction you are seeking, the debt collection firm may want some evidence of your financial condition to show that you cannot pay the whole balance.  If you can reach an agreement, ensure that you get it in writing, and the lawsuit will often go away so long as you keep up with your payment arrangement.

If you cannot reach the debt collection company and/or cannot reach an agreement with them, you should go to the Court when the trial date comes.  Many Courts are doing these types of lawsuits via Zoom (or other electronic forum), while others are doing them in person.  If you do not appear at trial, the Court will likely enter a judgment against you for the full amount, plus interest and costs, and in some cases, even attorneys’ fees.  If you go to the Court, you will likely have time to talk to an attorney or representative from the debt collection firm and negotiate a settlement directly.  Sometimes you can get a trial reset (or rescheduled) to get more time to come to an agreement.  Either way, simply not showing up will likely put you in a worse position and I urge you to appear on the set day at the correct time and place.

Do I Need An Attorney?

Attorneys can certainly assist in the process of negotiating a debt and/or asserting any defenses you have.  Many choose to retain a law firm simply to avoid the stress of trying to handle it themselves.  My office negotiates many of these types of claims on a constant basis, typically resulting in some type of settlement that works for the client, and at times, getting dismissal if the debt is subject to a valid defense.  The amount of savings realized from a settlement of the case typically more than makes up for the attorneys’ fees involved in settling the lawsuit.

They Have a Judgment, Now What?

If a debt collector gets a judgment against you, there is still an opportunity to resolve the debt or enter a payment plan.  If you do not enter into a payment agreement, the debt collector can take steps to investigate your assets and see if some of these assets can be used to satisfy the judgment.  For example, they can obtain a court order to compel you to produce bank account and other asset information.  Alternatively, they could seek a judge to appoint a “receiver.”  A receiver is essentially a debt collector with the authority of the Court behind it to seize assets that are not exempt.  Many assets, such as your homestead, are exempt from collection.  However, there are other items that can be seized – such as bank accounts, boats, extra cars, and so on.

Conclusion

Debt collection lawsuits are continuing to grow, and as they do, the firms bringing them are becoming more adept at collections and doing what they can to legally collect on debts.  The best advice is to NOT ignore the lawsuit, and whether on your own or with the assistance of an attorney, find a resolution for the debt so that it does not become more of a financial and emotional burden on yourself.