As debt collection lawsuits continue to burden state and local courts, new legal protections and emerging technologies, including artificial intelligence (AI), are being deployed to help consumers facing financial strain. These suits typically arise when individuals fail to repay credit card, medical, or other debts, potentially resulting in wage garnishments or bank account seizures.
Lester Bird, senior manager of courts and communities at the Pew Charitable Trusts, highlighted that the rise in collection lawsuits adds to the financial pressures many Americans already face, particularly with current high costs for essentials like gas and groceries. Bird also noted that many debts filed in court may be years old and often involve large debt-buying firms that purchase delinquent accounts at a discount and pursue lawsuits to collect on these debts. Because the debt buyer’s name may differ from the original creditor, borrowers sometimes dismiss collection notices as scams, which can lead to default judgments against them.
The increase in debt collection suits has been attributed to several factors. Credit card debt rose to $1.25 trillion in the first quarter of 2026, up from $1.18 trillion a year earlier, according to data from the Federal Reserve Bank of New York. Additionally, technology has lowered the cost and complexity for debt buyers to purchase and analyze portfolios of overdue accounts, enabling profit from cases involving relatively small balances. Stanford law professor David Freeman Engstrom pointed out that this ease of filing suits has contributed to growing court congestion, with collection cases being the most common civil suits in state courts.
After a decline during the COVID-19 pandemic, collection suits have surged since 2023, exceeding pre-pandemic levels in most states studied by Pew Charitable Trusts, including Alabama, Massachusetts, and Texas. Some states and municipalities have enacted measures to protect consumers. For example, Virginia’s new law, effective July 1, mandates that banks protect at least $1,000 in a consumer’s account from seizure following a debt judgment without requiring court intervention. Similar laws require collection firms to verify that they are suing the correct individuals and that debts are within legal time limits.
While these protections aim to ease the burden on consumers, representatives of debt buyers caution that lawsuits are generally a last resort. Donald Maurice, outside counsel to the Receivables Management Association International, indicated that new limits on debt collection communications—such as a cap on phone calls starting in New York City this September—might reduce borrower-collector dialogue, potentially increasing the number of legal actions.
In response to the mounting volume of cases, some courts are experimenting with AI tools to expedite and improve case reviews. Los Angeles County Superior Court, the largest trial court in the United States, is collaborating with Stanford Law School to test AI-assisted evaluations of debt collection claims. Early research suggests AI can reduce errors by more than 50 percent and decrease review time by about one-third. Court officials emphasize a cautious approach given AI’s limitations and risks.
Consumers seeking assistance with debt management may turn to nonprofit credit counseling organizations, which offer free budget analysis and, for a fee, can negotiate debt management plans with creditors. An example is Money Management International, which has seen increased referrals from AI chatbots, reflecting growing interest in using artificial intelligence for personal finance guidance. However, privacy experts warn consumers to be cautious when sharing sensitive financial information through these platforms.
Resources for those seeking help include nonprofit credit counseling groups accessible through organizations like the National Foundation for Credit Counseling or the Financial Counseling Association of America.