What to Do If a Collection Agency Sues?

Dealing with a collection agency can be stressful. When contacted by a collection agency, consumers should gather information on the collection process in order to determine the proper course of action. The good news is that while collection agencies typically can sue, agencies generally only use lawsuits as a last resort due to the costs and uncertainty of success.

Threat of Lawsuit

When a collection agency mentions lawsuit, consumers often panic. In response to the threat of a lawsuit, consumers should not take any action that will make their financial situation worse, such as skipping house payments to pay the debt. Though collectors may threaten a consumer with a lawsuit, this typically does not mean that a collection agency is actually going to sue. While threatening to sue without intent to do so is a violation of the Fair Debt Collections Act, it is still a common practice, as it is often difficult to prove.

Negotiation

If the collection agency is suing or threatening to sue, the consumer and the collection agency can still reach an agreement on the debt. Consumers should try to work out a payment arrangement on the debt with the agency. Collection agencies will likely accept a settlement offer of 50 percent or less on many debts. Collection agencies may also allow the debtor to make payments toward the settlement amount over a period of months. Debtors should document all conversations and insist on having the terms of a settlement in writing before making payment.

Respond to Notice

If a collection agency does file a lawsuit, the consumer must receive notice of the hearing. Laws on proper service delivery vary by state, but the consumer may receive notice via hand delivery, certified mail or First Class mail. When receiving a notice of hearing, the consumer should respond to the notice and plan to attend the hearing. Collection agencies must prove that the consumer owes the debt, but if the consumer does not attend the hearing, the court may grant a default judgment.

Seek Assistance

Consumers facing a lawsuit over a debt or simply requiring assistance in dealing with the debt have access to assistance. A credit counselor can help negotiate with the collection agency to work out a payment plan. The consumer can also contact an attorney to determine what legal recourse may be available. Consumers receiving notice of a lawsuit should strongly consider hiring an attorney to represent their interests. Consumers who feel that the collection agency is violating their rights should file a complaint with the Attorney General's office in their state as well as the Federal Trade Commission. Consumers may also sue the collection agency.