Image: Credit card © Hill Street Studios, Getty Images

What happens when you are sued by a debt collector? While it may feel like the end of the world, it's a pretty routine occurrence in courts across the country. "Most debt collection law firms file hundreds of lawsuits a day, assuming that 99% of defendants will not answer," says Atlanta bankruptcy attorney Jonathan Ginsberg.

While it would be easy to dismiss this as simply a matter of debtors getting what they deserve, it's not always so cut and dried. It's not unheard-of for a debtor to be hounded by multiple collection agencies for the same debt. Or "zombie debts" may show up in court years after the debtor defaulted.

A New York Times story compared the recent spate of debt collection "robo-lawsuits" with the "robo-signing" mess in the mortgage industry and quoted Brooklyn Civil Court Judge Noach Dear as saying, "Roughly 90% of the credit card lawsuits are flawed and can't prove the person owes the debt." Dear says he sees as many as 100 of these cases a day.

Even when the debt is legitimate, the additional costs that result from a lawsuit can make it that much harder for the borrower to resolve the matter.

So what can you do if you are sued by a collection agency? Here are seven options:

No. 1: Always respond

The No. 1 mistake borrowers make when they are sued for a debt is failing to respond to the notice, which usually arrives in the form of a "summons and complaint." If you owe the debt and can't pay it, you may assume there's not much you can do. If you fail to respond, however, the collection agency will get a default judgment against you. That opens up new avenues of collection for the collector, including wage garnishment or taking money from your bank account, depending on state law. Worse, the collector may be able to add attorney's fees, court costs or interest charges to the balance. In some cases, the balance can double or triple due to these additional costs.

Responding to a debt collection lawsuit, then, is a must. "Even if you owe the plaintiff money, a two-sentence response denying liability to the lawsuit filed in court will likely lead to a negotiated settlement that will save you money," Ginsberg advises. "If you do respond and force them to work, they will either back down or offer a settlement on favorable terms."

He adds that it is not sufficient to simply send a letter to the plaintiff (the person bringing the lawsuit). "You must file your response to the lawsuit, called an "answer," in the court where you were sued within the designated time to respond -- usually 20 to 30 days after being serviced with the summons -- and you must send a file-stamped copy of your answer to the plaintiff's lawyer." You can get a file-stamped copy from the court where you filed the answer.

When you do respond, don't just state that you can't afford to pay the debt. "If you admit liability, then 90% of the fight is over, and they are not forced to prove their case," warns Billy Howard, an attorney and the head of the consumer protection division of Florida law firm Morgan & Morgan. He likens it to a criminal case where the defendant says, "I did it!"

No. 2: Challenge the lawsuit

"Challenge the plaintiff's ability to bring the lawsuit by challenging their standing to sue in their own name," suggests Ohio consumer lawyer Troy Doucet. He explains that credit card debt is often bought for pennies on the dollar by collection agencies, which then sue to collect.

"The collection company needs to prove they have the right to collect, as evidenced by a transfer of the signed credit card agreement, in order to be in court and ask the court to win. The right to sue is called 'standing' and (is) what the consumer should challenge," Doucet says.

Howard agrees. "Ask the court to dismiss the case because they don't have standing and lack the chain of custody of paperwork. A lot of judges look at the paperwork (that collectors provide) and tell the plaintiff that they must be joking," he says.

No. 3: Make them prove what you owe

"We always demand to see the original signed agreement and a balance on the account from zero to the present," says Ginsberg. More often than not, the debt collector's documentation will be inadequate. Debts may have changed hands multiple times before the current collection agency purchased them.

Even the original creditors may lack accurate documentation of the debts customers owe. A former employee of JPMorgan Chase says she was fired after she raised questions about the documentation being provided to buyers of delinquent debts. She alleged that as many as a quarter of the files showed incorrect amounts owed, with errors often in the bank's favor. If credit card issuers can't provide accurate documentation, there's a good possibility collection agencies won't have it either.

Click here to become a fan of MSN Money on Facebook

More from Credit.com: