The U.S. civil court system was designed to handle a wide range of non-criminal cases, ranging from family disputes to substantive contract breaches, property disputes and more. However, over the past several years, the civil courts in most states have been overrun by debt collection cases against consumers. 

The increase in lawsuits filed against consumers for unpaid medical debt, credit card bills, automobile loans and other collection issues comes as no surprise to attorneys and others working in the industry. A recent analysis conducted by Pew Charitable Trusts revealed a dramatic rise nationwide, even as other civil matters are declining in number. Some key findings from the Pew research include: 

  • Between 1993 and 2013, the number of debt collection cases filed annually more than doubled, from 1.7 million to about 4 million
  • Debt collection cases have claimed an increasing share of the civil docket, making up about 30% of the civil court caseload in the one state where comprehensive data was available
  • The dollar value of claims filed annually by debt buyers increased from $6 billion in 1993 to $98 billion in 2013

Often, a small number of debt collectors and debt buyers make up a significant share of the debt collection claims filed. In one state, nine debt buyers filed 43% of all civil and small claims cases statewide in a recent calendar year. 

Those are big numbers, but for consumers who are behind on debt, the growing number of debt collection lawsuits is not the biggest problem. 

Fighting Back When Debt Collectors Sue

The Pew researchers found that while most businesses filing debt collection claims were represented by attorneys, only about 10% of consumers being sued had lawyers. That is important, because the study showed that consumers who were represented were significantly more likely to reach a settlement or win their cases than those who did not have an attorney. 

Default Judgments in Debt Collection Cases

Many consumers who are sued for outstanding debts do nothing, and that is generally a big mistake. The survey data showed that more than 70% of debt collection suits ended in default judgments. That means that the court entered an order in favor of the creditor or debt collector because the consumer did not show up or did not file necessary paperwork. 

Struggling with debt can be exhausting and discouraging, and it is no surprise that many consumers do not feel like they can fight back in court. Some think they cannot afford an attorney. Some think the creditor’s lawyer will steamroll over them and they do not have any real way to fight back. Some do not read the paperwork and do not know what’s required of them. Some just cannot take the day off work to show up in court. 

Whatever the reason, ignoring a debt collection lawsuit can mean big trouble. In Alabama, if a judgment is entered against you, the creditor who got the judgment can do several things as far as trying to collect on the judgment.   It can garnish wages and bank accounts, it can force the sheriff to seize your home, real estate, and personal property. It can place a judgment lien on your home and real estate through the probate office.  These judgment liens grow at a rate of at least 12% per year and can encumber your home and real estate for up to 10 years and can be renewed for another 10 years beyond that.  This may prohibit a refinance or sale of the property unless the judgment lien plus interest is paid in full.  As you can see, it is very important to fight any lawsuit on the front end and to do what you can to prevent a judgment from being entered in the first place.

Here are a few of the most common ways an attorney can help  consumers avoid judgments in debt collection lawsuits: 

  1. Finding flaws in the claim. Many consumers think debt collectors hold all the cards and they will not be able to fight back effectively, but many debt collection lawsuits are seriously flawed. Some debt buyers sue on cases that are outside the statute of limitations–especially in states like Mississippi where the statute of limitations on debt collection cases is short. And debt buyers often lack the necessary documentation to prove either that they have the right to pursue the claim or that the amount owed is accurate. 
  2. Asserting consumer financial protection claims. If a debt buyer or collection agency has violated a consumer protection statute such as the Fair Debt Collection Practices Act (FDCPA)–and they often do–that provides leverage to fight back. In some cases, the debt collector may even owe the consumer compensation for those violations. 
  3. Negotiating a payment plan. Consumers who agree that the amount of the debt is accurate and want to avoid further collection action are often able to make payment arrangements with the creditor or debt collector. That may mean continuing the case as the consumer makes payments and ultimately dismissing when the debt is paid in full, or an agreed judgment that provides for specific payments and keeps other collection action at bay as long as payments are current. 
  4. Filing bankruptcy. In most bankruptcy cases, an automatic stay is entered as soon as the petition is filed. The stay freezes collection action, including debt collection lawsuits. Most consumers will not file bankruptcy over a single debt unless it is very large, but if a debt collection lawsuit is part of a larger pattern of collection calls and threatening letters, it may be time to consider bankruptcy.

The worst thing you can do when facing a debt collection lawsuit is to ignore it. Failing to respond to a lawsuit can result in default judgment on a case you could have won, and end in wage garnishment or loss of other assets. The best thing you can do is to gather accurate information about your options and the pros and cons of each in your particular situation. 

At Bond & Botes, we have been helping people in financial trouble for decades. Our attorneys are experienced in both consumer bankruptcy and the protections available when debt collectors cross the line. You can schedule a free consultation right now by calling 877-581-3396 or filling out the contact form on this page.

Bradford Botes
Written by Bradford Botes

Brad Botes is a principal of each of the Bond & Botes Law Offices throughout Alabama, Mississippi, and Tennessee. He holds a Bachelor of Science from the University of North Alabama, and a Juris Doctorate from Cumberland School of Law at Samford University. He and his team of bankruptcy lawyers have spent over 30 years guiding people through financial challenges. Read his full bio here.

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