Can a Collection Agency Sue You If You Make Payments?

Of all the weapons in a collection agency's arsenal, the one that debtors fear most is a lawsuit. Debt collectors threaten lawsuits much more frequently than they actually file them. But should a collector file a lawsuit against you and win, it earns the right to seize certain assets you own. Unfortunately, making regular payments to a collection agency does not protect you from a lawsuit.

Legal Rights

Unless you have a contract with the collection agency that states otherwise, the company can file a lawsuit against you -- even if you are enrolled in a payment plan. In most cases, it is not cost-efficient for a collection agency to seek legal recourse against an individual who submits regular payments, but that does not mean the company lacks the right to do so.

Collection Methods

The statute of limitations in your state prevents your creditors from illegally filing debt collection lawsuits against you. An expired statute of limitations does not protect you from collection activity, however, and collectors will continue contacting you about the debt.

If you make a payment on the debt, doing so resets the legal statute of limitations for lawsuits, since the statute runs from the date of your most recent payment. If a debt collector can successfully coerce a consumer into making a single payment on an out-of-statute debt, it earns the right to sue once more. In this situation, making payments actually enables the lawsuit, rather than helping to prevent it.

Late Payments

When making payments to a collection agency, it is imperative that you not miss any payments. If the company agrees in writing not to file a lawsuit if you remain current on your payments, making a payment even a single day late voids your agreement and leaves you vulnerable to legal action.

Small Payments

The Fair Debt Collection Practices Act grants debt collectors the right to add interest charges to collection accounts if the consumer's original debt included interest charges. In addition, collection agencies typically add collection fees to debtor accounts. This leaves many individuals owing much more to the collection agency than they did to their original creditors. Unfortunately, a higher debt also means that the company can demand higher periodic payments. If you send the collection agency less than the minimum payment, it can accept the payments without classifying you as actively enrolled in a payment plan -- leaving you more apt to face a lawsuit than if you paid the requested amount.