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Creditor Sues

Creditor Sues

Legal Aid Consumer Fact Sheet: When a Creditor Sues You

Know Your Rights

Important: This fact sheet does not replace legal advice. It outlines your key rights in debt-related lawsuits, especially involving mortgage loans. For legal assistance, refer to the resources listed at the end.

Who Can Sue You?

Any creditor can sue you in Civil or Supreme Court. This includes:

  • Credit card companies

  • Hospitals

  • Banks

  • Collection agencies

The party suing is called the plaintiff. You are the defendant, and you have the right to defend yourself in court.

What If You Don’t Recognize the Creditor?

Do not ignore the lawsuit. The original creditor may have sold your debt to a collection agency. That agency can legally file the case against you.

I’ve Been Served—What Should I Do?

If you receive a summons and complaint, you must respond on time. The deadline depends on how you received the papers:

  • 20 days if handed to you in person

  • 30 days if sent by mail or another method

If you fail to respond, the creditor may win a default judgment against you. Additionally, if the papers were served incorrectly, you can include that in your response.

How to Answer the Complaint

Your answer gives you a chance to deny the claim, assert defenses, and raise counterclaims. It is essential to respond accurately and on time.

What Defenses Can You Use?

You may raise several defenses depending on your situation. For example:

  • You already paid the debt

  • The creditor calculated the amount incorrectly

  • The goods or services were defective

  • The debt was discharged in bankruptcy

  • The lawsuit was filed too late (usually more than six years)

  • You never received the court papers properly

Although not every defense applies to every case, use those that fit your situation.

Can You File Counterclaims?

Yes. If the creditor owes you money or caused damages, you may include a counterclaim in your answer.

What If You Don’t Understand the Lawsuit?

Along with your answer, send a Bill of Particulars. This document asks the creditor’s attorney for details about:

  • The amount owed

  • The type of charges

  • The date and purpose of each charge

Asking these questions can help clarify the lawsuit against you.

Steps to Serve and File Your Answer

  1. Serve a copy on the creditor’s attorney by mail or in person
  2. Complete an Affidavit of Service (notarized)
  3. File the original answer and the affidavit with the court
  4. Keep copies of both for your records

Although this process seems complex, following each step protects your rights.

Where to Get Legal Forms

You can find the necessary forms:

  • At stationery stores (ask for “Blumberg” forms)

  • From the court clerk’s office

  • Online: www.nycourts.gov

Forms you may need include:

  • The Answer

  • Bill of Particulars

  • Affidavit of Service

What Happens After You File an Answer?

Next, both sides begin discovery, where they exchange information. Discovery may involve:

  • Requesting documents

  • Sending written questions (interrogatories)

  • Taking sworn testimony (depositions)

Through this process, each side prepares for trial.

What to Expect at Trial

During the trial:

  • The creditor must prove the debt

  • You must present your defenses and counterclaims

You can use:

  • Your own testimony

  • Witnesses

  • Documents (e.g., contracts, receipts, letters)

After hearing both sides, the judge will issue a decision.

Can You Settle Before Trial?

Yes, and the court may even encourage it. Settlement options include:

  • Paying less than the full amount

  • Creating a payment plan

However, be cautious. Many agreements require full payment if you miss even one installment. Before agreeing, ask:

  • Can the creditor enforce a judgment?

  • Are you “judgment proof”?

Understanding the terms helps you avoid surprises later.

If the Court Rules Against You

If you lose the case, the court will issue a money judgment. The creditor can then:

  • Seize your bank account

  • Garnish your wages

  • Put a lien on your property

Each of these actions has limits and procedures, which we explain below.

What If You Didn’t Know About the Judgment?

Sometimes, people discover a judgment years after it was issued. This often happens due to improper service—such as court papers sent to an old address.

If you never appeared in court, the creditor likely obtained a default judgment.

How to Vacate a Default Judgment

To undo a default judgment:

  1. Visit the court where the judgment was entered
  2. File an Order to Show Cause
  3. Explain:
  • Why you didn’t appear
  • What defenses you have

If the judge signs your order, the case goes back on the court calendar. You’ll then appear in court and serve the documents on the creditor’s attorney.

How Creditors Locate Your Assets

Creditors may use tools such as:

  • Subpoenas

  • Depositions

  • Written questions

They may ask for:

  • Bank account details

  • Employment information

  • Property you own

This process helps them decide how to collect on the judgment.

Do You Have to Respond to a Subpoena?

Yes, you must respond honestly. Ignoring a subpoena or giving false answers may result in contempt of court. However, if the request is abusive, you may request a protective order from the judge.

Enforcing a Judgment

Here are common methods creditors use:

Garnishing Wages

The court can allow up to 10% of your gross income or 25% of your disposable income to be taken—whichever is less. But your income cannot fall below 30x the federal minimum wage after garnishment.

The income execution notice tells you how to challenge the garnishment if necessary.

Restraining Notices on Bank Accounts

A creditor can freeze your bank account by sending a restraining notice. The bank must notify you within four days. You must then be informed that the following funds are exempt:

  • Social Security

  • SSI and veterans benefits

  • Disability and workers’ compensation

  • Unemployment benefits

  • Child support or alimony

  • Public assistance

  • Pensions (public or private)

If exempt funds are frozen, contact the creditor’s attorney immediately with proof.

Seizing Personal Property

A sheriff may seize non-exempt personal items, such as luxury goods. However, the law protects essential items like:

  • Basic furniture

  • One TV and one radio

  • Personal items (e.g., wedding ring, work tools)

If a computer or vehicle is necessary for your job, you may request that it be treated as a tool of the trade and protected.

Placing a Lien on Real Estate

If you own a home, a money judgment creates a lien for 10 years. You must pay off the lien before you can refinance or sell the property.

Helpful Resources

For More Information or Complaints

Federal Trade Commission (FTC)
📞 1-877-FTC-HELP (1-877-382-4357)
🌐 www.ftc.gov/ftc/consumer.htm

Credit1Solutions.com
📞 1-877-782-7839
Need a consumer credit reporting lawyer? Contact our office for help.