Hello again. First and foremost - there will be no warrant for arrest for your failure to appear in court. This is a civil matter. At worst, your failure to appear might result in a default judgment against you. But it has been many, many years since the days of debtors prisons, where people were locked up for failing to pay debts.
Now, whoever laughed at you regarding you lack of service claim may not be very familiar with the law (as is often the case with sheriffs and debt collectors). Under Indiana law, service upon an individual may be made by, among other ways, "leaving a copy of the summons and complaint at his dwelling house or usual place of abode." However, Rule 4.15(F) provides that service shall not be deemed insufficient when it “is reasonably calculated to inform the person to be served that an action has been instituted against him.”
In Norris v. Personal Finance, 957 N.E.2d 1002 (Ind. Ct. App. 2011), a borrower failed to make payments on a loan, and the lender filed a collection action. The sheriff delivered the complaint to the address of the parents of the borrower and sent another copy to that address by first class mail. Since the borrower failed to appear at the trial, the court entered a default judgment against him. In a post-judgment hearing, the borrower argued that service of process at his parents’ address was insufficient and that the default judgment should be set aside. The appellate court reversed, however, finding that service was insufficient because it was not reasonably calculated to inform the debtor of the pending suit.
Note that in Norris, the debtor's parents were actually home to receive the papers. Still, service was insufficient because, in this case, they were not under any duty to inform their son of the suit. In your case, no one was home to receive the papers. Moreover, the sheriff should have known this since, as you stated, the house was clearly unoccupied. His effort, therefore, does not appear to have been reasonably sufficient.
As for whether the collector could argue that you were obviously notified - this would not be a persuasive argument. The same argument was tried in Norris, where the evidence showed that the debtor knew about the lawsuit even though he had not received the summons and complaint. Indiana law is well settled that the mere fact that a defendant has knowledge of the action will not grant the court personal jurisdiction.
You should appear in court at the scheduled hearing anyway. If you fail to appear, one of two things could happen: (1) you could get lucky and the judge will dismiss the complaint for insufficient service; or (2) the judge will render a default judgment against you, in which case you'll have to appear in court eventually in order to try to vacate the default judgment. Neither your mere appearance, nor any cease and desist letter should support the plaintiff's argument that you were served.
Finally, I am sorry, but I cannot represent you in this matter. Please consider retaining a local attorney who can represent you for a reasonable fee. I'm not sure how much the alleged debt is in your case; but if it's a lot, it may be well worth it to invest in legal counsel.
I hope this answers your questions and concerns well enough for now. Once again - best of luck to you.