When your debt is sold to a collection agency, some debt collectors might use the threat of court action to try to intimidate you in order to get you to pay up.

Technically, it is illegal for debt collectors or creditors to threaten court action if they do not intend to carry through with it.

Taking you to court is time consuming and expensive for them, and there is no guarantee it will result in the outcome the creditor wants.

So typically, a court action is a tactic to get you to pay up, or to obtain a default judgment against you if you don’t respond to a summons and complaint.

Here are 5 things you should know in case you are presented with a court action by a debt collector or a creditor.

1) Answer a summons and complaint.

If a debt collector or a creditor serves you with a summons and complaint, not merely a letter saying you owe debt, then you must answer within a certain timeframe set by your state laws (perhaps 10, 20 or 30 days), in order to avoid a default judgment.

I’ll speak more on how to answer a summons in the coming days.

2) Know the statute of limitations.

There is a time limit on how long creditors have in which to try to obtain a judgment against you for the money you may owe them.

That “statute of limitations” varies by state and type of debt.

Typically, it is anywhere from 3 years to 10 years.

A creditor can use the limits in your state or the state where they are located.

They will often use the state with the longest statute of limitations, because it is obviously beneficial for them.

Here is a state-by-state list of limitations timeframes for debt.

3) Credit bureaus limits are not the same as debt statute of limitations.

Federal law typically requires the credit bureaus (Equifax, Experian, TransUnion) to drop negative information after about seven years from the date of your first missed payment. (There are exceptions, such as bankruptcies can stay on for 10 years, and tax liens can stay on for longer).

If you live in a state with a 3-year statute of limitations on legal collection of debt, it will still show up on your credit report.

If you live in a state that allows judgments to be entered for 10 years, it is possible the debt came off your credit report after 6 years.

So do not use your credit report to help you determine if you owe debt. You can use it, however, to check to see when the creditor first considered you to be delinquent.

4) Statute of limitations can start over.

Please note that if you enter a payment agreement, make a payment — even a partial payment—, or promise to make a payment, you will restart the statute of limitations to day one.

5) Face the debt collector or creditor – show up to court.

If you are sued, make sure you or legal representation on your behalf appear in court.

If you don’t, the court can issue a judgment against you for the full amount the creditor requests.

Even if you make a settlement agreement prior to court, don’t trust the debtor to notify the court that it has been settled.

Appear in court for any date that was set and let the judge or trustee tell you to go home.