New 'Form Answer' and updates coming
There are big changes happening in the world of debt collection in Maine as of Fall, 2021. Debt collection lawsuits that used to be handled in Small Claims Court are moving to Maine District Court. This process will be different and more formal - but may give you a better chance to use a legal defense. We are working to update all of our debt collection guides to reflect these changes. We have started with a basic guide: What happens if I am sued for a debt in Maine District Court?
What is this information about?
If you owe someone money, they can try to collect it from you by taking you to court. This guide will help you understand the court process and the rights you have. You are the debtor. The person who you owe money to is the creditor.
The creditor may not be the person you made the deal with. Creditors sell their debt accounts to debt buyers. Then the debt buyers try to collect on the debts. Sometimes the first debt buyer sells an account to another debt buyer. This can happen over and over again.
This guide covers regular unsecured consumer debt, like fuel bills and credit card debts. It does not cover:
- child support debt
- student loans
- fines or taxes owed to the government
- home foreclosures
- secured debts*
* A secured debt is one where you put some property up as collateral to get a loan, like a car loan or home mortgage.
Is there anything I can do to avoid being sued over a debt?
If you get a 30-day demand letter, you may want to send a letter back to the creditor. Do this before the end of the 30 days. This could prevent a law suit.
You can do a few things in your letter:
- If you don't think you owe the debt, say why you believe that you don't owe the debt.
- You can try to convince the creditor to stop trying to collect the debt because your income and assets are exempt (see lists of exempt property and earnings)
- If you know you owe the debt, and you can pay, you can offer to pay a lump sum or to set up a payment arrangement.
You have the right to ask for:
- the amount of the debt
- the name of the creditor they say you owe
- proof that the debt exists
- the name and address of the original creditor, if different from the current creditor
If the demand letter does not give this information, ask for it.
Finally, in your letter, explain any legal defenses that you think you may have. Read more about legal defenses. If the creditor's lawyer agrees with your defenses, they may decide not to sue you.
Here is a sample letter disputing the debt and asking for "validation" of the debt. You can use this as a model. You can add any other legal defenses you may have, like an expired "statute of limitations," or that you are "collection proof" because of your low income and minimal assets.
What if they sue me?
If you didn't settle your debt by now, you may be sued. There are 2 ways a creditor can do this:
- Small Claims Court (within the District Court), or
- District Court
What if I owe the debt and don't have a legal defense?
Lump sum payment
If you know you owe the debt and you are able to offer a lump sum payment, be ready to prove your income and expenses. You need to convince the creditor that you are offering the most that you can afford to pay. Make an agreement only if you can afford it.
The creditor may want you to sign an agreement. Read it carefully and get answers to any questions you have before you sign it. Once you pay, be sure to get a written statement from the creditor that the debt has been settled in full. Keep the statement in case someone else tries to collect on the same debt in the future.
Be aware that the cancelled portion of some debts may be reported to the IRS. You may have to pay income taxes on the amount of the debt that was “written off
Weekly or monthly payments
If you know you owe a debt and you want to offer weekly or monthly payments, be ready to prove your income and expenses. Offer only what you can realistically afford.
If you agree to payments, the creditor may still want to get a court judgment against you, to make sure you pay. They will want a signed agreement. They may suggest that you accept service on a court complaint (instead of having you served by a sheriff). Part of the deal will be that you agree to court judgment for the amount of the debt. Again, read everything you are asked to sign carefully. Get answers to all questions you have before you sign.
If you agree to a court judgment, the creditor will most likely file a lien against any real estate you own. There are rules that the creditor has to follow about what property they can put a lien on. (see lists of exempt property)
After you make your final payment, get a written statement from the creditor that the debt has been paid in full. Make sure that the creditor removes any lien it has filed against your property. Keep these documents in case someone else tries to collect the same debt in the future.
Are you “collection proof”?
If you know you owe the debt, but your income and assets are all exempt from collection, show this to the creditor. They will probably want proof of your exempt income, like a statement of your monthly income or a copy of your tax return. If the creditor knows that your income and assets are exempt, they may not bother to sue you
Remember: Creditors often sell accounts they can't collect on. So you may still be contacted by a different debt buyer later on.
What happens if I'm sued in Small Claims Court?
The Clerks of the District Courts can provide you with a free brochure on Small Claims Court. It explains how Small Claims Court works and your appeal rights.
Basically, Small Claims is a simplified court process. Small Claims are limited to $6,000.00. Read the Court’s brochure to learn more about the Small Claims process. You can be summonsed to Small Claims Court by mail or by sheriff service.
If you get a Small Claims summons, go to court on the day listed on the summons or the notice you get from the court clerk. You may be required to go to a mediation session before any hearing with a judge. Mediation is a chance to reach an agreement if possible. But don't agree to payments that you can't make. If you can't reach an agreement during mediation, you will have a hearing with the judge. The hearing may be that day or at a later date. When your case is called, tell the judge your side of the story. Bring all papers, photos or records you may need to support your story. You should also bring any important first-hand witnesses.
Read more here about some common defenses where the company suing you is not the company you borrowed the money from (or, in a credit card case, not the credit card company you signed up with).
If you don't think you owe the debt, or you think the amount is wrong, go to the court hearing. If you don’t go, you will lose the case. But, it is not a crime if you don’t go.
If you go to court and lose, you have the right to appeal. The appeal process is explained in the brochure available from the clerk. An appeal is hard to do without a lawyer.
To learn more about possible legal defenses and filing written responses, read more below. In Small Claims Court, you don't have to file an answer (or a discovery request). But, you may want to do this to show the court how serious you are. You can file these papers up until the time of the court hearing date.
What happens if I'm sued in regular District Court instead of Small Claims Court?
Start with this guide: What happens if I am sued for a debt in Maine District Court?
Debt collection lawsuits that used to be handled in Small Claims Court are moving to Maine District Court. This process will be different and more formal - but may give you a better chance to use a legal defense. We are working to update all of our debt collection guides to reflect these changes.
And remember this about District Court: When you are sued in District Court, you must file a written answer within 20 days of the day the Complaint and Summons are delivered to you. If you do not file a written answer within 20 days, you will likely lose the case by default.
How do I write and file court papers?
How do I file my answer?
You must complete the form answer that is attached to the complaint and file it with the court within 20 days.
You can also find the form answer here.
Why do I need to file an answer? What will happen if I don't?
If you do not file an Answer with the Court within 20 days, the Court may automatically decide you owe the debt. They can decide you owe all the money the plaintiff is asking for - whether you actually owe it or not. But filing an answer will prevent this 'default judgment' from happening!
How do I fill out and "file" the answer?
Filling out the Answer form
First, fill out the District Court location and the parties names at the top of the form. The Plaintiff is the creditor - the company or person who claims you owe them money. You are the Defendant.
Next, check the box next to the statement:
I am the defendant in this case. I believe there are good reasons a judgment should not be entered against me on some or all of the claims raised by the plaintiff. I deny at least some of the plaintiff’s statements in the complaint. I assert all affirmative defenses that apply to my case.
By checking this box, you are telling the court that you may have a defense to the case. This could be that you do not owe the debt, or the amount is wrong, or some other reason.
Finally, make sure to sign the form and fill out all the other sections at the bottom of the form (printed name, mailing address, email address, phone number).
"Filing" your answer
Once you complete the Answer form, you must mail it to the Court at the location listed in the Summons served with the Complaint. Or you can deliver it to the clerk of that court. You must also mail a copy to the Plaintiff’s attorney and remember to keep a copy for yourself.
You may want to include with your Answer a "Notification of Discovery Service." This is a legal process for getting answers to the questions you have, like:
- Do I really owe the amount they say I owe?
- How did the Plaintiff become the owner of my debt? Do they have “standing” to sue me?
You may want to use our Sample Discovery Request. The Plaintiff must respond to your requests in writing before the court hears the case. This may help you to better understand the details and your possible legal defenses.
What happens next in District Court?
Again, it will be difficult for most people to do this without a lawyer. But the most important thing is to read everything you get from the Court and from the Plaintiff's lawyer. If it says you must do something by a certain date, you need to do that before the deadline. Otherwise, the Court will probably "default" you and you will lose. Most likely, you will go through several court procedures leading up to a trial. This includes writing and filing papers and going to court meetings. Again, do the best you can to respond to every notice and document you get. And show up when the court schedules a meeting or hearing.
If the Plaintiff's lawyer says that they are giving up on the case, ask the judge to issue an order saying the case is "dismissed with prejudice." If you get a simple dismissal - which means you win - it won't stop this creditor, or another creditor who "buys your debt," from suing you again on the same debt. To put the matter to rest forever, the dismissal must be a "dismissal with prejudice."
What if I go to court and lose the case?
If the court rules against you, there will be a judgment entered against you. This is a formal finding that you owe a certain sum of money to the person or company that sued you. You have appeal rights. If you want to appeal, you must do this within 21 days of the judgment going on the court record. Try to get a lawyer’s advice immediately if this happens. If you don't appeal, the judgment becomes “final” and can be enforced for the next 20 years.
This probably won't be the last time you have to go to court. The creditor has the right to find out if you can afford to pay. A creditor who has a judgment against you can subpoena you to appear at a disclosure hearing. At this hearing the judge will decide if you can afford to pay the debt. We have a guide about the Disclosure process: How To: Get ready for a Disclosure Hearing in Maine
What if I can't afford to pay the judgment?
Many people cannot afford to pay their bills. If you cannot afford to pay, you may be “collection proof.” The judgment is considered “uncollectable.” You cannot be punished, fined or jailed if you truly cannot afford to pay your debts.
But, the creditor has the right to find out if you can afford to pay. A creditor who has a judgment against you can subpoena you to appear at a disclosure hearing. At this hearing the judge will decide if you can afford to pay the debt. We have a guide about the Disclosure process: How To: Get ready for a Disclosure Hearing in Maine
If you are served with a subpoena for a disclosure hearing, you must go to court. If you don't, the creditor can ask for a civil order of arrest to make you show up at court. They can also ask for an order to garnish your wages. Learn more about Disclosure hearings in our guide.
Is any of my income or property safe from the creditor?
Yes. Maine law recognizes that there are certain basic things a person needs in order to live. Some property and income cannot be taken from you unless you agree.
Some property is totally exempt from debt collections (unless you have put the property up as collateral). This means the creditor can’t take this property. “Equity” means the amount of the value of your property which is available to you, after accounting for any existing liens. These items are exempt:
- Equity in your home up to $47,500.
- This exemption increases to $95,000 if:
- a minor dependent lives with you, or
- you or are at least 60 years old or disabled, or
- you have a dependent who is at least 60 years old or disabled.
- If you don’t own a home, you can apply this exemption to a burial plot.
- Equity in one vehicle up to $7,500.
- Equity in “tools of the trade” of up to $5,000.
- Your clothing up to $200 in value for each item.
- Equity in household furniture, appliances, and other household goods up to $200 for each item.
- Jewelry up to $750 in total value, and your wedding and engagement rings.
- Life insurance contracts (and up to $4000 in any accrued dividends, interest, or loan value in such contracts).
- Certain farm equipment if you are a farmer.
- A fishing boat if you fish commercially.
- Certain amounts of heating fuel and cord wood.
- Your furnace, heating stoves and one cook stove.
- Prescribed health aids.
- A supply of food, seed, and gardening tools.
- You may also claim a $400.00 exemption on any property whether or not otherwise exempt.
If you have not used all of your home equity exemption (the first item on this list), you may use up to $6,000.00 of the unused portion to protect your clothing, household goods, tools of trade, or personal injury award.
From your weekly income or paycheck, this amount is protected from debt collection:
- $290.00 (40 hours x $7.25, the federal minimum wage), or
- 3/4 of your take home pay, whichever is more.
Important Note: Different rules apply to some special categories of debt, like child support.
Exempt Sources of Income
These sources of income are exempt from debt collection:
- Social Security & SSI
- Veterans Benefits
- Worker’s Compensation
- Maine State Retirement Benefits
- Unemployment Compensation
- Alimony or support necessary for support of debtor or dependents
- Other forms of public aid
- Earned Income Tax Credit and Additional Child Tax Credit
Some other kinds of income are exempt, like: income from certain pension funds and retirement plans, certain life insurance payments, and certain types of damage awards. Get legal advice if you have questions about this kind of income.
If your exempt property, income, or earnings are taken by order of the court, seek legal advice immediately. You can call Pine Tree Legal Assistance for help.
Important Note: These rules may not apply if you have put your property up as “collateral” to secure a loan, such as a car loan or a home mortgage. Remember, these rules do not apply to certain types of debt, such as child support.
The State of Maine Office of Consumer Credit Regulation publishes several booklets on related topics in their Downeaster Guide series:
Guide to Debt Collection & Repossession
Pocket Credit Guide
Consumer Guide to Cut-Rate Auto Financing
Guide to Credit Bureaus & Credit Reports
These booklets are free to Maine residents. Order by calling: 1-800-DEBT-LAW or get online versions of some of these publications.
The Office of Consumer Credit Protection may also be able to help you with specific problems and questions regarding consumer credit issues. Their online services include a sample letter to request a free credit report, and an online complaint form if you believe that a creditor, debt collector, credit bureau or other business regulated by the CCP may have violated the consumer credit laws.
Note: This is only a brief summary of your rights. There are other methods creditors can use to collect a debt from you. If you have more questions, contact your nearest PTLA office.
Updated August, 2017