Do I Need to Hire a Lawyer If a Creditor Files a Lawsuit Against Me?

In a typical debt collection lawsuit, the creditor or collector that files the action almost always has a lawyer on its side. People facing suits for unpaid debts, however, rarely have an attorney representing them in the matter. If a creditor or collector files a lawsuit against you, you’ll need to decide if it's worth paying a lawyer. Usually, it is. An attorney can raise any defenses you have in court, negotiate a settlement of the debt, and inform you about your rights. According to a 2020 Pew Charitable Trust report, studies in multiple jurisdictions show that consumers with legal representation in debt collection cases are much more likely to win their cases or work out settlements.

Debt Collection Suits Are On the Rise

The number of debt collections suits going through each state’s court system has skyrocketed in recent years. In some cases, the original creditor, like a credit card company, files the lawsuit against the consumer. Other times a debt buyer—a business that purchases delinquent debt from original creditors—sues the debtor to collect it. The amount at stake in these kinds of suits for unpaid credit card debt, medical bills, car loans, and other unsecured consumer debts is typically less than $10,000 and often no more than $5,000.

Options for Dealing With a Creditor Lawsuit

If a creditor or debt collector sues you for an unpaid debt, you could:

• ignore the suit and let the creditor or collector (the plaintiff) get a default judgment, which is an automatic win, against you (most collection lawsuits end in default judgments)
• respond to the action yourself (called acting “pro se”), raising any defenses or counterclaims, or
• hire a lawyer to represent you in the case.

Which route you should take depends on a variety of factors.

Do You Have Any Defenses or Counterclaims?

Ignoring the suit is almost always a bad tactic. If you fail to appear in the case, the court won’t examine the validity of the debt, the accuracy of the amount sought, or whether the correct person was sued. Creditors and debt collectors often automatically win cases that have inaccurate information or where defenses are available. So, in most cases, it’s usually best to respond to a lawsuit. It’s also a good idea to get an attorney to help you raise valid defenses and counterclaims, though you aren’t required to have one to participate in the action.

Potential Defenses in a Creditor Lawsuit

Some potential defenses that typically require a lawyer’s assistance, but you might be able to raise on your own, include:

• the statute of limitations has passed (you need to be especially careful not to restart the statute of limitations by saying or doing something that acknowledges that the debt is valid or making a payment on the old debt)
• the creditor filed the case filed in the wrong court
• you aren’t the person who owes the debt, or
• the plaintiff can't produce the original paperwork to prove you owe the debt or that it owns the debt.

An attorney might also be able to identify other defenses and bring them up in court. Without consulting with a lawyer, you’re unlikely to recognize all potential legal challenges you can present.

What Is a Counterclaim?

A counterclaim is a separate claim that you can make against the creditor. For example, if a debt collector files a lawsuit against you for an unpaid credit card debt, but it previously violated the Fair Debt Collection Practices Act when trying to get you to pay up, you can file a counterclaim. If you prevail on your counterclaim, you might get a money judgment against the collector. Also, filing a valid counterclaim sometimes provides leverage when negotiating a settlement.

Compare the Cost of Hiring a Lawyer to the Debt

If you don’t have any defenses or counterclaims, and assuming the creditor has sufficient evidence to prove its case, you’ll lose. So, if you have to pay a lot in attorneys’ fees—more that you owe on the debt—it might not make sense to hire a lawyer to help you.

Be aware, though, even a relatively small debt can increase by a lot when and after the creditor gets a judgment, even when you don’t pay for a lawyer. Courts typically order debtors to pay not only the debt balance, but also interest (until the judgment is paid), the plaintiff’s attorneys' fees, and court costs. You might find yourself on the hook for hundreds or thousands of dollars more than you originally owed. For this reason, it might be worth hiring an attorney to help you work out a settlement with the plaintiff for a reasonable amount or negotiating one on your own.

Are You Judgment Proof?

Generally, once a creditor gets a judgment against a debtor, that creditor may garnish wages, levy bank accounts, place a judgment lien on any real estate, or seize personal property (things other than real estate) to collect the debt. But if you’re judgment proof, the plaintiff won’t be able to collect anything from you even if it gets a judgment. So, if you have little or no equity in a home or other real estate, own minimal personal property, and are unemployed, it might not make sense to respond to a suit or spend money hiring an attorney to defend against it.

However, being judgment proof is sometimes a temporary condition; your financial situation might get better. In most cases, even if you’re currently judgment proof, it’s still a good idea to respond to the lawsuit and try to avoid a judgment. Judgments remain valid for a long time and can be renewed. If your financial circumstances improve, the plaintiff could be able to collect from you then.

Getting Help With a Creditor Lawsuit

Even if you can’t afford to hire a lawyer to represent you in court, meeting with an experienced debt settlement lawyer for one consultation can help you evaluate the plaintiff's case and your circumstances to determine the best course of action. Around a dozen states have laws or court rules designed to ensure that debtors get a fair shake when it comes to collection suits. These laws and rules tend to require that all parties receive notice about lawsuits. They also usually require the plaintiff to prove ownership of the debt and that the defendant owes the debt. Some states, like California, specifically prohibit debt collection suits after the statute of limitations has expired. A lawyer can tell you what laws apply to your situation.

Or you might be able to get low-cost or free help from a legal aid program or clinic. Also, if you have a significant amount of debt, especially credit card or other unsecured debt, it might be worthwhile to talk with a bankruptcy lawyer to find out if filing for bankruptcy might be right for you.