Kristy's Blog

If you have a debt in collection, paying off those debts may not be very high on your priority list. A few basic internet searches will teach you how to force debt collectors to stop calling you and stop sending you payment demands and paying those collectors may no actually help your situation: the simple fact is that collection agencies don’t remove their trade lines from debtors’ credit reports after receiving payment. As a result, you may be unmotivated to pay the debt because it doesn’t directly benefit you: the credit agencies are leaving you alone and your credit scores remain unaffected.

There is no guarantee, however, that ignoring a collection agency will make it go away. If you don’t negotiate with a debt collector, you run the risk of being sued by the collection agency, however, not everyone who fails to pay gets sued. Collection agencies use a variety of different criteria when determining whether or not to sue a debtor.

The Age of Your Debt

One of the most crucial factors that could herald a lawsuit–even more so than a particularly high debt–is the age of the debt. Once your state’s statute of limitations for debt collection expires, debt collectors lose the ability to sue you for payment. Each state’s statute of limitations varies and can range from four years to fifteen years. The average statute of limitation is 6 years.

For debt collectors, lawsuits are a last resort, as suing costs money. Phone calls and letters are the cheap tactics in the collecting game. Debt collectors want to give you as much time as possible to pay the debt voluntarily. They may even try and get you to make partial payments since making a payment restarts the clock on the statute of limitations in most states – therefore extending the window in which they can sue you.

If the statute of limitations is rapidly approaching, however, and you have yet to make payment arrangements, beware. This is the time period during which a collection agency is most likely to sue you. You’re clearly unlikely to pay on your own, and soon the collector will lose the ability to take legal recourse. If it wants to recover the debt, a lawsuit is the company’s only viable option.

The Amount You Owe

The amount you owe to the collector plays a considerable role in whether or not you’re a ripe candidate for a lawsuit. In general, the more you owe, the greater your risk. Suing a consumer costs money, so if you only owe an amount less than $100, chances are you are not likely to be sued as the cost of the suit would not offset the monies that could be collected. However, low debt amounts are not a guarantee against a lawsuit. Some law firms specialize in low-cost lawsuits: they operate by filing suits in volume – generating the paperwork to initiate a suit plus the filing fee could be cheap enough that if enough lawsuits are filed, the net winnings could offset the cost of lawsuits that lose or cannot be collected on. In 90% of the cases, consumers do not show up to court, and the JDB wins the suit by default.

Who Owns Your Debt

Junk debt buyers often get lumped into the same category as debt collectors, but there are some differences, especially when it comes to getting sued.

A junk debt buyer (JDB) typically buys debt in bulk for pennies on the dollar, while a collection agency contracts with the original creditor to try and get the money from a debtor. Much of the debt a JDB buys is not likely to be collected, but the junk debt buyer pays for quantity, not quality. A junk debt buyer may only send out a few letters to each debtor as the total effort they will make to try and pick the low hanging fruit from the pile of debts they purchase. If they get no response, they may resell the debt to another JDB. However, junk debt buyers often run lawsuit mills where they literally file thousands of lawsuits all at once. If your collection agency is actually a junk debt buyer, you are more likely to be sued. How can you tell which is which? Do a search online – if there are numerous complaints about the qualify of the suits brought to consumers, they are more likely to be a junk debt buyer.

Your Financial Situation

As creditors, collection agencies can review your credit reports whenever they wish. If you’re a candidate for a lawsuit, debt collectors will closely review your other debts and whether you are paying them on time. They’ll also look into whether or not you’ve recently applied for any new debt. If you seem to have your financial house in order, collectors can safely assume that you have disposable income that the company can seize via a lawsuit. Others’ only income is exempt from seizure.

Your Personal Situation

In some cases, debt collectors will go a step beyond your financial situation and review your personal life This provides collection agencies with a wealth of information about your ability to pay–even if the information itself isn’t directly financial. If, for example, you’ve gotten married recently or gotten a new job, a debt collector may conclude that your household income has increased and, as a result, you have additional income with which to pay off your debt.

In Conclusion

Not every debtor gets sued. Each collection agency has different guidelines that dictate when a lawsuit is or is not an option. If, after considering the amount you owe, the age of the debt and your personal and financial situation you feel that you are at risk of facing a lawsuit from a collection agency, you may want to contact the company and attempt to negotiate a settlement. Remember, its always better to negotiate a settlement and pay voluntarily–even if it’s inconvenient–than it is to have your wages or bank accounts garnished as the result of a lawsuit.