The next time you get a collection letter, pay attention to the details.
Collection letters are not lawsuits
A collection letter is just that: an attempt to collect a debt. It is not a lawsuit. It may be a precursor to a lawsuit, but in order to get sued, you need to be served with a summons and complaint.
That said, a collection letter may be provide clues about whether you will be sued and how soon. If you receive a collection letter from a law firm licensed to practice law in your state, a lawsuit may happen sooner rather than later. Pay close attention, however, as some law firms will send collection letters into states that they are not licensed to practice law in. If they cannot practice law in your state, they cannot sue you unless they retain an attorney licensed in your state.
If you receive a collection letter from a debt collector, they may pursue a lawsuit, but they will likely engage an attorney to assist with that process. The bottom line is that collection letters should get your attention, but they are separate and distinct from a lawsuit.
Law firms usually represent the creditor, they are usually not the actual creditor
Many consumers are confused when they are sent a letter or served with a lawsuit by a law firm representing a debt buyer they have never heard of. Many consumers assume that the law firm has purchased the debt and is suing the consumer. Consumers then get confused about who is suing them, what for, and why they don’t have any information.
In many cases, the law firm is separate and distinct from the creditor—the law firm represents the creditor. I have not encountered a law firm that buys debts, at least not directly. Some law firms own companies that buy debts and then represent those companies, but the firms do not directly purchase debt. For example, law firm owns “debt purchasing corp.” That company buys debts and the law firm then represents that company.
Whatever the basis for the confusion, some consumers then ignore a lawsuit, thinking they never had a debt with that law firm. Ignoring a lawsuit is a bad idea for lots of reasons. Most importantly, ignoring a lawsuit means the creditor can request an entry of default judgment—meaning you lose before the case even starts. Once a creditor obtains a default judgment your options are more limited and more expensive.
In Minnesota, pocket service is valid service
One of the most confusing issues for Minnesota consumers is “pocket service.” Pocket service allows a party to initiate a lawsuit without filing it with the court.
To many consumers a pocket lawsuit looks like a fake lawsuit because it does not have a court file number. To add to the confusion, consumers will call the court, and the court will say they don’t know anything about the case (because it has not been filed with the court).
I’ve helped lots of consumers answer debt collection lawsuits, and I have yet to run across a “fake” lawsuit. In other words, if you are served with a summons and complaint, you need to respond in writing within 20 days. It’s also a good idea to contact a consumer rights attorney to learn about all your options.