When a debtor owes money to a creditor, the creditor can take a number of different steps to collect payment of his money. Collection tactics can range from the relatively benign, such as calling or writing a letter to the debtor, to the severe, such as wage garnishment and bank account seizure. Generally, a creditor will have the legal right to sue the debtor. However, whether he chooses to do so will depend on a number of factors.
Legal Right
When a person agrees to borrow money from a lender or receive another asset on credit, this transaction is legally protected. Whether the agreement was made verbally or in the form of a written contract, the lender has the legal right to receive timely payment of the money, as per the terms agreed to by the two parties. If the debt becomes delinquent, the creditor has the write to file a civil suit in court to compel payment.
Financial Advantage
While a creditor has the write to sue the debtor, he will not always find it in his financial interest to do. Unless the creditor has extensive legal knowledge, he will generally need to retain the services of an attorney to draft the civil suit and to argue the case in court. In many cases, the creditor will find that the cost of hiring an attorney will exceed the cost of the debt, with no guarantee that the judge hearing the case will rule in the creditor's favor or that the money will ever be collected.
Statute of Limitations
In addition to the cost of hiring an attorney, a creditor must also consider laws regarding the statute of limitations on debts. Each state has different laws restricting how long a creditor can legally pursue collection of a debt. After this time limit has expired, the creditor can still sue the individual, but the case has no legal merit. A judge hearing the case will be legally obligated to throw out the creditor's suit.
Legal Collection Tactics
While a creditor may not choose to sue a delinquent debtor, he must first do so if he wishes to pursue a number of collection tactics. For example, in order for the creditor to garnish a debtor's wages, he must first obtain a ruling from a judge ordering the money to be turned over. If the debtor does not comply, only then can a creditor file a motion for garnishment. If the debt is large enough, the creditor may find it in his financial interest to sue.
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