If they answer the lawsuit does it have to be on legal paperwork and does the defendant have to answer the lawsuit using legal forms?

In the type of case you describe there is no requirement that the Answer to the Complaint be in any special form or use approved or mandatory court forms. A piece of paper with the case name and case number on it and some reference to being an answer will suffice. So this means you can't proceed to get a default order - if an Answer has been filed.