Any individual with unpaid debts may be at risk of a lawsuit by a collection agency. Fortunately, consumers do not need an attorney to successfully defend themselves against a debt collector in court.
How a Default Judgment Works
A default judgment simply means that a plaintiff in a lawsuit wins by default. This occurs most often when the defendant does not appear in court. A defendant who appears in court and loses the case has a judgment levied against him, but not a default judgment.
In most debt lawsuit cases, the collection agency will file a formal lawsuit with the court in the debtor's county of residence. A summons is then delivered to the defendant. If the defendant does not reply to the summons within the given time frame, the judge accepts the word of the plaintiff as the truth and signs off on the judgment.
Even in cases where the debt in question is clearly outside of the state’s statute of limitations, unless the debtor replies to the summons or shows up in court to make this known to the judge, the out of statute debt will still result in a default judgment.
Reasons to Avoid a Default Judgment
A default judgment can severely injure a consumer’s financial future and should be avoided at all costs. Some of the consequences of a default judgment are:
- A judgment can cause a credit score to drop by 100 points or more, depending on how good the individual’s credit was before the ruling.
- A judgment is limited to a 7 year reporting period, but is renewable. This means it can linger on a credit report up to 20 years in some states.
- Wage garnishment is a common result of a judgment.
- A judgment may cause an individual to pay higher interest rates on loans and lines of credit for as long as it appears in the consumer’s credit file.
Plan the Defense Before the Lawsuit
Individuals who know they may be in danger of a lawsuit from a debt collector should begin creating a paper trail ahead of time. Section 809 of the Fair Debt Collection Practices Act gives all consumers the right to request that any debt collector prove that they owe the debt by the process of debt validation. Because the FDCPA does not stipulate what constitutes debt validation, a genuine validation may be hard to come by (See What is Legitimate Debt Validation?)
The step-by-step process is:
- Dispute the debt
- Mail the dispute certified mail
- Wait for the return receipt
- Wait for a response from the collection agency
Make copies of everything for court.
Most collection agencies respond to a request for validation through a program called e-Oscar that automatically generates a printout of the consumer’s debt. An e-Oscar printout will rarely hold up in court.
Individuals expecting a lawsuit over a debt should also keep up with the statute of limitations on the debt. If the statute of limitations passes, the debt is no longer legally enforceable (See The Statute of Limitations on Debt Collection).
Respond to the Court Summons and Show Up in Court
Once an individual receives a lawsuit summons, he or she should immediately respond to the summons and state the intention to appear in court. The amount of time a person has to respond to a summons varies but will be outlined in the initial court communication.. A collection agency will frequently withdraw a lawsuit against an individual who intends to appear and fight the lawsuit. The goal of a collection agency when it files a lawsuit is to be awarded a default judgment- not to fight a court battle.
Individuals should request proof of the debt in court that cannot be disputed. A printout is not proof due to the fact that any name and dollar amount can be added to a sheet of paper. Legal proof would be the consumer’s original signed contract with the original creditor. Very few collection agencies will be prepared to provide this information.
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