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When will the Collection Agency sue you?

By Debt Prison on March 26, 2009

There’s no absolutes as to when a collection agency will sue you for debt owed. Today a friend of mine received a summons for a civil suit from a collection agency. This article is pretty much part two of this article which I wrote earlier on. He was trying to wait them out hoping they wouldn’t sue. This is the second friend I’ve seen sued over the years by collection agencies.

**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.

Here are the facts on the recent case.

He owed $5,000 to creditor on a high interest credit card.

He stopped paying the debt one year ago.

Received a collection letter from collection lawyer (debt ballooned to $6,000) in another state not licensed in Mississippi. I advised to ignore the letter since the collector couldn’t sue in MS court.

Debt was transferred to another collection agency in TN which has a lawyer on staff in MS. They mailed out a collection letter to my friend two months ago describing the debt in the amount of $6,200.

My friend ignored the letter and did not request validation of the debt.

Summons came yesterday for civil suit for debt.

It doesn’t always happen this way. And in the case of my friend he is an unlikely candidate for civil suit. He has no assets, is a student in college, and has a part time job. Even though it will take the creditor probably years to retrieve their money with a judgment, they still pursued the civil suit/judgment.

My other friend was sued under the same circumstances. He was a full-time student and had a part time job with no assets. However, some people go years without being sued.

So what makes a person more likely to be sued than another?

There really are no certain criteria for determining when and if a collection agency will sue you.

For some hints check out the following articles I’ve written on the subject:

How to avoid a lawsuit from a collection agency

The more money you owe the more likely you’ll be sued within 18 months or less.

If you move to another state and fail to update your information (by not registering to vote, getting a new Drivers License, or applying for new credit) you can make it difficult for the collection agency to locate you. If they can’t locate you before the Statute of Limitations has passed you should be in the clear.

If you have assets like a car or home and a decent job then you are a good candidate for a lawsuit. However, the lack of all of these items doesn’t necessarily mean they won’t sue. And the more debt you owe the more likely they’ll sue.

Don’t forget to mail out a Debt Validation Letter in response to each collection letter you receive.

I’m advising my friend to get a lawyer to represent him. This can prevent him from being abused by the collection agency by paying a bunch of phony charges. Often, without any assistance, you can end up paying much more than what you should.

** Remember, the best way to solve these problems is to pay the debt and get it out of your life.

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

When Can I Start Settling My Debts?

By Debt Prison on December 1, 2008

A reader at How to settle your debts on your own wants to know when he should start trying to settle his unsecured debt. He also wants to know which one to settle first. Now bear in mind that you can’t miss a payment in October and expect to settle your debts in November or December. Credit card companies and collection agencies aren’t stupid! If you could afford a lump sum settlement that soon after having missed a payment…. then common sense will tell you that the debtor can afford to continue making the minimum payments.

My wife and I owe more or less $40,000 on our credit card debt and an unsecured loan. We plan to settle our debt on our own. We stopped paying our credit card bills two months ago and they immediately started calling and harassing us. Also, I lost my job so my wife is the only one working and we can’t afford to pay the minimum monthly payments. We’ve got a $25,000 unsecured loan and more or less $15,000 in credit card debt. I don’t know when will I start sending them letters and who’s the first one I will talk to and negotiate with. And I’m worried that if I don’t take action in the near future they will sell my account to a collection agency! Please help – thank you very much!!!!

Angelo

Hey Angelo,

First off it’s too early to even start discussing settlement with these guys. That’s because you need a cash lump sum to settle with the collectors. And if you could afford a lump sum you could afford the minimum payments. You’re gonna have to let this thing sit for at least a year most likely. Meanwhile you can just tell them that you’re broke for the time being and will make payments when you have money… but for now you’re living from check to check to eat.

Sometimes the original creditor will not settle the debt – they sell it off to a collection agency instead. If they sell or assign the debt to a collection agency then I suggest you exercise your rights under federal law and write them a Debt Validation Letter. This is just to insure that the collection agency is following correct procedures.

Now let me ask you this question…

Would you rather have to deal with this crap (collectors calling, judgments, wage garnishment) for the next three to ten years… or would you rather get a job (or two jobs) and work like crazy to pay this debt off in full. That’s about your only options…
Now if you can’t or are unable to work then the best thing to do is settle with these guys later on. But in the meantime you might want to change your phone number and deal with your collectors through the mail only. And then there’s always the possibility of getting a judgment slapped on you in civil court. Bear in mind the better record keeping you undertake the better off you will be. See also, How to deal with collection agencies.

Also, is there anything you could sell to help get you out of this jam? Can you sell your cars, your houses? Can you downsize to cheaper cars or cheaper houses? Can you move in with a relative and pay no rent? You and the wifey need to have a serious discussion and think of these types of questions.

If you do decide to settle I would use the ‘debt snowball’… starting with the smallest debt and working my way towards the largest. I’d initially try and settle for 50 cents on the dolllar with the debt of lowest balance. Bear in mind that I would try and settle based on what the balance is RIGHT NOW. Not what it will be in one or two years.

That’s because once the credit card companies and collection agencies get through tacking on their satanic onslaught of fees, penalties, and interest… these debts could easily double in balance before you’re ready to settle them. So what may be a credit card balance of $4,000 today… may be 8 or $10,000 in two years. I would inform them that I’ll settle for 50 cents on the dollar based on the original default amount… in this case I’d offer $2,000 for the initial defaulted debt of $4,000.

Good Luck and Happy Holidays!!!

Barry