When You Owe Money
Section 4 - Lawsuits in Court for Money
A Publication of Prairie State Legal Services
Page Revised: May 25, 2006
Content Updated: January 2006
About These Materials
The following information is not meant to be legal advice or to replace the advice you should receive from an attorney. There are times when it would be wise to consult a lawyer and other times when it is essential to do so. Always remember, each individual case is unique. This information applies to general consumer situations and should help you to avoid many problems before they happen. If you have additional questions or want legal advice, follow this link to find the Prairie State office nearest you.
Lawsuits in Court for Money
If a creditor decides to sue you on the debt, you will receive a Summons and a Complaint. The Complaint should state how much money the creditor wants the court to order you to pay. If you are being sued for less than $10,000, the lawsuit should be brought in small claims court. [You may wish to read Prairie State's pamphlet describing small claims court called What To Do When You Are Being Sued In Small Claims Court.] We tell you below whether it is likely or not that a creditor will go to the trouble of a lawsuit. If you are sued, this section tells you how to respond. Finally, we will explain the meaning and effect of a court judgment, in the event one is entered against you.
Will a Creditor Sue on a Debt?
If a debt is not paid for any period of time, the consumer at some point is going to worry about whether or not the creditor is going to go to court. Only a small percentage of all debts wind up being collected through the court system. Still, it is a common sight in most courthouses in the United States to see creditors and their lawyers bringing lawsuits and using the judicial process to collect debts. So, how are you to know whether that is going to happen to you on any particular debt?
Generally speaking, creditors will not resort to a lawsuit if there is another easier or less expensive way to collect what you owe. The court process is slow and can be expensive. And, as we'll discuss later, even when a court judgment is entered against the consumer, there is no guarantee that the creditor will be able to collect any money on that judgment.
So although there is no hard and fast rule that creditors use in deciding whether to file suit, they are less likely to go to court when the amount of the debt is small, when the consumer disputes the debt or has a good defense; and when the creditor has no history of filing lawsuits. You might consider checking with your local court clerk who can help you determine if a given creditor has filed other lawsuits in that court.
How to Respond to a Collector's Lawsuit
Do Not Ignore the Summons. If you do get served with a Summons [and Complaint], the worst thing you can do is to do nothing. Ignoring it will not make it go away and can have serious consequences against you. If you are fortunate enough to have a lawyer to represent you, advise your lawyer immediately as soon as you receive the Summons. If you have no lawyer, then you must pay attention to what the Summons directs you to do.
If the lawsuit is for $50,000 or less, the Summons requires that you appear in court on a specified day. It is extremely important for you to make sure that you show up in court at the date and time scheduled for your appearance. If you don't show up in person or by attorney, the court will order a judgment in favor of the person or company suing you. If the lawsuit is for more than $50,000, the summons is in a different form and requires that you file a document called an appearance or an answer within 30 days after you are served.
How the Summons Must Be Delivered. The Summons and Complaint must be delivered to you [called being served] according to state procedure. It may be given to you personally by a deputy sheriff or by a process server. Also, it can be given to any member of your household who is over the age of 13. A small claims complaint and summons may be served by registered or certified mail.
Try to Work Out a Settlement Agreement. If you have received a Summons and you know that you owe some money, you may contact the other party [or their attorney] and try to work out a settlement agreement. The plaintiff is often willing to take less than what he or she is suing you for in order to avoid a courtroom dispute. In addition, the creditor may be willing to set up a payment plan so you can pay off the debt over a period of time.
If you and the plaintiff reach an agreement that is satisfactory to both of you, you should put the agreement in writing and both you and the plaintiff [or the attorney] should sign it before it is presented to the judge. However, do not agree to a payment plan if you are not absolutely sure that you will be able to make all the payments, or if all your income and assets are exempt. [To find out if your income and assets are exempt, see Exemptions Which Prevent Creditors From Taking Your Money or Property in this booklet.] No matter what you agree to, be sure to be present in court at the date and time specified on the Summons, and when the agreement may be presented to the judge.
Contesting the Case. If you cannot work out an agreement or if you think you should not pay as much money as the plaintiff wants, then you must be prepared to show up in court and contest the case. In court, the judge will ask you whether you believe you owe the plaintiff the amount of money claimed as due. If you admit that you owe the money, a judgment will be entered against you.
If you tell the judge that you do not owe the plaintiff any money, or that you owe less than what is claimed, there will have to be a contested hearing called a trial. The judge may set another date for a trial. However, in some counties, particularly in small claims cases, the judge may hold the trial on the first appearance date. Check with the judge's clerk or the court clerk to find out whether you need to be prepared for trial on the first appearance date.
Defenses and Counterclaims. A consumer can tell the court why the creditor should not be able to collect all or some of the money that is being sought. This can be done by presenting a defense or a counterclaim or both. A defense is either a set of facts or a legal reason why the plaintiff should not recover the amount being sought. A defense can defeat the creditor's action or tries to reduce the amount of money you need to pay. There are many different types of defenses which are possible in consumer cases.
A counterclaim is a claim by the consumer that the creditor owes money to the consumer because of something which the creditor did wrong. A counterclaim can be made whether or not the consumer owes the creditor any money on the debt. Counterclaims are used when creditors or debt collectors violate consumer protection laws.
It is very important for consumers to raise defenses and counterclaims in debt collection lawsuits. Creditors [or their attorneys] will be more inclined to either drop a case or settle on very favorable terms for you if your defense is going to eat up a lot of their time or substantially increase their costs. If you have had any problem with the creditor, or the product or services, then it is always best to consult an attorney, if you can.
How to Present Your Defenses or Counterclaims to the Court
This will vary a lot depending on what court you are in. If you do not have an attorney to present your defenses and counterclaims, then you might consider checking with the court to see what its procedures are to do this. Some courts require a written statement called an Answer to be filed at the beginning of the case. The Answer states the consumer's defenses and counterclaims. Some small claims courts do not require you to file an Answer and allow you to raise your defenses and counterclaims in your statements at the trial. If you have any counterclaims, it is best to file them in writing with the Court Clerk's office early in the case and before the trial, so that at the trial the creditor cannot complain that he never received any notice of your claims. In this way, the judge can decide the claims of both parties at the same time.
Of course, a lawyer can best present your case for you. If you need a delay in the trial date to find an attorney, you should not hesitate to ask the court. Such a delay is called a continuance. If you cannot afford to pay a lawyer to handle the trial, you should at least try to consult a lawyer about how to present your case.
The key to any presentation is preparation. Always go to court prepared. This means you should have collected all papers relating to the case. In more formal courts, the consumer may need to bring someone who can identify the documents and prove they are authentic. Bring witnesses to court, if they are available. The court will not look at written statements of witnesses who aren't there, but will listen to them if they are there in person. Bring a written checklist of the facts you think are important [and a checklist of your documents, too]. At trial, you will tell a story through your words and your witnesses' words. Make sure the judge hears all the facts and sees all the documents. It is usually best to start at the beginning and tell your story in a clear and organized way in the order that it happened.
The Judgment
In most lawsuits, the judge will sign an order deciding the rights of the parties. This order is called a judgment. A judgment can be agreed to by the consumer and the creditor, or it can be what the judge decides after a contested trial, or after a default.
A default happens when you ignore the summons and fail to show up in court. You lose the case automatically! If for some reason you fail to show up in court at the specified date and time, it may not be too late to change the default judgment against you. You should immediately consult an attorney to see if the default judgment can be vacated.
If the judgment favors the creditor, it will say how much money the consumer has to pay the creditor. Once a judgment for money is entered in favor of a creditor, you do not have to pay the money immediately. However, the entry of a judgment does give the creditor certain legal rights to force payment. [See Creditors' Methods to Collect Court Judgments.]
On the other hand, a certain amount of a consumer's income and property is protected by state and federal laws. Protected income and assets cannot be taken by a creditor. Protected income and property are called exemptions. You should read very carefully the section about Creditors' Methods to Collect Court Judgments and the part about Exemptions Which Prevent Creditors from Taking Your Money or Property. These sections will tell you what income and property is protected and how to make sure they stay protected. A consumer is said to be judgment proof when all of his or her income and assets are exempt. That means they cannot be taken by creditors. If a consumer is judgment proof, he or she does not have to worry about the judgment until his or her financial condition improves. A judgment proof consumer may well decide to wait to pay off the judgment in order to save the small amount of income they receive to pay necessary bills and expenses.
How to Appeal
In Illinois, any party to a lawsuit in the state courts has the right to appeal a final judgment to a higher court called the appellate court. An appeal must be started by the filing of a Notice of Appeal in a specified form within 30 days after the date of entry of the final judgment. If you lose your appeal in the appellate court, you may ask the Illinois Supreme Court to hear your appeal. To get the Supreme Court to hear an appeal from an appellate court, a party must file a Petition For Leave To Appeal, and the Supreme Court will then decide whether it wants to hear the appeal. If you are considering an appeal, see a lawyer.
Copyright 2002 Prairie State Legal Services, Inc.
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