What to do if you are sued for a debt in Georgia?

Notice of lawsuit

What to do if you are sued for a debt in Georgia?

Receiving a lawsuit can be an intimidating event in one's life. How does an account get to the point where you are served papers by someone you owe?

There are many reasons in life, including COVID-19, that cause someone to not be able to pay a debt on time. Whether through a divorce, job layoff, or injury, you may be struggling to pay minimum payments or even miss a payment altogether. Your creditors are not likely to simply go away. If you cannot timely pay your debts, creditors will eventually become more aggressive in their collection tactics.

What is In-House Collection vs. a Collection Agency?

If you owe a credit card debt, for example, the credit card company will try to “work” the account in-house for a period of time. This means it will try to get you to pay it without having to send the account to an outside collection agency. The general rule is that a credit card company will work the account for six months after you have become delinquent. This is just a general rule and it could be shorter or longer depending on how responsive you are to their payment requests and what their individual policies are regarding how long to work a delinquent account.

If you are slow paying on the account (paying late) or paying less than the monthly minimum amount owed, the credit card company may continue to work the account longer since they are receiving some funds. However, if you are unresponsive to their phone calls and written correspondence, then there really is no incentive for them to work the account any longer. At this point, they will sell your account to an outside collection agency. Just because they sell your account does not mean they can change the terms of your loan. The terms of your contract with the initial credit card company remain the same and the only thing that changes is who owns the account and who you now are legally required to pay. This happens all the time in the credit card industry.

Your credit card company can transfer your account in two ways:

  1. The credit card company can sell (or transfer) 100% of your contract to a third party. The new owner of the account now has the right to collect on it from you as if it were the credit card company itself. In this situation, the new owner of the account (the collection agency) keeps 100% of whatever they collect from you. They still have to accurately report your payments on your credit report and keep a current balance of your account, but they do not send any of the money to the original credit card company since the note has been sold and transferred to the collection agency.
  1. The second option is the credit card company retains ownership of the account but simply assigns it to a third party to collect on behalf of the credit card company. Here, the credit card company and the collection agency agree on a percentage that the collection agency can keep for its fee and the balance is sent to your credit card company.

Either way, once the collection agency or your credit card company decides that you are not paying promptly enough, either one may send your account to a law firm to file a lawsuit against you. A lawsuit is simply a formal way for them to ask a judge to declare that you are in default and owe the amount they claim.

Sometimes the law firm sends out a demand letter giving you a final opportunity to pay. Sometimes they do not and proceed to file a lawsuit against you.

In Georgia, when you are served with a lawsuit you have 30 days to file your response, or defense, to the lawsuit. You are now on the clock, so to speak, and must take some action to protect your rights. It's generally best to speak with a lawyer as soon as possible to discuss your options and protect your rights that could be lost.

If you do not file a response and the 30 days expires then you are in default and a judgment can be entered against you fairly quickly. Once your creditor has a judgment against you it may then proceed to garnish your wages, bank accounts, or even put a lien on any real estate that you own. It is a serious matter.

What Legal Defenses Do You Have to a Lawsuit?

You may have an affirmative defense to raise to the judge. An affirmative defense is one that you have to tell the judge about. You do this by filing a timely answer and spelling out the defense. If you don’t raise an affirmative defense you may lose it. Some examples of affirmative defenses are:

  • Statute of Limitations - this means that the creditor may be time-barred from proceeding with the lawsuit. This time period varies from state to state so you should check with your particular state to see if the debt is too old to be enforced. Just because the statute of limitations expires does not mean the debt is eliminated.

  • Improper Service of the Complaint and Summons - this also varies by state law but each state has a certain process for how a lawsuit is initiated. If a creditor does not follow the correct process the lawsuit could be dismissed.

  • Fair Debt Collections Practices Act (FDCPA) – the FDCPA is a federal law that governs the actions that can be taken to collect a debt. If you ask your creditor to validate the debt then they must provide proof of the debt and suspend any collection activity until they do. If this has happened to you and a creditor has filed a lawsuit against you then you may have a counterclaim against that creditor for damages of up to $1,000 per violation, plus other damages, such as paying your legal fees.

  • Payment of the Credit Card Account - payment of the account, partially or in full, is always a defense against a lawsuit. It is important that you save copies of all of your payments so you can prove what you have paid or that you have paid it in full.

  • Lack of Standing - the credit card company or collection agency must have a relationship with you. Usually, when an account is sold or transferred there is a record of this and the credit card company or collection agency should be able to produce this to show that they have a right to file the lawsuit against you. Sometimes your account is sold multiple times and the paperwork showing ownership is sometimes lost.

  • Fraudulent Credit Card Charges - this applies to theft, a stolen credit card, or a business improperly processing your card. Don't wait until you have been sued. Contact your credit card company as soon as possible and file a police report.

  • Discharge in Bankruptcy - if you are being sued for a debt that was discharged in a prior bankruptcy case, you are no longer responsible for payment of the debt. Raise the discharge in your defense against the lawsuit. If you were represented by a lawyer in your bankruptcy case, contact your bankruptcy attorney for instructions. If the credit card company continues to try to collect a discharged debt, then your bankruptcy lawyer may be able to sue them.

Just because you cannot pay the debt is not a defense. It’s not up to the judge to decide if you can pay the debt or not, only to decide if you owe the debt. And once the judge decides you owe the debt then a judgment against you will likely soon follow. Be sure to protect your rights by speaking with a lawyer as soon as possible.

Attorney Alex has over 30 years of experience dealing with aggressive creditors and can certainly give you guidance.