If the above measures have all failed to resolve a debtor’s default, creditors may file suit in local state or federal court. This makes the debt collection a matter of public record. There are very few available defenses, except those permitted by the Uniform Commercial Code (UCC) for defective products
Creditors’ lawsuits are generally grounded in contract. Damages are limited to the face amount of the loan balance, accrued interest, (sometimes) attorney fees, and court costs. Creditors will sue for the entire balance owed on the account, not just the payments in arrears. They seldom ask other creditors to join them in a suit, even if those other creditors also have defaulted loans. This is because there seldom is sufficient assets to cover the entire judgment immediately, and the creditor that filed suit wants to be first in line. If a defendant-debtor fails to appear in response to the lawsuit, a default judgment will likely be entered against him or her.