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How to Avoid a Lawsuit From a Collection Agency

By Debt Prison on January 14, 2009

**Disclaimer – Debtprison.net does not administer legal or financial advice. The contents of this website are my opinions on collection agencies and how to deal with them. Nothing on this website should be interpreted as legal advice or council. No opinions on this website should be used to replace the advice of your financial advisor or your legal council.

The first thing you need to understand is that most large collection companies have a lawyer at their disposal who writes letters on their behalf and handles any disputes. Some lawyers work exclusively for collection agencies, while others are hired only when needed. These lawyers also represent the collection agency in the likely event a debtor sues them! If the collection agency is not located in your state, there is a very good chance they will not attempt legal suit. Most likely they will call, mail letters, and when you fail to respond… they’ll sell the debt to another collection agency for pennies on the dollar. In order for them to sue you (out of state), they would have to employ the services of a lawyer where you live. This can be very expensive and will usually void the benefits of a civil judgment. It is only when they have a debtor in their state that they prefer legal suit. A good candidate for legal suit is one with at least a balance of $500, at least one asset, and the debt is not in dispute. See also all of my articles on Collection Agencies and make sure to read How to avoid paying a debt.

To file a complaint with the Federal Trade Commission regarding a collection agency click here or call toll free at 1-877-FTC-HELP.

Many Judgments are Never Collected

There’s a good possibility that even with a judgment a collection agency will never be able to collect on the debt. Many debtors are in such a position financially that they cannot legally be collected on. So even with a judgment to repay the debt… the collection agency and court can’t enforce it. To learn more about this read Restrictions on Wage Garnishment for Debt Collection.

Many debtors move to another state which creates more legwork for the collection agency. They have to determine where you moved and then request for the new state to enforce a judgment acquired from your old state. Some female debtors get married and change their last name. This can slow down the enforcement of a judgment. Also, some states don’t consider assets joint – so a person can nullify a judgment by putting all assets in their spouse’s name, not working, or hiding income (hiding your income is illegal). See also, What is a Junk Debt Buyer?

**Some states will consider debts and assets as joint accounts even if your spouse’s name is not on the account. In California they can collect on your spouse’s assets to satisfy a civil judgment.

Is your debt past the Statute of Limitations?

In my home state of Mississippi the Statute of Limitations (SOL) is three years, this is the lowest SOL in the United States – who says Mississippi is last in everything? So if I stop paying on my VISA credit card in August of 2008, the creditor or collection agency has until August of 2011 to get paid or sue me in civil court for the debt owed. If I can put off paying on the debt, or acknowledging I owe it, for three years and the collection agency doesn’t get a judgment… then I no longer legally owe the debt. They cannot take me to court and be awarded a judgment, provided I show up and inform the court that the SOL has expired on the debt. See also, Debt Past the SOL and Collection Agency still sues.

Is the Collection Agency located in your State?

Most collection companies will not file a civil suit for debt collection on a debtor that lives in another state. Most collection agencies have a lawyer on staff or one they regularly work with. Since the collection agency has to sue you in the state where you live, they aren’t likely to hire a lawyer in your hometown to represent them in the case… if they are located out-of-state. They also are not likely to send their lawyer across state lines to collect a debt. Besides, in order for a lawyer to cross state lines he has to be licensed in that state. Most lawyers are only licensed in one state.

The Amount of the Debt

The lower the dollar amount of defaulted debt the less likely the collection agency will pursue legal action. Very seldom will a collection company file suit on a debt of less than $500 and most likely $1,000. Obviously it’s a lot of time and expense involved in a civil court suit… so they don’t like to bother with court unless they feel confident of a decent pay off. However, I should make you aware that some of my readers have been taken to court for less than $1,000.

How many assets do you have?

The more reliable assets you own, the more likely the collection agency will pursue a legal course of action. If the collection agency knows that you have a home, land, or a vehicle which is paid for – they can win a judgment, then via a writ of execution they can be awarded a lien on said property or force a ‘Sheriff’s sale’. A job is considered an asset since they can seek to garnish your wages or bank account.

Is the debt in dispute?

A collection agency cannot file suit on a debt that is being disputed. If you requested validation of the debt, and their information is insufficient (they didn’t accurately prove you legally owe them the debt), their case can be thrown out of court.

Don’t apply for new credit

One of my readers contacted me about a bill collector who was threatening to file suit if she didn’t cough up a payment by the end of the month. The bill collector informed her that he had been watching her credit report and noticed she had recently applied for credit on a vehicle purchase. When you apply for credit on new purchases the collection agency rightly figures you have money to pay them! The information you put on the credit application is also an opportunity for your credit report to get updated with your current address, spouse, and asset information. A collection agency can acquire your credit file and read up on your latest hits.

TIPS for Avoiding the Collection Agency Lawsuit

1. Get any property you own out of your name.

2. Quit your weekly paycheck job.

3. Go into business for yourself (no wage garnishment).

4. Maintain a story of no job, no assets, and a gloomy future.

5. Move to MS (SOL 3 years) or TX (SOL 4 years).

6. Always deny any knowledge of the debt.

7. Do not answer their phone calls.

8. Record their violations of the FDCPA and sue them (or threaten to).

9. Leave the United States with no forwarding address.

Discuss this article and meet new people at Debt Prison Forums.

Related Articles

* What is a Junk Debt Buyer?

* Restrictions on Wage Garnishment for Debt Collection.

* The Fair Debt Collection Practices Act

* Reasons not to file Bankruptcy or Settle Your Debts

* Can you go to jail for not paying your debts?

* How to settle your debts on your own

* How to deal with collection agencies

* Sample Debt Validation Letter

Should you respond to a collection letter?

By Debt Prison on December 29, 2008

Recently a family member sought my advice on a collection letter he had received. He’s only 20 years old and racked up some ridiculous debt from a sport bike purchase. In order to finance the bike, the dealership placed the interest from the loan and some accessories on a credit card they provided for him. After he sold the bike (the sale covered the remaining principle balance), he was still left with several thousand dollars of debt on the credit card. Since he went back to college he has no money, and has therefore defaulted on the debt.

The debt was sold to a collection agency, charges were added (the debt grew by $1,000), and the collection letter was mailed. The collection agency also calls daily, which is annoying others at the home. Like many larger collection agencies, they have a lawyer on staff that writes their letters and handles any disputes. The collection letter appeared to come from a law office. However, an internet search of the law office revealed that it’s simply a lawyer working within a collection company.

Further web research (reading online forums) revealed many former employees who provided intimate details about the way in which the company operated. Every source I found suggested that the collection agency’s lawyer would only sue if your home was located in the same state as their office. Now I realize getting information in such a fashion isn’t always going to be 100% accurate. However, it is often dead on. And since big companies won’t disclose their collection policies, listening to ex-employees is often a great source for valuable information on their collection practices.

I have also noticed that all collectors claim that debt validation letters draw unwanted attention to your account. Which brings up the question of when a debt validation letter should be applied by the debtor? I’ve come up with the following short list of when a debtor might want to apply a debt validation letter:

You need a clean credit report (and are willing to hire a lawyer to insure you get one).
You don’t legally or morally owe the debt.
You have no knowledge of the debt.
The dollar amount has been increased with bogus charges.
The debt is past the Statute of Limitations.

In the case of my family member, he doesn’t need a clean credit file, and the collection agency isn’t likely to seek legal action against him in the state of Mississippi (the SOL in MS is 3 years). So for the time being, I suggested he ignore the phone calls and letters, and be patient until it’s sold to another collection company. When the debt is sold to another collection agency we’ll take some time, research their company, and make another decision on how to handle the debt.

Discuss this article and meet new people at Debt Prison Forums.

Related Articles

* Restrictions on Wage Garnishment for Debt Collection.

* The Fair Debt Collection Practices Act

* Reasons not to file Bankruptcy or Settle Your Debts

* Can you go to jail for not paying your debts?

* How to settle your debts on your own

* How to deal with collection agencies

* Sample Debt Validation Letter

How To Stop Bill Collectors From Harassing You

By Debt Prison on December 1, 2008

A reader at Sample Debt Validation Letter asks how to get a collection agent to stop harassing her. Of course the quick and easy solution is to pay them! But if you find yourself unable to pay, there are a few things you can do to make life easier for yourself. Always keep in mind, that no matter what they say or how they say it, the goal of a debt collector is to get YOU to cough up some cash. And often they’re willing to do and say anything to accomplish this task.

I had a lady from a collection office call me and harass me about a credit card I have. She even called my cell phone and left me a very rude message saying that she hoped her attorney sued me for every dime I had. She then sent another message on my cell saying she was giving me 24 hours to call her back.

Who can I report her to? And how do I get her to quit harassing me? The debt is an old credit card and has a balance of 2800.

Rhonda

Stop talking with these people on the phone.

First of all, once you enter the world of defaulted credit card debt - what good is it doing to talk to these people on the phone? If you had the money you’d pay them (right?). But since you don’t have the money… discussing your personal crisis with these bill collectors… will leave you angry, embarrassed, or scared. And possibly all three. Therefore, when I defaulted on my credit card debt I wrote them registered letters (kept the receipts) and explained to them my situation. Here’s how the phone calls work.

“Hello”

May I speak with Barry?

This is him.

Mr. Barry this is Jahid Patel calling from Citibank.. you are 60 days past due on your account. Can you make a payment today over the phone and get this balance up to date?

Nope

Well Mr. Barry… can you make any payment today… how about $100

Nope

Well Mr. Barry how about $50 could you afford to pay that today?

Etc, etc, etc”

Now bear in mind this is an extremely civil example of how the conversation would go. Once I had a collector call me at my job (damn I gave them my number when I got the credit card). She asked me if I could make a payment right now. I said no that I was at work and preferred to discuss this matter through the mail. Within about 10 seconds she proceeded to tell me that this was going to their ‘legal department’… which I promptly told her “Great.. get on with it” and that was that. It never went to their legal department.

The point I’m trying to make is that if you don’t have any money to pay them with.. write these bill collectors a letter (registered) and don’t talk with them on the phone. The only purpose it serves is for them to get you on the phone and proceed to tell lies and intimidate you. Being in Debt Prison is difficult enough without these types of conversations further ruining your day.

Should you change your phone number?

Changing your phone number may not be a bad idea if you have multiple creditors with whom you’re defaulting on. This way you’ll force them to deal with you via snail mail. However, if your particular phone number is important to you then there are other options.

If you have a home phone and a computer there’s a little trick that you may find beneficial. I had a desktop computer that I left on all day. I also had a phone line plugged into the back of it. I downloaded phone tray for free. Phone tray is a free caller i.d. and call blocker combined into one. Once a bill collector calls you, you can program their number into phone tray and then select how you want their call to be blocked. I always gave them the “We’re sorry, the number you are trying to reach has been disconnected or is no longer in service.” Phone tray has a variety of audio cuts that you can use. The only problem I encountered is that the phone would still ring once if it was a bill collector. So if the phone rang more than once, I knew it was actually someone I wanted to talk to.

Cease and Desist

You can also write a collection agency (not the original creditor) a ‘Limited Cease and Desist’ letter. This informs them to only contact you by snail mail. Keep a copy, send the letter registered, and attach the usps receipt to your copy of the letter. Keep all correspondence within a folder under lock and key.

I would also like to request, in writing, that no telephone contact be made by your offices to my home or to my place of employment. If your offices attempt telephone communication with me, including but not limited to computer generated calls and calls or correspondence sent to or with any third parties, it will be documented, considered harassment, and I will have no choice but to seek a legal course of action against your office. All future communications with me must be done in writing and sent to the address noted in this letter by USPS.

You can also throw in the kitchen sink and write a Debt Validation Letter. I recommend the kitchen sink if you feel that the collection agency isn’t treating you fairly.

Other options for Rhonda

1. Call her back and tell her you’re broke because you had to wine and dine her husband.

2. Tell them to get a judgment if they can because you are ready to shut them down in front of the local Judge who happens to be your brother.

3. Tell them at every dime they wouldn’t be getting much cause as a woman in the USA you only earn 60% of wages of fellow male co-workers.

Now on a serious note… talking on the phone with bill collectors is usually a bad idea 90% of the time.

Don’t call her back unless you can pay all of the debt back in one final swoosh.

If it goes to court you can go and represent yourself (not as scary as it sounds) in which case the judge may declare you owe the money and you can pay a little each month until the judgment is satisfied.

But there’s not much you can do about her rude manner. She’s got your number and it’s her job to call and push and push until they get a payment. Put yourself in their shoes… how would you collect money from people who didn’t or couldn’t pay? The other option is to record the conversations if it’s legal in your state. Inform the collection agency that you have a recording of their violations of the Fair Debt Collection Practices Act. And that you are prepared to file suit against their company if these violations continue.

Discuss this article and meet new people at Debt Prison Forums.

Related Articles

* Restrictions on Wage Garnishment for Debt Collection.

* The Fair Debt Collection Practices Act

* Reasons not to file Bankruptcy or Settle Your Debts

* Can you go to jail for not paying your debts?

* How to settle your debts on your own

* How to deal with collection agencies

* Sample Debt Validation Letter

* Information on Credit Card Balance Transfers

* How I Escaped Credit Card Debt

* What You Should Know About Credit Cards