Collection agencies have a number of ways of compelling a debtor to pay the money for an unpaid debt or bill. However, in general, a collection agency is not allowed to seize a person's property unless that property has been used to secure the loan. The closest the agency can come is garnishing the person's wages or, in some cases, placing a lien on their property.
Debt Payment
Under U.S. law, the only time a debt collector can seize a person's physical property is when that property has been used as collateral for a loan. For example, in a mortgage, the mortgage company is allowed to seize the borrower's house in the event of a default, as the property was used as collateral on the loan. In other cases, the house nor the possessions in it could be seized.
Contracts
A collection agency is not allowed to modify the terms of the contract that outlines the debtor's obligations after the agency takes possession of the debt. This means that it can only seize the collateral listed on the debt contract. However, the collection agency also has the option of suing the debtor in court, so long as the statute of limitations on the debt has not expired.
Asset Seizure
If a creditor does take a debtor to court -- on the grounds that he breached the debt contract -- and wins his case, the debtor is obligated to pay the creditor damages set by the judge, usually equivalent to the amount owed the collection agency. If the debtor refuses to pay, the creditor may potentially seize the money in his bank account or take part of his paycheck in a garnishment.
Liens
In certain cases, a creditor may be allowed to put a lien on the debtor's property. This means the debtor must pay the creditor a set amount before the property can be sold. However, this usually is only allowed in the event of a default judgment -- the debtor failing to appear in court to contest the debt -- or when the person owes taxes to the government.
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