Normally, the federal government does not file lawsuits to collect student loans because it has many other avenues it can take to collect debts other than the judicial system. However, private student loan lenders frequently file student loan lawsuits as one of the most effective collection tools. These private lenders will also hire collection agencies to pressure you to pay on your student loan debt.
Generally, you should not ignore a lawsuit unless you have no defenses and if there is no possibility of being forced to pay a court judgment. However, you probably need help to figure this out. A judgment allows the creditors to try and collect on the debt with different methods. The success of these additional tools depends on the amount and type of income and property you have. State and Federal laws protect certain types and amounts of property, income, and assets.
The most important strategies to consider if you have been sued are defending against the lawsuit and the consequences of judgment against you.
The best way to deal with a lawsuit is to win it. You may have defenses such as you made a payment and it was not credited, you do not owe the debt, the amount due is not correct, the debt has been discharged in bankruptcy or if it is a private student loan, that the creditor has waited too long to sue. In some cases, you can also defend a private lender lawsuit because of problems you had with the school, but the school must have had an affiliation with the lender of some sort.
If your defenses do not work and you lose your case, the lender will obtain a judgment against you. This judgment gives the lender creditor the right to force you to pay. How effective the judgment is depends on what type and how much income and property you posses. If Federal and State laws protects your assets and income from seizure you are judgment proof. If that is your case, you do not have to worry about the judgment unless your situation substantially improves.
A holder of a judgment against you can take or "garnish" money belonging or owed to you that is in the hands of others. Generally, the judgment holder garnishes money from your wages or bank account.