This is a situation which happens with surprising frequency. Many collection law firms are merely retained by collection agencies for the purpose of collecting low hanging fruit, and when a debtor requests their day in court by serving an answer, a law firm and/or collection agency decide that it is not worth their while to pay the court filing fee and attorney’s fees associated with litigation, or perhaps they don’t have enough information on file to prevail in court (or perhaps there is the question of whether they sued within the applicable statute of limitations), which calls into question why they sued in the first place.

So sometimes they just let the lawsuit sit there, and unless the debtor files an answer, which requires paying a $330 court filing fee, asks a judge to dismiss the lawsuit, the account languishes on the debtor’s credit report, regardless of its merit. And getting a disputed account off of one’s credit is a lot easier said than done.

There is a new rule which went into effect July 1, 2014 which prohibits a creditor from even filing a lawsuit if it has been more than one year since it was served. It is contained in rule 5.04 of the Minnesota Rules of Civil Procedure. The new rule is as follows:

Any action that is not filed with the court within one year of commencement against any party is deemed dismissed with prejudice against all parties unless the parties within that year sign a stipulation to extend the filing period.

While a bankruptcy of course renders these issues moot, if this is your main issue, then what I would do would be to write the creditor’s attorney a letter after the one year has passed, citing the rule, and asking for them to confirm the same. I would also ask that they instruct their client to remove any negative reporting on your credit report, and moreover, I would send a copy of all correspondence to the three major credit bureaus, which should help clean up your credit, but again, that is always easier said than done.