First, check your state laws to see if you (or your parents) were properly served. laws vary from state to state on the proper way to serve someone. (e.g. some require that you get physically served, while others say that publication in the newspaper and/or certified mail delivery will suffice).
If your state is one of the fortunate ones that have the law where they physically have to serve you, then the collection agency committed an FDCPA violation by “threatening to sue with no intention of doing so.”
I’d call after going and getting the papers you apparently got and see why they sent it to your folks instead of you. That sounds fishy.
As someone mentioned earlier, they will contact anyone they can find. I still get notices at my mother’s address claiming I owe some money and I haven’t lived there in thirty years!! (On a side note, since she passed away in November, bill collectors call while I’m trying to clean up her house. It’s a bit of a shock when I tell them she has died and can’t pay anything at this time).
In California, $5000 would be considered small claims (someone correct me if I am wrong) and no lawyers are allowed. I still have not seen an answer (or I missed it) to what it means to have a judgment against you.
Are you being sued or are they taking you to debtor’s court? Try the Free credit counseling services. Do you have an actual copy of the the suit and do you know the name of the credit card company that is suing you?