Debt Lawsuits on the Rise

American households are struggling under a collective debt burden of almost $19 trillion dollars. Debt collectors are intensifying their efforts to recover this money, with a recent report from the Pew Charitable Trusts revealing a sharp increase in debt lawsuits. According to the report, more debt holders are taking debtors to court in an attempt to recoup their losses.

Debt lawsuits declined during the pandemic but have since surged, with some states experiencing a significant spike in cases. Missouri, for example, saw a nearly threefold increase in debt lawsuits in 2025 compared to 2019.

The rise in debt lawsuits is closely tied to the growing number of credit card delinquencies and living costs. However, navigating these complex legal proceedings can be daunting for consumers, and the consequences of failing to do so can be severe.

Default Judgments: The Consequences of Not Showing Up

When consumers fail to appear in court, they risk facing default judgments, which can have far-reaching consequences. According to Lester Bird, senior manager at the Pew Charitable Trusts and lead author of the report, around 70% of debt lawsuits end in default judgments on behalf of the creditor.

These default judgments can result in the creditor garnishing the consumer’s wages or wiping out their bank account. In some cases, the creditor may even put a lien on the consumer’s property. The Consumer Financial Protection Bureau notes that debt collectors can take up to 25% of a consumer’s paycheck if they earn more than $1,256.66 per month.

Despite the risks, many consumers fail to appear in court, with less than 10% of defendants in debt cases having the benefit of legal counsel. Hiring a lawyer can significantly reduce the likelihood of a default judgment, but for many consumers, this is a luxury they cannot afford.

States Taking Action to Protect Consumers

Some states are beginning to enact laws that protect consumers from debt buyers. Virginia and Washington have recently passed legislation requiring debt lawsuits to be more transparent, with courts checking to ensure that the information provided is accurate.

Other states have passed laws that prohibit debt collectors from taking all of the money out of a debtor’s bank account, leaving some funds for essential expenses. However, the Pew Charitable Trusts suggests that states can do more to protect consumers from debt lawsuits.

The organization recommends simplifying the lawsuit process for consumers who do not have legal counsel and requiring proof that someone has been properly served through GPS verification. By taking these steps, states can help ensure that consumers are better equipped to navigate the complex world of debt collection.

Protecting Consumers from Debt Lawsuits

While some states are taking steps to protect consumers, more needs to be done to address the issue of debt lawsuits. The Pew Charitable Trusts suggests that states can take several steps to improve the process, including:

• Simplifying the lawsuit process for consumers who do not have legal counsel
• Requiring proof that someone has been properly served through GPS verification
• Ensuring that debt collectors are transparent in their dealings with consumers

By taking these steps, states can help ensure that consumers are better equipped to navigate the complex world of debt collection and avoid the severe consequences of default judgments.