Debt collection lawsuits rise, and AI tools help some consumers respond

In short: More people are being sued over unpaid consumer debts, and a mix of clearer court help and some AI tools is making it easier to respond.

What's going on

A growing number of Americans are facing debt collection lawsuits over unpaid credit cards, medical bills, and personal loans. A Pew Charitable Trusts report found that in many states and cities, these lawsuits rose in 2025 to their highest levels in years, above pre-pandemic levels.

These cases often start after months of missed payments. Credit card accounts are commonly treated as seriously past due after about six months, and the debt may be sold to a debt buyer, meaning a company that purchases old debts and tries to collect them. Lawsuits are usually not the first step, they tend to come after calls and letters do not lead to payment.

Consumer advocates and courts are also trying to make the process easier to understand. Federal rules, including the Fair Debt Collection Practices Act, limit what third-party collectors can say and do, and they ban threats like saying you will go to jail for ordinary consumer debt. Many state courts now offer plain-language online self-help pages and forms, which can work like a fill-in-the-blanks guide for writing an official response.

Some people are also turning to AI-driven services that help draft an “answer” to a lawsuit, spot key deadlines, and suggest questions to ask, like whether the collector can prove the debt is yours. These tools can lower costs, but they can also be wrong, and rules differ by state.

What to watch

Regulators and courts are paying more attention to unfair collection practices and to tools that help people avoid default judgments, which happen when someone does not respond. Expect more debate about standards for AI legal help, especially around accuracy and privacy.

Source: NYTimes