Overview: The Phases of a Debt Lawsuit
A debt collection lawsuit can be divided into phases. And understanding the basic timeline and process of a lawsuit can help you plan your strategy. Lawsuits are kind of a weeding-out process. Very few cases actually go to trial. Most cases are settled, or decided by a motion or dismissed for some other reason. But you need to understand the process of a lawsuit. So here are the basic phases of a debt collection lawsuit.
Phase 1: The Summons, Complaint & Answer
Being served with a summons and complaint is often the first time the consumer learns of the lawsuit. These are the documents that begin a lawsuit. They are prepared by the debt collector’s attorney and usually served on you by a process server.
The summons is essentially a court order for you to respond to the lawsuit. It is the document that the court signs or stamps that is ordering you to take action. It will usually contain general instructions on what you need to do and when. In Arizona, you have 20 days to file a response to a lawsuit. You get 30 days to respond if you were served out of state, but this is rare. The 20 day time period is usually the deadline.
The complaint is the document that contains the allegations against you. This is where the debt collector spells out the basics of their case against you. Usually, it will state that you had some sort of credit contract that you breached, like a credit card agreement. It may state other legal theories against you also. But essentially, they are saying that you owe money and haven’t paid.
The first and one of the most important things to do is respond to the complaint. Usually, this means filing an answer to the lawsuit. In some cases, we may file a motion to dismiss if there are grounds for such a motion.
It cannot be overstated how important it is to properly respond to the lawsuit. Failure to do so can result in a judgment against you, garnishment and other collection remedies. Once you’ve responded to the lawsuit, the next phase will begin.
Phase 2: Discovery
The discovery phase of the lawsuit is when the parties learn about each other’s case, legal arguments, defenses, witnesses and evidence. Each party is entitled to “discover” relevant information about the other party’s case. In a typical debt collection lawsuit, there are two types of discovery documents.
In Arizona, the parties are supposed to exchange disclosure statements 40 days after the answer is filed with the court. That means that both the debt collector and the consumer should prepare their own disclosure statement and provide it to the other party. The disclosure statement contains basic information about the claims in the lawsuit, defenses asserted, witnesses that may be called to testify if it goes to trial, evidence and documents that may be used at trial. Disclosure statements may be amended or supplemented as more information is learned, new documents are obtained, etc.
Arizona has a fairly comprehensive requirement for disclosure statements and a continuing duty to supplement it. Other states may be more or less strict in that regard and may have different deadlines for disclosure.
Usually, after the disclosure statements are exchanged (or sometimes simultaneously), the parties may request specific items from each other. There are generally three types of discovery requests:
- Request for Admissions
- Request for Interrogatories
- Request for Production of Documents
A request for admissions is a series of questions you are asked to either admit or deny. A request for interrogatories is just written questions for you to answer that usually contain some explanation or objection. A request for production of documents is a request that you provide some specific document or documents. Both the debt collector’s attorney and you the consumer can send discovery requests to the other party. In fact, we typically send very specific discovery requests in debt collection cases.
Phase 3: Motions
Motions can be filed at any time during a lawsuit. But they usually come during or after some discovery has occurred. The two most common motions in a debt collection case are a Motion for Summary Judgment and a Motion to Dismiss. The debt collector is most likely to use the motion for summary judgment against you.
Essentially, a motion for summary judgment is the debt collector saying: “Look Judge, the evidence and documents are clear, we don’t need a trial, please just go ahead and give us a judgment against the debtor now.”
A motion to dismiss may be used by a consumer debtor. It is usually filed early on in the case, even before the answer is filed. It should only be used if there is some legal basis for dismissing the case early on that doesn’t involve a lot of factual disputes. A consumer can also file a motion for summary judgment if they want.
Phase 4: Mediation or Arbitration
Depending on which court you are in, you may be required to participate in either a mediation, an arbitration or both.
A mediation involves sitting down with a neutral third party (often another attorney or court personnel) that is supposed to help the parties try to reach a settlement. The decision to settle is voluntary, but you may be required to participate in good faith.
An arbitration is like a mini-trial. You will be assigned an arbitrator, usually another attorney. Each side will present their case to the arbitrator who will then make a decision about who should win. The arbitrator will then issue a ruling that can become a judgment. In Arizona, either party may appeal the arbitrator’s ruling and the case proceeds on to a normal trial, almost as if the arbitration never happened. The process is aimed at helping to weed-out smaller cases.
Phase 5: Court Hearings
Like motions, court hearings can happen at any time. But usually, they happen after the case has progressed for awhile. If you are in an Arizona justice court (which is for claims under $10,000), the court may set a pre-trial conference about 60 days after you file an answer. If you are in superior court (cases over $10,000) there may not be a hearing until much later in the case.
Typically, court hearings are scheduling related and they are where the judge tries to move the case along and get deadlines set or select a trial date.
Phase 6: Trial
Once a trial date has been set by the court, the parties will begin preparing for trial. That means getting documents, evidence and any witnesses ready. The trial is typically the last thing that will happen in a case. And the outcome determines what happens next.
Types of Courts: Justice Court vs. Superior Court
In Arizona, most debt collection cases will take place in one of two different types of courts. The first is called Justice Court. It is essentially a small claims type of court for cases in which the amount in dispute is $10,000 or less. Note that this does not include interest and costs. Things tend to move a little quicker in Justice Court and the judges are not required to be attorneys. For these reasons, debt collectors may choose to squeeze a bigger case into justice court by only seeking the $10,000 limit.
Superior Court is for cases over $10,000. In other words, if you are being sued for an $18,000 credit card debt in Arizona, it will be in Superior Court. The judges are attorneys and the cases tend to move slower.
Other states may have slightly different court systems and may call the courts different names. For example, some states may call it District Court or Supreme Court or something else. You should check the amount in dispute for the court you are being sued in to make sure the debt collector has sued you in the right court.