UPDATED: October 13, 2022

You’re drinking your morning tea, and someone knocks at your door. This man gives you an envelope, and you’re wondering what’s inside. Upon opening it, you see that it’s a collection lawsuit from your creditor.  In other words, you’ve been served!

Receiving a collection lawsuit is not a pleasant thing. However, don’t be too stressed when you receive one. The lawsuit is not a court sentence. The law still protects you as long as you’re innocent.

But, what happens when you get served papers for debt? In this article, you’ll learn the nature of debt lawsuits and what you can do when you are served.

If you’re wondering if you can still settle your debt after being served, the quick answer is NO.

What Should I Do After Being Served?

Upon receipt of the lawsuit, contact your lawyers. If you don’t have a lawyer, you can seek community defender organizations to represent you. You can check this directory for a list of federal and community defenders.

While The Constitution allows you to represent yourself in court, it’s best to hire a lawyer instead. You can also visit the American Bar Association, where you can find free legal services like pro bono cases or Legal Services Corporation to provide you with legal aid.

Should I Pay the Debt to Dismiss the Lawsuit?

No, and don’t try to settle it.

When the creditor files a lawsuit, paying your debt won’t make the case go away. According to CreditCards.com, settling your debt after being served does more harm than good. Here are the reasons why:

  • It resets the statutes of limitations (varies per state).
  • It makes your position weak.
  • You’ll have no opportunity to reach a favorable settlement plan.

However, you might ask, “can I pay debt before court date?

Again, it’s a BIG NO. Once the creditor files a case, you’ll have no choice but to go with the flow. You should cooperate with the Court’s requirements and attend all hearings. 

The creditor, being the plaintiff, will pay the filing fee and include it to the amount demanded. So if you owe $10,000 and the creditor pays $500 court fees, the plaintiff will ask the court to grant them $10,500 should they win the case.

If you’re worried about wage garnishment and asset seizures, the creditor cannot collect your wage or seize your assets unless they win the case. As the case is progressing, the creditor cannot enforce you to give up personal or real properties to settle your debt. Moreover, they cannot order your employer to withhold a portion of your salary to pay off the debt.

What are the Statutes of Limitations?

When you incur debt, the state only allows the creditor to file a lawsuit against you for a certain number of years. Let’s take an example from California.

According to California’s Code of Civil Procedure, the creditor or collection agency can sue you within four years from the date you incurred the debt. If the creditor sues you in the fifth year, you can argue to the Court that the statute of limitations has passed, and it can make the lawsuit go away.  If you want to know more about the statutes of limitations per state, check this website.

What is a Collection Lawsuit?

When you borrow money or buy items on account, you incur liabilities in the form of debt. For sellers and creditors, extending credit to customers is part of doing business. But if the customer or debtor fails to pay the debt on the promised date, the creditor will do its best to collect from you.

However, a lawsuit is not the immediate recourse of the creditor. The creditor must exhaust all forms of collection techniques before filing a lawsuit. When the creditor has exhausted all means of collecting from you, they can file a collection lawsuit against you.

How Does it Work?

The creditor’s lawyers will file a petition to the court and list you as the defendant. If you’re not the only person involved, there might be several persons named as defendants. Once the court verifies the creditor’s complaint, the prosecuting lawyers should “serve” the lawsuit to you, including the summons.

In the summons, you’ll see the reasons why you’re being sued, and it’ll instruct you on how to file a formal response to the court. You have 20 to 30 days to make a response, and you should submit it within this period if you want to dismiss the case against you amicably.

Different Ways to Settle a Debt After Being Served

The rule is not to immediately pay the debt after receiving your court summons. But, you can settle your debt as you face the case head-on. There are two ways to settle a debt while the case is going on. 

You can settle it extrajudicially or judicially, depending on the facts and circumstances surrounding the case. Here are the ways to pay your debt:

Extrajudicial Settlement with Agreement

When you say “extrajudicial,” you’re referring to a resolution made between the defendant (you) and the plaintiff (the creditor) without involving the courts. In other words, this kind of settlement is a more peaceful, convenient, and less costly way of compromise.

However, since the courts have no involvement, there will be a written agreement to tell how you will pay your outstanding debt. In an extrajudicial settlement, you have the following options:

1. Full Payment

Paying your debt in full is the best option to take this case off your shoulders. However, if you don't have enough money to pay in full, you may consider other options below.

2. Negotiation of an Affordable Payment Schedule

If you're employed, but your income is just enough for your necessities, you can ask the creditor to give you a longer payment schedule with small installments. You should also try to negotiate a little or no interest rate to keep the outstanding balance bearable.

3. Debt Restructuring

Restructuring your debt is the only practical way if there are no more other options left on how to settle credit card debt when a lawsuit has been filed. Creditors don't want this option, but they'll have no choice if you can prove to them that you can't pay the full amount.

In debt restructuring, you can renegotiate the payment terms by extending the payment period, reducing interest costs, or a partial condonation of the debt. This option is the hardest one to pull off. But with a good lawyer, you can increase the odds of success in this.

Judicial Settlement

In a judicial settlement, the courts will give the final decision after considering the case’s facts. Choosing this road can be psychologically and mentally challenging since you’ll be attending court hearings. You must have a lawyer if you intend to let the courts decide.

Below are ways to settle your debt judicially:

1. Filing Bankruptcy

Declaring bankruptcy is the best way if you have no means to pay your debt. However, you can’t say to the creditor that you’re bankrupt. Only the courts will tell if you are bankrupt or not after looking at the evidence. 

You can ask your lawyer to use this defense. You can read the bankruptcy process here. Assuming you’re successful, the courts may discharge you from your debt or provide an affordable payment schedule that’ll suit your financial situation.

Though declaring bankruptcy sounds like an easy way out, it comes with certain disadvantages. First, bankruptcy affects your credit score. Should you recover from bankruptcy and apply for loans again, creditors and banks may hesitate to approve your loan. 

Second, filing bankruptcy opens your private financial information to the public including friends, family, and relatives. Since it is the subject of the case, your financial information will be under scrutiny. If privacy of financial information is not a paramount concern for you, then this one might not be a major concern.

And finally, being declared bankrupt means that you let an appointed bankruptcy trustee sell your property—personal or real—to pay off your debt. You cannot control which property should be sold because it is not the concern of the trustee. As long as the proceeds settles your debt, the trustee will sell all your property, as necessary, without bias.

2. Debtor’s Proof of Settled Debt

Sometimes, debt collectors perform shady tactics by filing a lawsuit. They often use a lawsuit to make you pay an old debt that is over the period afforded by the statute of limitations.

If the court supports your argument, you will win the case, and you can ask the court to grant you damages for the disturbance the case has brought to you.

3. Countersuit Pursuant to Fair Debt Collection Practices Act

If the creditor sues you for non-payment of debt, you can counter sue if the creditor or collection agency violates the Fair Debt Collection Practices Act. While your debt remains effective, violation of this law can put the creditor in a bad light. So, you must tell your lawyer about the creditor’s collection method.

Violations may include but are not limited to harassment, threats to life, or informing other people of the debt. You can use these violations as leverage against the creditor.

4. Court’s Decision

Assuming all options above have been exhausted, you have no choice but to let the court decide. Talk to your lawyer and provide information that’ll help your case. But, here’s a fair warning. Winning the case is not equivalent to being discharged from the debt. While some cases release debtors from the obligation to pay, that doesn’t apply all the time.

How Often Do Debt Collectors Take You to Court?

Creditors can only sue you once unless it’s a different debt. For example, if a creditor sued you for an unpaid debt back in 2019, they can’t sue you again for the same debt. That’s why you should enforce your rights whenever that happens.

But, here’s a caveat. Once the court decides (judicial) or when both parties agreed to a fair settlement term (extrajudicial), violation of such can be another valid subject for a case. In other words, the creditor or debt collector can involve the courts once again.


Receiving a lawsuit for unpaid debt is a stressful situation. But, you should remain calm and determine your possible courses of action. After being served, contact your lawyer and avoid any form of communication with the creditor. And remember not to try and settle the debt to avoid a court case. 

Let your lawyer do the legal work and provide the necessary information to build your case. If you can’t afford a lawyer, you can visit LawHelp.org because they help people in the low-income class get access to affordable legal aid.

Whether or not the court’s decision is favorable to you, comply with the court’s decision to avoid complicating the problem. If your rights have been violated, you can use it to counter sue the creditor for illegal collection tactics.

And if you’re holding the court summons right now or if you’re on your way to the court, remain civil and let the case move on. If you have additional thoughts, tips, or pieces of advice, please comment below and help other people who are going through or will go through this unpleasant predicament.