American households are almost $19 trillion dollars in debt — and debt collectors are going to great lengths to get that money back (1).
A recent report from the Pew Charitable Trusts found that more debt holders are suing debtors in court to get their money back (2). Debt lawsuits dropped in number during the pandemic, but have been climbing rapidly since.
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Pew tracked eight states' debt filings from 2019 to 2025. Of those, only Virginia had fewer filings last year than in 2019. Missouri had the highest spike since 2019 — with cases nearly tripling in 2025.
It's not a coincidence that debt lawsuits have gone up along with credit card delinquencies and living costs (3). But these lawsuits tend to be hard for consumers to navigate — and can come with hefty consequences for failing to do so.
Here's what happens when you're sued for outstanding debt, and what states are doing to make the process better for consumers.
Lester Bird, senior manager at the Pew Charitable Trusts and lead author of the report, said that around 70% of debt lawsuits end in a default judgement on behalf of the creditor. Not all default judgements are due to a borrower not showing up in court, but many of them are.
"We know that people rarely engage in these cases, and when they don't the consequences are severe," Bird told the Wall Street Journal (4). "They can have their wages garnished and bank accounts wiped to zero."
When your wages are garnished, the debt collector can automatically take a percentage of your paycheck away whenever you're paid. How much they can take depends on how much you make. For example, if you make more than $1,256.66 per month, they can take up to 25% of your paycheck (5).
The Consumer Financial Protection Bureau says debt collectors can also put a lien on your property if they get a default judgement (6).
Even fewer borrowers get the help of a lawyer when they're sued by debt collectors, even though they probably should. The Debt Collection lab found that hiring legal help was associated with over a 90% decrease in likelihood of a default judgement (7). But less than 10% of defendants in debt cases have legal counsel (8).
Source: Yahoo Finance Top News — This article was automatically imported from the source. Read full article at original source →
