What To Do if a Debt Collector Threaten You With a Lawsuit

Steps To Take if a Debt Collector Threatens To Sue You

If a debt collector says they’re going to sue you, don’t panic. They might be trying to pressure you into paying, even if they don’t actually plan to file a lawsuit. 

Here’s what you can do:

• Check if the debt is legitimate. Debt collectors must provide a validation letter within five days of first contacting you. If you haven’t received this, request it in writing.

• Find out if the debt is too old to be collected through a lawsuit. Each state has a statute of limitations that limits how long creditors can sue for unpaid debts. If the debt is time-barred, they can’t take you to court.

• Don’t ignore the threat. If the debt collector follows through and files a lawsuit, you need to respond to avoid a default judgment.

• Negotiate if possible. You might be able to set up a payment plan or settle the debt for less than what you owe.

• Know your rights. The Fair Debt Collection Practices Act (FDCPA) makes it illegal for debt collectors to threaten lawsuits they don’t intend to file. If you think a collector is making false threats, report them (more on how to do this below).

While this article mostly covers threats from debt collectors, it's important to understand the role that creditors play as well.

Can a Creditor Sue You for Unpaid Debt?

Technically, yes, creditors can sue you for unpaid, but they're much more likely to resort to other options first.

If you fall behind on a credit card debt, loan payment, medical bill, or other consumer debt, the creditor has the right to try to collect. When you signed the agreement, you agreed to make payments. If you stop paying, the creditor may:

• Report the missed payments to the credit bureaus, which can lower your credit score.

• Charge late fees and interest, making the debt more expensive.

• Send the debt to a third-party debt collector or sell it to a debt buyer.

• File a lawsuit to try to collect through wage garnishment, bank levies, or other legal means.

Some debts also come with built-in consequences for nonpayment. For example, if you default on a car loan, the lender may repossess the vehicle. If you default on your home loan, the lender can start foreclosure proceedings.

Do Creditors and Debt Collectors Have to Follow the Same Rules?

Original creditors (the company you originally borrowed from) don’t have to follow the Fair Debt Collection Practices Act (FDCPA), but third-party debt collectors do. 

The FDCPA protects consumers from harassment and deceptive practices by collection agencies, debt buyers, and law firms collecting debts on behalf of creditors. However, some state laws also restrict what original creditors can do when trying to collect a debt.

If a creditor or debt collector is threatening to sue you, it’s important to understand your rights and options before taking action.

Debt Collection Laws: What Debt Collectors Can’t Do

Debt collectors must follow federal and state laws when trying to collect a debt. The Fair Debt Collection Practices Act (FDCPA) makes it illegal for them to use abusive, unfair, or deceptive tactics. 

The Federal Trade Commission (FTC) enforces these rules, and many states have additional protections.

What Debt Collectors Are Not Allowed to Do

Under the FDCPA, debt collectors can’t:

• Harass or threaten you

• Use abusive, obscene, or profane language

• Misrepresent the amount you owe

• Claim you’ll be arrested if you don’t pay

• Threaten to do anything illegal

• Say they will sue you if they don’t intend to

Time-Barred Debts: When Debt Collectors Can’t Sue

Each state has a statute of limitations that sets a deadline for filing a debt collection lawsuit. If that deadline has passed, the debt is considered time-barred, and collectors can’t sue you for it. 

However, they can still ask you to pay. Be cautious — if you make a payment on an old debt, you might reset the statute of limitations, allowing them to sue.

Debt Collection Calls: When and Where They Can Contact You

Debt collectors can contact you about a debt, but laws limit how debt collection agencies can communicate with you.

Under the FDCPA, debt collectors can’t:

• Call before 8 a.m. or after 9 p.m. (your local time) unless you agree to other hours

• Call you at work if you tell them your employer doesn’t allow it

• Call repeatedly in a short period to pressure or harass you

• Contact family, friends, or your employer except to ask for your contact information

• Continue calling after you send a written request to stop, except to confirm they won’t contact you again or to notify you of legal action

You have the right to ask the debt collectors to stop contacting you. This is typically best done by sending a cease and desist letter. Note that this won’t make the underlying debt go away, but it can reduce the stress of dealing with collection phone calls.

What To Do If a Debt Collector Violates the Law

If a debt collector harasses you, makes false threats, or violates your rights, you can take action by reporting them or suing them.

How To Report Debt Collectors That Violate the Law

If a debt collector harasses you, makes false threats, or violates your rights, you can take action by reporting them to the Federal Trade Commission (FTC), the Consumer Financial Protection Bureau (CFPB), and your state’s attorney general’s office.

File a complaint with the CFPB

File a complaint with the FTC

Find your attorney general’s information

How To Sue Debt Collectors That Violate the Law

You can also hire a consumer protection attorney and file a lawsuit against the debt collector. You typically have one year from the violation date to take legal action. 

Many consumer protection attorneys work on a contingency basis, meaning they don’t charge upfront fees and only get paid if you win your case. Some may offer free consultations to review your situation.

How To Avoid a Debt Collection Lawsuit

If you’re behind on payments, you might worry about getting sued. The good news is that you have options to prevent legal action — but the sooner you act, the better. Here’s how to take control of the situation.

Step 1: Make Sure the Debt Is Legitimate

Debt collectors must provide a written notice with details about the debt, called a validation letter. You should get this within five days of their first contact. 

This letter should include:

• How much you owe

• The name of the creditor

• How to find out who the original creditor was

• How to dispute the debt if you think there’s an error

If you don’t receive a validation letter, request one in writing. Until they send it, they can’t keep trying to collect from you.

Step 2: Dispute the Debt if Something Seems Wrong

If you believe the debt isn’t yours — or the amount is incorrect — you can send a dispute letter (also called a letter of verification). You have 30 days from receiving the validation letter to do this.

Once they receive your dispute, they must stop all collection efforts until they send proof that the debt is valid. Proof could be something like an original bill or account statement.

Step 3: Try to Settle or Work Out a Payment Plan

If the debt is valid but you can’t afford to pay it all, you may be able to negotiate a lower amount or a payment plan. Many creditors would rather settle for less than spend money on a lawsuit.

Reaching an agreement before a lawsuit is filed can save you a lot of stress and money. If you’re unsure how to negotiate, a nonprofit credit counseling agency may be able to help.

Step 4: Consider Debt Management, Settlement, or Bankruptcy

If you have multiple debts and are struggling to pay, you might want to explore:

• Debt management plans: A nonprofit credit counseling agency helps you consolidate and pay off debt with structured payments.

• Debt settlement: You or a company negotiate with creditors to pay less than what you owe, but this can have major credit consequences.

• Bankruptcy: This could help you wipe out debts (Chapter 7) or set up a manageable repayment plan (Chapter 13). As soon as you file a bankruptcy case, all collection activities must stop thanks to the automatic stay.

How To Spot Debt Collection Scams

Not all debt collectors are legitimate. Some scammers pose as collectors to trick you into paying a debt you don’t owe or to steal your personal financial information. Watch out for these red flags:

• They demand payment immediately and refuse to provide written proof of the debt.

• They won’t identify themselves or give details about their company.

• They threaten arrest, jail time, or law enforcement action. Legitimate debt collectors can’t have you arrested.

• They ask for sensitive information like your Social Security number, bank details, or credit card number over the phone.

• They pressure you to pay using unusual methods like gift cards, wire transfers, or cryptocurrency.

• They send fake legal documents that look like court papers but have no case number or court contact information.

• They refuse to give you time to verify the debt or say you must pay immediately to avoid "further action."

If you're unsure whether a debt collector is legitimate, ask for their name, company, address, and phone number. Then verify their information by checking with the original creditor or searching online. If you suspect a scam, report the scammer to the appropriate government agency.

Never give out personal or financial details unless you’re sure the debt is real. 

What To Do if You Get Sued

If a debt collector sues you, take action! The worst thing you can do is ignore the lawsuit.If you do, the court may issue a default judgment against you. This allows the creditor to get a court order to garnish your wages, freeze your bank account, or place a lien on your property. 

To avoid losing automatically, be sure to respond to the lawsuit by the deadline. Some courts provide answer forms (the official paperwork) and make this process relatively easy. Others do not.

If you're worried about responding on your own, but you can't afford a lawyer, you can draft an answer letter using our partner SoloSuit. They've helped 234,000 people respond to debt lawsuits, and they have a 100% money-back guarantee.

Let’s Summarize….

Dealing with debt collectors can feel overwhelming, especially if they threaten legal action. But you have rights, and you don’t have to face this alone. 

First, confirm that the debt is real and that the collector is legitimate. Next, keep records of all communication, especially if the collector engages in harassment or other illegal behavior — if they do, report them to the appropriate authorities. Finally, if you’re served with a lawsuit, don’t ignore it.