No. 4: Raise the statute of limitations as a defense
In most states, creditors have a maximum of four to six years to sue to collect a debt. After that, the statute of limitations expires. That doesn't always stop collectors from suing, however, because they are counting on borrowers failing to show up in court. If the statute of limitations has expired and the borrower raises that as a defense, the collector will lose. But making a payment on an old debt may start the clock ticking all over again, so a debtor should get legal advice before any payments on a very old debt.
No. 5: Sue them back
If a debt collector has violated provisions of the Fair Debt Collection Practices Act, you may be able to sue it. "Once you attach their lawsuit as Exhibit A to your lawsuit against them, the tide turns, and if you or your attorney knows what they are doing, the alleged debtors can get damages and attorney's fees and costs," says Howard. He's referring to the fact that consumers who successfully sue for violations of the debt collection practices act are entitled to statutory damages of $1,000, plus punitive and economic damages, if awarded. In addition, the collection agency will be required to pay the attorney's fees and costs.
No. 6: Bring in the big guns
Debtors often hesitate to contact an attorney when they are being sued over a debt they owe -- perhaps due to embarrassment, or maybe because they figure they can't afford one. Attorneys who regularly take on these types of cases will typically offer a free consultation, however. And they will often represent a consumer for free if they think the collector has broken the law. That's because the attorneys will expect to collect their fees from the plaintiff. "Do not be afraid or intimidated to call or email a consumer protection or bankruptcy lawyer for a quick word of advice," Ginsberg says.
Once the collection agency is notified that you are represented by an attorney, it may be much more amenable to settling the debt rather than trying to duke it out in court.
No. 7: File for bankruptcy
While bankruptcy usually doesn't make sense when you owe just a small amount of money, if the debt you are being sued for is large or if it is just one of many debts you owe, it may make sense to file for bankruptcy. When you do, you will be protected by the "automatic stay," which will halt collection efforts against you.
A tip: If you are thinking about bankruptcy, it's best to talk with an attorney as soon as you are served with notice of the lawsuit, instead of waiting until the day you're due in court.
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