Why Debt Collection Lawsuits Are About to Explode (2025 Data)

Debt collection lawsuits fell off a cliff in 2020. Courts shut down, stimulus checks flooded bank accounts, and eviction moratoriums made collectors pause. For three years, the industry went quiet.

That pause is over.

US household debt now sits at $17.5 trillion—up 39% since 2013. Credit card balances alone jumped $150 billion in 2024. Meanwhile, major debt buyers like PRA Group and Encore Capital spent 2023 and 2024 purchasing charged-off accounts at record rates. They're not buying debt to frame it.

The math is simple: more debt plus aggressive purchasing plus courts back at full capacity equals a wave of lawsuits. If you're carrying balances you can't pay, you need to understand what's coming and what you can do about it.

The Debt Lawsuit Volume Dropped, Then Debt Kept Climbing

Look at the gap. From 2000 to 2019, debt collection case filings tracked pretty closely with household debt levels. When consumer borrowing rose, lawsuits rose. When credit tightened after 2008, filings dropped.

Then COVID hit. Lawsuit filings in major counties across California, Florida, and Texas fell by 35-45% between March 2020 and December 2022. Courts slowed. Collectors got government pressure to ease up. Consumers had temporary cash from stimulus programs.

But household debt never stopped growing. Credit card debt crossed $1 trillion in 2023. Auto loans hit $1.6 trillion. Medical debt still crushes millions of families. The debt existed,it just wasn't being pursued in court.

That forbearance wasn't charity. It was a delay.

Debt Buyers Spent 2023-2024 Stockpiling Accounts

Debt buyers purchase charged-off accounts from original creditors for pennies on the dollar, then sue to collect the full balance plus interest and fees. Two of the largest buyers,PRA Group and Encore Capital,pulled back purchases in 2020 and 2021. Their 10-K filings show they bought 40% less debt in 2021 than in 2019.

Starting in mid-2022, that changed. Both companies ramped up acquisitions. PRA Group's debt purchases increased 60% from 2022 to 2023. Encore followed the same trajectory. They're not buying debt to negotiate,they're buying it to sue.

These portfolios take 12-24 months to work through internal collections before lawsuits get filed. The debt purchased in 2023 is hitting the court system now. The debt purchased in 2024 will hit in 2025 and 2026.

Original Creditors Are Filing Again Too

Debt buyers get attention, but original creditors,banks, credit card issuers, hospitals,still file more lawsuits than anyone else. Capital One, Discover, Citibank, and Synchrony Bank were responsible for over 200,000 lawsuits annually before the pandemic.

Their volume dropped during COVID, but internal data shows it rebounded sharply in 2024. These creditors have in-house legal teams and established relationships with high-volume law firms. When they decide to sue, they sue fast and in bulk.

If you're behind on a credit card from a major issuer, don't assume they'll wait forever. Once your account is 120-180 days past due, you're in the danger zone. They'll either sue directly or sell your debt to a buyer who will.

The Law Firms That File Thousands of Cases Per Month

Debt collectors don't sue you themselves. They hire law firms that specialize in high-volume debt litigation. These firms file hundreds or thousands of lawsuits per month using automated systems.

The top debt collection law firms from 2000-2023 include Pressler and Pressler (New Jersey/New York), Covington & Burling (national), Mandarich Law Group (California/Nevada), and Markowitz & Richman (Florida). These firms represent the biggest debt buyers and original creditors.

In 2022-2023, firms like Arias Sanguinetti Wang & Torrijos (California) and Barron & Newburger (Texas) ramped up filings. They operate like factories: automated complaint generation, process servers in bulk, default judgments by the thousands.

If you get sued by one of these firms, you're not dealing with a scrappy solo attorney. You're facing an industrial litigation machine. But that machine has weaknesses. These firms rely on you not responding. When you file an Answer, you force them to actually prove their case,and many can't.

Most People Don't Respond to Debt Lawsuits

Here's the brutal stat: over 70% of consumers sued for debt never file a response. They ignore the Summons and Complaint, and the collector wins by default. Once that default judgment hits, the collector can garnish wages, freeze bank accounts, and place liens on property.

Why don't people respond? Some never receive proper service. Some don't understand the paperwork. Many assume they can't afford a lawyer, so there's no point. Others are paralyzed by shame or fear.

But you don't need a lawyer to respond. You need an Answer,a document that admits or denies the claims in the lawsuit and raises defenses. Filing an Answer stops the default judgment clock and forces the collector to prove you owe the debt, that they have the right to sue, and that the amount is correct.

Debt collectors lose or settle a huge percentage of cases where the defendant actually shows up. They're counting on you not fighting back.

What You Can Do If You're Sued

If you've been served with a debt collection lawsuit, you have a short window to respond,usually 20-30 days depending on your state. Miss that deadline and you lose automatically.

Start by reading the Complaint. Who's suing you? Is it the original creditor or a debt buyer? What are they claiming you owe? Do they include an account number, payment history, or signed contract?

Next, draft an Answer. In most states, this is a numbered response to each allegation in the Complaint. You can admit what's true, deny what's false or unverifiable, and claim you lack sufficient information for anything unclear. You can also raise affirmative defenses,legal reasons the lawsuit should fail even if the debt is real.

Common defenses include:

• Statute of limitations: The debt is too old to sue over (varies by state, usually 3-6 years).
• Lack of standing: The collector can't prove they own the debt.
• Improper service: You weren't served correctly.
• Failure to state a claim: The Complaint doesn't include required details.

File your Answer with the court and serve a copy on the plaintiff's attorney. This one action changes everything. Suddenly, the collector has to work for the judgment. Many will offer settlements rather than take the case to trial.

If you need help drafting an Answer, tools like SoloSuit let you generate a state-specific response in 15 minutes. You answer questions, and the software builds the document. You can file it yourself or pay a small fee to have it filed for you. That's infinitely cheaper than hiring a lawyer for full representation, and it's infinitely better than ignoring the lawsuit.

Settlement Is Often the Best Outcome

Once you file an Answer, the collector's attorney will usually reach out to negotiate. They'd rather settle for 40-60% of the balance than spend months litigating a case they might lose.

If the debt is legitimate and you can scrape together a lump sum, settlement is smart. Get the agreement in writing. Make sure it states the collector will dismiss the lawsuit with prejudice and report the account as settled to credit bureaus. Never agree to a payment plan without court approval,if you miss a payment, they'll just get the judgment anyway.

If you can't afford any settlement, bankruptcy might be the better path. Chapter 7 wipes out most unsecured debt in 3-4 months. Chapter 13 restructures debt into a 3-5 year payment plan. Either option stops lawsuits, wage garnishments, and collection calls immediately through the automatic stay.

You can check if you qualify for Chapter 7 bankruptcy in under two minutes using our bankruptcy screener. If you qualify, you can file without an attorney using our step-by-step tool at talkaboutdebt.ai/file-bankruptcy.

Why Lawsuits Are About to Surge

Three forces are converging:

First, courts are back. Pandemic backlogs are clearing. Judges are moving cases faster. Virtual hearings make it easier for collectors to show up without flying attorneys across the country.

Second, debt buyers are armed. The portfolios purchased in 2023 and 2024 are moving through the collection pipeline. Expect filings to spike 30-50% in 2025 and 2026 compared to 2022 levels.

Third, consumers are broke. Credit card delinquencies hit 3.2% in Q4 2024,the highest since 2010. Savings rates dropped to 3.4%, down from 7.5% pre-pandemic. Inflation shredded budgets. People are making minimum payments or skipping them entirely.

When you combine high debt, low savings, and aggressive collectors, you get a lawsuit boom. The industry has been coiling for three years. It's about to spring.

The Lawsuit Doesn't Mean You're Powerless

Debt collectors want you to feel helpless. The legal jargon, the tight deadlines, the fear of court,it's designed to make you freeze. But you're not powerless. You have rights, and you have options.

If the debt is yours and you can pay something, settle. If the debt is questionable, fight. If you're drowning in debt from multiple sources, bankruptcy might give you a fresh start.

The worst move is doing nothing. A default judgment follows you for years. It's a public record, it tanks your credit, and it gives the collector legal weapons to seize your money.

You've got 20-30 days from the date you're served. Use them.