Getty Images/iStockphoto
Creditors and debt buyers file millions of debt collection lawsuits against borrowers each year and while there can be serious repercussions that stem from a debt-related lawsuit, the majority of borrowers never actually respond after they’re served. The instinct to avoid a lawsuit is understandable, though. Not only can the paperwork be intimidating, but the legal language is dense, and many people assume that the debt is too old to matter, too small to escalate or simply too complicated, so they choose not to contest the issue.
Whatever the reason for not responding, though, the reality is that the legal system doesn’t treat absence as ambiguity, and ignoring a debt lawsuit won’t make it disappear. In fact, that silence can trigger a series of consequences, ones that move quickly and can be difficult to reverse once they’re in motion. That’s why understanding what happens after you ignore a debt lawsuit is critical — especially if you want to protect your income, your bank account and your financial future.
So, what’s actually at stake if you don’t respond to a debt lawsuit, and what options remain to deal with it? Below, we’ll detail what you need to know if you’re facing this issue.
Learn what relief options you can use to tackle your high-rate debt now.
What happens if you don’t respond to a debt lawsuit?
When you fail to respond to a debt lawsuit within the required timeframe, the plaintiff, which is usually a creditor or debt collector, can ask the court to enter a default judgment that says you legally owe the amount claimed. In most cases, courts will grant these requests automatically. That means there’s no hearing, no review of whether the debt is valid and no consideration of whether the statute of limitations has expired.
From that point, the creditor has more tools to collect what you owe. Depending on your state’s laws, they may be able to:
- Garnish your wages: With a wage garnishment, a debt collector can typically take up to 25% of your disposable earnings per pay period under federal law, though some states allow less.
- Levy your bank account: A bank account levy allows the creditor or debt collector to freeze your bank account and seize a portion of the funds directly and your bank must comply.
- Place a lien on your property: A lien on your property can complicate things if you’re planning to sell or refinance the home.
- Collect interest: Debt collectors and creditors may also be allowed to collect interest on the judgment amount, which continues accruing until the debt is paid.
Judgments are also a matter of public record and can appear on your credit report for up to seven years, further damaging your ability to borrow, rent, or in some cases, secure employment. In some states, creditors can even seek to have a judgment renewed, extending their collection window.
It’s worth noting, though, that not all assets are fair game. Federal benefits are generally exempt from wage garnishment by private creditors, and some states offer extra protections for borrowers — but those protections generally only kick in if you respond and assert them.
Find out how to start the credit card debt forgiveness process today.
What options do you have if you’re facing a debt lawsuit?
Receiving a debt lawsuit summons doesn’t mean you’re out of options. Responding to the lawsuit, even if you can’t afford an attorney, preserves your right to contest the debt, challenge the amount or negotiate a settlement before the court rules. Many debt collection cases involve errors, expired statutes of limitations or debts that have already been sold and resold to the point where documentation is incomplete.
If the debt is legitimate and the amount is correct, responding to the lawsuit also opens the door for settlement negotiations. While you can take a do-it-yourself approach, a debt relief company can help you negotiate lower lump-sum settlements or repayment plans with creditors, reducing the full amount owed, and some specialize specifically in situations where litigation is already underway. Either way, acting before a default judgment is entered gives you significantly more leverage than trying to negotiate after the fact.
Depending on the scope of your debt, filing for bankruptcy may also be worth exploring. Chapter 7 can discharge eligible unsecured debts entirely; Chapter 13 allows you to reorganize payments under a court-supervised plan. Both options trigger an automatic stay that halts collection activity, though, including pending lawsuits.
The bottom line
Ignoring a debt lawsuit is one of the most costly decisions a borrower can make. A default judgment doesn’t erase the debt. It amplifies what a creditor can do to collect it. So, if you’ve been served, responding within the deadline is critical, even if you’re unsure how to proceed. Consulting a consumer law attorney or a reputable debt relief service can also help you understand your options before the window to act closes.