Wednesday, June 9, 2004

When Can a Creditor Sue You for a Debt They Just Bought?

A debt collector purchasing a debt can file a civil lawsuit to collect the entire balance owed. The timing depends on how soon the debt collector initially contacts the debtor, and whether the debtor delays the debt collection process by disputing the debt. It is possible that the debt collector could sue in 30 to 45 days after making first contact. However, if the debtor disputes the debt, the time frame could increase by several months.

Junk Debt

    Creditors sell delinquent debt after giving up on attempts to collect it. Often the debt is several years old, although a creditor can sell a closed account at any time. The debtor remains fully responsible for the debt even after the creditor sells it. So-called "junk debt buyers" purchase delinquent debt at rock-bottom prices, sometimes as low as a penny on the dollar, according to MSN Money. That gives the junk debt buyer a chance to make enormous profits. Some junk debt buyers and debt collectors may file lawsuits as soon as legally possible.

Notice

    Debt collectors purchasing debt usually start activity on a specific account by sending out a letter to the debtor. The letter informs the debtor that the debt collector now owns the account and is demanding full payment. The Fair Debt Collections Practices Act, a federal law, also requires the debt collector to include other important information in the letter. The letter must notify the debtor that he has a legal right to dispute the debt. Disputing the debt, in writing, forces the debt collector to prove that the debt is valid and that the debt collector has the right to collect it. The debt collector accomplishes this by providing confirmation of the debt, such as a signed application or most recent billing statement. By law, the debtor has 30 days to dispute the debt after receiving written notice from the debt collector. One advantage for the debtor is that the debt collector, by law, must stop all debt collection efforts -- including a possible lawsuit -- until the debt collector provides verification of the debt if verification is requested.

Paperwork

    Disputing the debt protects the debtor's rights and could stall the debt collection process and a potential lawsuit indefinitely. Signed credit applications and other records are sometimes lost or mishandled. Without the information, the debt collector cannot verify the debt, and without verification, it may simply cease attempts to collect the debt. However, the debtor remains liable for the debt, and there is no deadline for the debt collector to respond. The debt collector could also sell the account to another debt collector, prompting the process to begin again. If the debtor does not dispute the debt, it automatically becomes valid by law, allowing the debt collector to sue after 30 days.

Advice

    A debtor worried about possible debt lawsuits should consult a consumer affairs attorney. The attorney can advise the debtor about rights under the Fair Debt Collection Practices Act and prepare for a possible suit. Debt collectors often have an advantage, because they understand the laws and debt collection process better than many debtors. Having an attorney helps level the playing field.

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