Can a collection agency sue you?

Introduction:

Many people believe they have no obligation to pay an amount to a third-party debt collection agency. After all, it is not the original company that created the debt that is demanding the amount. Once you default on the original credit agreement and the company sells the debt to a collection agency, that agency has the right to collect that debt – provided that the agency operates legally. The collection agency may even be able to sue you for the amount owed.

What to Do If a Debt Collection Agency Sues You?

If a debt collection agency has sued you over a debt, it is best for you to speak with an attorney who can help you assess your options and defend you in court. Some attorneys may offer free, no-obligation consultations to advise you about your rights.

Note: The worst thing you can do if a debt collection agency has sued you is to ignore the lawsuit. Ignoring a summons can hurt you in the long run, even if the debt is beyond its legal statute of limitations.

If you are sued over a debt that is beyond its legal time limit, you may be able to dismiss the lawsuit if you have proof that the debt is no longer enforceable. However, if you fail to appear in court, that gives the collection agency a chance to win a default judgment against you. This means that the court may have ordered you to pay the debt.

A collection agency that wins a judgment against you may be able to request the court’s permission to garnish your wages or levy your bank account. The judgment will be added to the public records section of your credit report and your credit rating may be adversely affected.

Dealing with Debt Collection Attorneys:

Some attorneys work as debt collectors and contact consumers on behalf of their clients. Some people may confuse attorney letters with formal legal notices, especially since the letters are printed on attorney letterhead. It should be noted that a summons is an official document sent by the court and must be served in a specific way, depending on the laws in your state.

Can Debt Collectors Sue You for a Small Amount?

You might assume that some debts are so insignificant that debt collectors do not care about them, but debt collectors may sue you for any amount – large or small. It is up to the debt collector whether or not to sue over the debt. Some aggressive debt collectors use lawsuits to recover debts when other methods have failed. Debt collectors may be more likely to sue you in states where filing fees are lower.

Debt collectors may be less likely to sue you if you are judgment-proof – meaning you have no income or assets, or if you live in a state that does not allow wage garnishment. Note: Having low income or few assets does not necessarily mean you are judgment-proof. If the debt collector wins a judgment against you, they may be able to collect any amount of income you have.

Even if the collection agency can no longer sue you, they can still make efforts to collect the debt from you. This includes contacting you, sending letters, or reporting the debt to a credit reporting agency if the debt is within the time limit for credit reporting.

The best way to prevent a debt collection agency from suing you is to pay the debt or make arrangements to pay the debt. Keep copies of any agreement you make to have your evidence.

Sources:

The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts mentioned in our articles. Read our editorial process to learn more about how we verify facts and keep our content accurate, reliable, and trustworthy.

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Consumer Financial Protection. “What is the time limit on debts?”

Source: https://www.thebalancemoney.com/can-a-collection-agency-sue-you-4582400