Unless you demand otherwise in writing, a collection agency has the right to send collection letters to your home and contact you via telephone and email to recover unpaid debts you owe. Even if you cannot afford to pay off your debt in full, ignoring the company’s efforts places you in a dangerous position, as you may find yourself facing legal consequences.
If your creditor sold your debt to a collection agency, the collection agency becomes your new creditor. As the debt’s legal owner, it then assumes the right to pursue you for the debt through the legal system. New York’s Neighborhood Economic Development Advocacy Project notes that whether a collection agency will take you to court for a debt depends on if the collection agency has a history of suing consumers and how much you owe. The higher your debt is, the greater the likelihood the collection agency will file a lawsuit against you.
Every state limits the length of time a collection agency has to file a lawsuit against debtors through a debt collection statute of limitations. While the statute of limitations doesn’t prevent the company from accepting voluntary payment for the debt, an expired statute of limitations bars the company from using legal force as a collection tool. If a collection agency sues you for a debt and the statute of limitations in your state has already expired, it may still win a judgment against you if you fail to use the expired statute of limitations as your legal defense.
The effects of a collection agency winning a judgment against you in court can prove financially devastating. While the actions a debt collector can take following a civil judgment differ by state, many states grant creditors with a judgment the right to garnish bank accounts and wages. In addition, some collection agencies will place liens against personal property and real estate you own – preventing you from selling or refinancing the property until you pay the debt in full.
When communicating with you over the phone or through collection letters, a collection agency may repeatedly mention its right to sue you. Reminding you of the potential legal consequences of leaving the debt unpaid is one way that a collection agency has of coercing you into making a payment. The Fair Debt Collection Practices Act, however, strictly prohibits third-party debt collectors from directly threatening to file a lawsuit against you if they have no intention of suing or no longer have the legal right to sue.
You can unknowingly give a collection agency the right to take you to court even if the statute of limitations on your debt has expired. Making a payment on an old account causes the statute of limitations to begin anew. Thus, submitting even the smallest payment to the collection agency gives it the right to bring legal action against you – no matter how long ago your state’s collection statute expired.
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