Is It Legal for a Debt Collector to Sue You? - GoodRx (2024)

It’s true — you can be sued for a debt.

If you have unpaid bills in collections, a debt collector could file a lawsuit against you to try to collect the debt. Not only will this hurt your credit score, but it could also lead to garnished wages or a lien on your home.

If you’re facing a debt collection lawsuit, don’t ignore it. Take action quickly to minimize damage to your credit or financial situation.

What happens if you don’t pay a debt in collections?

When the original creditor sells your debt to a collections agency, it can show up as a “charge off” on your credit report. This essentially means the creditor has closed the account due to nonpayment. However, you still can be responsible for paying the debt.

If you don’t pay debt in collections, the following might occur:

• Multiple phone calls: The agency will attempt to collect the money, usually through verbal or written requests. The Fair Debt Collection Practices Act (FDCPA) protects consumers from harassment by limiting when and how often you can be contacted.

• Damaged credit score: Having an account in collections can hurt your credit score. The negative item can remain on your credit report for up to 7 years — even after you’ve paid it off.

• Additional fees: The unpaid debt could accrue additional interest charges or other fees if they’re part of the original agreement.

• Debt collection lawsuit: Debt collectors may sue you and try to obtain a court judgment to garnish your wages or place a lien on your property.

Is it legal for a debt collector to sue you?

A debt collector can legally sue you if all of the following are true:

• They own the debt. The original creditor may transfer or sell the unpaid bills to a collection agency, which then has the right to try to collect.

• The debt is legitimate and belongs to you. A debt collector can sue you for a valid debt, but you are not responsible for a debt that isn’t yours.

• The statute of limitations has not expired. The statute of limitations is the amount of time a debt collector has to file a lawsuit against you. This time frame varies by state and debt type, but is usually 3 to 6 years.

A debt collector must notify you before taking legal action. Typically, they will make several attempts to collect the debt — usually via phone calls and letters — before taking you to court.

What can a debt collector sue you for?

A debt collector can sue you for the full amount you owe.

However, collection agencies typically buy debts for less than what is owed. So they may be willing to accept a smaller amount.

You can still be responsible for the debt after the statute of limitations ends, but the collection agency can’t sue you.

How likely is it that you will be sued for a debt?

According to one Consumer Financial Protection Bureau report, 1 in 7 — or about 15% — of consumers contacted about a debt in collections were sued. But the likelihood of a debt collection lawsuit depends on several factors.

You have a higher chance of being sued if:

• The statute of limitations hasn’t expired or the debt is new.

• You have unprotected income or assets (like home equity) and are not judgment-proof (meaning a court could garnish your wages or bank account, or place a lien on your property).

• The debt is large.

• The account is multiple months past due.

• The debt collector has the appropriate paperwork.

• You have good credit.

• State filing fees for debt lawsuits are low.

Debt collectors will conduct due diligence to determine if a lawsuit is worth filing. If they believe they can recover the amount owed, or enough to cover legal fees, they may pursue the debt in court. Otherwise, they may try to set up a payment plan with you to collect the money.

What should you do if you are being sued by a debt collector?

If you’re being sued by a debt collector, here’s what you can do:

• Verify the debt is yours. Debt collectors are required to send a debt validation notice when they contact you. If you don’t receive this notice, send a debt verification letter to request one. A debt could be in the wrong amount, in the wrong name, under the wrong account number, or been paid already.

• Don’t accept responsibility upfront. Whether the debt is legitimate or not, don’t immediately accept responsibility verbally or in writing. And try not to provide extra information or details that could be used against you in court.

• Check the statute of limitations. Even if your debt is considered time-barred (beyond the statute of limitations), some debt collectors will still try to sue you. In that case, you can use this as a defense in court.

• Know your rights. You are protected under the FDCPA, Fair Credit Reporting Act, and Truth in Lending Act. If the debt collector has violated your rights, you may be able to use this as a defense in court as well.

• Make sure you aren’t dealing with a debt collection scam. Any suspected scams should be reported to the Federal Trade Commission or your state attorney general’s office.

• Hire an attorney. Work with a lawyer to review the lawsuit and help you respond. If you have an attorney, the debt collector must communicate with them, except under certain circ*mstances.

• Respond to the lawsuit. You can do this in writing, via a court appearance, or both — whatever is required. If you don’t respond, the debt collector could receive a default judgment allowing them to garnish your wages or put a lien on your property.

• Attempt to settle. If you’re facing a legitimate debt collection lawsuit, you could attempt an out-of-court settlement. This is less expensive than going to court and may be a win-win for both you and the debt collector.

Can I sue a debt collector?

You can sue a debt collector if they’ve broken a law or otherwise violated your rights as a consumer under federal or state law. You typically have 1 year to do this.

Can I refuse to pay a debt?

You are still responsible for paying a debt even if you can no longer be sued legally.

Paying a medical debt can be especially beneficial for your credit report. Starting in 2022, the three consumer credit bureaus stopped reporting paid medical debts and agreed to wait 1 year before reporting unpaid medical debt.

Beginning in 2023, medical debt that is less than $500 will not be added to credit reports.