Monday, March 14, 2011

Is a Letter From a Collection Agency a Legal Judgment?

When a person accrues a significant amount of debt, his lender may choose to outsource the collection of this debt to a collection agency. The agency will either purchase the debt outright or will agree to pursue the collection for a fee. Often, collection agencies begin their collection by sending a letter to the debtor ordering him to make good on the debt. Although the letter may sound official, it is not a legal judgment.

The Debt Collection Process

    When a debtor accrues a debt, his creditor has a number of legal options for attempting to collect his money. Initially, a collection agency may simply send letters or place telephone calls to the debtor ordering him to pay. While the debtor may indeed owe money to the creditor, a letter ordering him to pay is not the same as a legal judgment compelling him to pay. A legal judgment must be issued by a court of law.

Legal Judgment

    If the debtor refuses to make good on their debt, a creditor may file suit against the debtor in court. This involves filing a motion in a court of law asking the judge to compel the debtor to pay. If a judge hears the case and decides that the debtor is responsible for the debt, he will issue a legal judgment against the debtor. The debtor will then be legally required to pay under threat of forceful seizure of the money.

Collection Options

    If a creditor receives a legal judgment against a debtor, he may send the debtor a letter informing them of this judgment. If the debtor still refuses to pay, the creditor may petition the judge to allow him to take a number of actions to collect his money, including garnishing the debtor's wages, freezing the debtor's wage or putting a lien on the debtor's property. All these judgments must be ordered by the court before they can be carried out. However, the creditor is not necessarily required to inform the person that he is taking these actions; requirements for notification vary according to state law.

Illegal Practices

    According to the Federal Trade Commission, it is illegal under federal law for a debt collection agency to state that the letter it is sending is a legal form if it's not. Likewise, if a debt collection agency does send a legal form, it cannot state that the document is not a legal form. Similarly, a debt collection agency is barred from stating that it will take legal action against you if it does not intend to do so or if doing so is against the law.


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