How Paperwork Prevents Consumers From Participating in Lawsuits

“NOTICE! You have been sued. The court may decide against you without your being heard unless you respond within 30 days.”

This is the first thing that Californians read when they have been sued in a debt collection case. At this point, either on their own or with the help of an attorney—and only 2.3% of these Californians are represented by a lawyer—they have three options:

1. Do nothing.
2. Reach out to the company suing them to negotiate an agreement outside of court.
3. Respond by filing a document with the court (known as an answer) to dispute the lawsuit and reduce the risk of having a judgment automatically entered against them.

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Only about 5.5% of them choose option 3, which means navigating procedural hurdles. As a first step, they must pay at least $225 to file an answer, for which there is no single form. If they can’t afford the $225 and want the fee waived, they must complete another form and may have to provide information about their household income and expenses, their financial accounts, and the value of personal property, including cars, boats, other vehicles, and real estate.

Not surprisingly, most people don’t choose option 3. And for those who don’t, 56% of cases end with the plaintiff winning a default judgment because the person sued did not participate in the lawsuit. Regardless of whether they did not receive notice, couldn’t figure out the next steps, or chose not to participate, the effect of a default judgment is the same. Once the court issues the judgment, the plaintiff can begin to garnish money from wages, bank accounts, or assets to satisfy the original debt and, often, to pay additional court fees. Up to 20% of the consumer’s weekly paycheck can be seized, further destabilizing families that may already be struggling to make ends meet.

Only four states allow a person who is sued to show up to court in all debt cases without filing a written answer, bypassing the costly and time-consuming barriers associated with option 3. (In 19 other states and Washington, D.C., if they are sued in small claims court, they have the option to file an answer or just show up to court, but if sued on the regular civil court docket, they may have to answer.) New research suggests that all parties benefit when the requirement to file a written answer is removed.

The benefits of letting people who have been sued to show up to court

Compared with jurisdictions such as California, those that are “answer optional” generally see lower default judgment rates and higher rates of participants reaching agreements. In those places, when a consumer is sued, they are given a court date to show up for an initial appearance (see Figure 1). Depending on the jurisdiction, this initial appearance may be referred to as a hearing, settlement conference, case management conference, or something else. In an answer-optional court, the person who has been sued can file a formal written document to dispute the debt or share that information at the initial appearance. Because debt collection lawsuits rarely operate as true adversarial proceedings between equal parties, getting people to show up to court can be a win-win for both.

Indeed, a new analysis shows that eliminating the answer requirement could help more people engage in their cases and resolve their debts. January Advisors, a data science consulting firm, used data from cases in Minnesota and Marion County, Indiana—two jurisdictions where the plaintiff can choose to file the case in small claims court with no answer versus general civil court with a required answer—to estimate the likelihood of a case being filed in a court with an answer requirement versus an answer-optional court. They then applied those probabilities to California to estimate how many more people would show up to court if there were no required answer. Using this model, January Advisors projected that 5,000 to 12,400 more consumers would show up to court to resolve their cases and dispute bad debts in an answer-optional court.

Consumers and creditors report positive outcomes when all parties appear in court

Data shows that when cases are resolved with consumers entering into affordable payment plans, there are benefits for the plaintiffs, who are more likely to be repaid, and for the consumers, who avoid the compounding economic consequences of garnishment.

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For plaintiffs, increased participation often leads to better collection of their claimed debt. Analysis from the Consumer Financial Protection Bureau found that lawsuits that end in a default judgment (an automatic win for the plaintiff when the person being sued does not appear in court) have lower recovery rates of the original balance than do cases that end in other kinds of judgments. In addition, research from Virginia shows that 78% of bank garnishments yielded no money for the plaintiff. This might be because the person who is being garnished no longer had an account with that bank, had an account with a zero balance, or had only protected assets, such as Social Security benefits.

For consumers, appearing in court to negotiate a payment plan is often more beneficial than not showing up, which, as noted above, can lead to a default judgment, added fees, and, in many states, wage garnishment of up to 25%.

To gauge whether agreements are resulting in outcomes that are substantively different from default judgments, The Pew Charitable Trusts recently analyzed a random sample of 400 cases in Missouri and Connecticut that were filed in 2024 and ended in agreements. Pew found that:

• Showing up to court gives people an opportunity to negotiate a lower debt. Forty-six percent of people sued in Missouri and 43% in Connecticut negotiated cost savings on the principal amount owed. For those who negotiated a reduction, it ranged from 20% to 38% of the principal in Missouri and 20% to 30% in Connecticut.
• Judgments regularly add court costs and attorney fees. Twenty-five percent of people sued in Missouri and 7.5% of people sued in Connecticut negotiated agreements under which they will pay only the principal—not court costs, attorneys fees, or service fees.
• Most people who entered an agreement stuck to the payment plan. Less than a third of cases in Missouri and less than 20% in Connecticut had a judgment entered for nonpayment that resulted in garnishment.

When people don’t attend court because they can’t figure out how to file an answer—or if it’s too costly—debt collectors and consumers lose this potentially mutually beneficial opportunity to negotiate.

Court systems are making moves to make answers optional

Some jurisdictions are beginning to eliminate the barriers to participation posed by answer requirements. For example:

• Michigan is considering a pilot where several courts would try an answer optional format.
• Maryland District Courts in Prince George’s County and Baltimore City docket debt collection lawsuits on the same day, enabling volunteer attorneys to provide day-of help to consumers who show up to court.
• The National Center for State Courts’ toolkit has in-depth case studies on how four jurisdictions docket their consumer debt cases to support participation, and a guide on how to pursue reforms to move to an answer-optional format.

By moving to an answer-optional format, courts can help people navigate their cases more easily and arrive at agreements that benefit all parties.

Casey Chiappetta is an officer and Eshaan Kawlra is a senior associate with Pew’s courts and communities project.