Collection agencies collect unsecured debts for a variety of creditors, including credit card companies. A credit card company has the option to either sell defaulted accounts to a collection agency or hire the company to recover debt and pay it a percentage of what it successfully collects. Although each collection agency's debt recovery procedure varies, a lawsuit is always a possibility when you do not pay your credit card debts.
Lawsuit Risk
Just because a debt collector has the right to sue you for your credit card debt does not mean that it will. New York's Neighborhood Economic Development Advocacy Project notes that collection agencies are more likely to sue consumers if their debts exceed $1,000. Even if your credit card debt is particularly high, however, making payments to the collection agency helps reduce your risk of a lawsuit.
Statute of Limitations
The defaulted credit card debt you owe is valid until you pay it off, but the collection agency does not have the right to sue you indefinitely. Your state's statute of limitations for debt collection lawsuits determines when any creditor can sue you for unsecured debts, such as your credit card debt.
Statute of limitations differ in each state but range from three to six years on average. Because the statute of limitations begins on the date you made the most recent payment on the debt, making any payment at all resets an expired statute of limitations, giving a collection agency the right to sue.
Old Debt Lawsuits
Although state laws prohibit creditors from suing debtors beyond the statute of limitations for debt collection, that does not stop some unethical collection agencies from filing lawsuits anyway. If a collection agency files an out-of-statute lawsuit against you and you do not respond, it receives a judgment against you by default. Provided you respond to the lawsuit and appear in court, an expired statute of limitations gives you grounds to have the collection agency's lawsuit dismissed.
Judgment Consequences
If a collection agency files a lawsuit against you and you either lack a defense or lose your case in court, the resulting judgment carries significant consequences. A debt collector with a judgment earns the right to garnish your wages, levy your bank accounts and place a lien on your home. A collection agency cannot, however, intercept any government benefits you receive, such as Social Security, or seize exempt income, such as child support and unemployment, from your bank account.
0 comments:
Post a Comment