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Ever wondered just how small a debt has to be before a debt collector decides it's worth suing you over? Yeah, it's a thing, and honestly, it can be pretty worrying. But don't sweat it too much.
This article's got your back, breaking down the nitty-gritty of debt collection lawsuits, including the smallest debts that could land you in court. We'll walk you through what to expect and how to handle it, so you can keep your cool (and your cash) when facing those daunting legal threats.
If you would like to speak to a debt specialist right away, we offer a FREE consultation.
The minimum amount a debt collection agency will sue you for
Outstanding debt is handled in two ways by the original creditor. The first is debt collection agencies that collect old debts on behalf of the creditor. The second is to sell the debt to a debt buyer. How the debt is handled is now up to the agency and the original creditor is no longer in the collection process.
Can a Collection Agency Sue You?
Many people often wonder, can third-party collectors sue you? Similarly, concerns arise about whether a finance company can sue you for unpaid dues. The answer is yes. The decision to sue is often based on the amount of debt, the feasibility of collecting the debt, and the specific policies of the collection agency.
It's important to note that there is no minimum amount of debt under which a lawsuit cannot be filed according to the Fair Debt Collection Practices Act, even for balance transfer credit card debts. This includes various debts, and many wonder, for instance, if medical debt collectors can sue you.
Additionally, some are asking can credit cards can garnish your wages, or even if entities like the CBE group can garnish wages when dealing with credit card balances. Is a possibility. To understand more about the circ*mstances under which a credit card company or even retailers like Conns might sue you, read about whether a credit card company can sue you for unsecured debt.
If you are served with a lawsuit, it is critical to respond and not ignore the summons, especially if you're dealing with minimum payments. Ignoring a lawsuit could result in a default judgment against you, which can have severe consequences including wage garnishment, bank levies, and liens on property.
In case you find yourself in such a situation, or if you're seeking advice on how to negotiate with collections from platforms like Reddit or searching topics like "pacific retrieval Reddit", seeking legal counsel, especially a debt collection attorney, is highly recommended.
Will a Collection Agency Sue you for $5,000?
If you're carrying a balance on your credit card between $5,000 to $10,000 then there is an increased chance that the collection agency or creditor may file suit against you, especially if you have balance transfer cards.
The collection agency will try to collect the full amount you owe. A debt buyer buys debt for pennies on the dollar and may agree to a decreased amount. In either case, the minimum amount a collection agency will sue you for is usually $1000. It can be less than this amount depending on the written agreements signed when you acquired the debt. The age of the debt also factors into the decision.
Unpaid credit card debt often shows up in courts, so it's crucial to keep your credit card payments under control, especially when considering balance transfer card options. If you are sued by a credit card company or if credit card companies sue you for past debt, the debt can be taken to court.
It's not uncommon for a credit card company to sue if the debt remains unpaid. If you are found liable, the court may award more money to the collector through interest and other fees until paid in full.
For more insights on when a debt collector might decide to take legal action, check out our article on when will a Debt Collector sue.
What to do if you get sued by a debt collector
It's essential to be aware of the worst things debt collectors can do to ensure you're prepared for any situation. Before you are sued, you receive written notice from the creditor, the debt collector, or the attorney. A demand letter gives formal notice that your creditor is considering legal action to attempt to collect a debt. There will be a demand for action, such as repaying your debt. A demand letter will include a threat of legal action.
Read the demand letter very carefully and respond within the time limit set out in the letter by requesting a validation letter.
If you receive a debt collector demand letter to collect a debt, do not ignore it. Instead, do the following:
- Make sure you owe the debt and the original balance is correct
- Make sure the debt amount is accurate
- Make sure the debt circ*mstances are correct
- Make sure debt is within your state’s statute of limitations
Disputing a Debt Collection Attempt
It's crucial to know your rights. Familiarize yourself with the Fair Debt Collection Practices Act to ensure you're treated fairly. Once you gather the necessary paperwork, respond in writing to the debt collector by requesting a validation notice. If you have already paid the bill, you should have documentation. Politely include the following:
- Explain any misunderstandings
- Send copies of documentation proving your argument – do not send the actual documents
- Send the letter with confirmation of delivery
- Do not make promises to pay. This can reset the statute of limitations.
- Do not admit you are responsible but do not lie
- Don’t make threats or use profanity
Keep records - you may have to request a validation letter twice.
Ignoring a Demand Letter could mean a Summons
If you ignore the demand letter or the debt collector does not respond, you will receive a summons from the court system as formal notification that you are being sued. It will contain the court's name, case number, parties involved, and what you must do. The summons letter will be delivered by a law officer or by registered mail. DO NOT IGNORE the court papers or summons. If you do, the next step the court will take will be a warrant for your arrest.
Legal fees over debt collection can be expensive but a good law firm is a definite asset. Consider talking with a law firm or a financial advisor to see what you can do to avoid being sued.
Steps in the debt collection lawsuit process
If you receive a summons or discover that a debt collector files a lawsuit against you:
- Make sure the debt is yours (you are the DEFENDANT)
- Make sure the debt amount is accurate
- Make sure the debt circ*mstances are correct
- Make sure your debt is within your state’s statute of limitations
If you need to respond to a dispute letter in a summons, include ALL the information on the letter so it can be filed correctly. This includes:
- Court’s name
- The court date
- The case number
- Your name
- The creditor’s name
You will receive notice of where, when, and what date you are expected to appear in court. If you incurred the debt in another state, you may have to travel to that state. If you have a legitimate reason for not being able to attend the hearing, you may ask, in writing, for the date to be changed. The court may or may not grant the change. If you simply do not show up, a default judgment will be on you and stay on your credit report for up to seven years.
Notice of Intention to Defend
If you plan to defend the suit or dispute partial payment of the debt, you must let the court know, generally within ten court days. The summons will contain a Notice of Intention to Defend.
If you miss the 10-day limit, follow the above advice. Email or fax the notice to the attorneys and then deliver the copies as noted above. It may help you avoid the default judgment.
To defend a summons:
- Fill out the Notice of Intention to Defend included in the summons
- Make two copies
- Take the copies to the court issuing the summons
- Have the original and the copies stamped
- Give one copy to the court to file
- Give one copy to the plaintiff or plaintiff’s attorney (address will be on summons)
- Have the original and the plaintiff copy stamped by the plaintiff
- Keep the original!
What Happens if You Are Sued?
If you are sued in court and can not defend the lawsuit lose the suit or do not bother to show up, several things can happen.
- If you do not show up, the court may have you arrested
- There can be a default judgment levied against you
- Your bank accounts or wages can be garnished
- It may stay on your credit report for at least 7 years, potentially affecting your credit scores
- The judge may award damages such as attorney's fees or reimbursem*nt for any costs incurred during litigation against you
- You could also face fines up to $1000 per violation depending on state law where it occurred
- Seize or put liens on personal property
Remember that any payments made toward your account during litigation may not apply toward satisfying the full balance owed. Courts have ruled differently on whether or not these payments can be applied toward the satisfaction of judgment amounts accrued during litigation periods.
Since this process can be complicated and lengthy from start to finish, hiring a lawyer makes sense because they know how best to protect their clients' interests throughout proceedings.
Any court settlement will show up on credit reports, which are maintained by credit bureaus. Always request your annual free credit score report to make certain the data was reported correctly.
Click for a free consultation today. We can help you understand all your options.
How to avoid getting sued by a debt collector:
In case you believe that the collection agency is wrong about the debt, you can send a debt validation letter, requiring the agency to prove the debt is yours. If they fail to provide sufficient proof, they might not proceed with a lawsuit.
Below are some ways you can help avoid getting sued by debt collectors.
- Do not ignore a letter from the collector and respond promptly
- If you believe that there is an error on your account, send them a dispute of their claim and give them 30 days to respond.
- Pay off the debt as soon as possible to avoid getting sued by the collection agency.
- Offer a repayment plan only if you intend to make the payment
If you want more information, read7 Ways to Avoid Getting Sued by Debt Collectors
Ways to settle your debts without being sued
One way to settle your debt is to work on a payment plan or offer a lump sum payment to the debt collector for less than what you owe. Do this preferably before you reach the stage of being sued. However, in a court order, you to collect a debt, you may be willing to settle out of court and save the court costs.
Understanding the debt collection price, which includes the amount you owe, any interest, fees(like foreign transaction fees if applicable), and charges accrued to collect interest, can help you negotiate a better settlement.
You could also negotiate your settlement by offering something else besides money, such as another asset or service in exchange. Most places will want cash, but it is worth the offer.
Things that make it more likely for collectors to sue you
Debt collectors often use various tactics to recover debts. Be aware of common myths and scare tactics used by debt collectors to ensure you're not misled. Each debt collection agency has a different approach to suing to recover outstanding debt. However, there are some generalizations that 'most' collection agencies follow.
In some cases, when the credit card company charges off your debt, it might increase the chances of a lawsuit. A credit card charge-off lawsuit can occur when the credit reporting company decides that the debt is unlikely to be paid and sells it to a collection agency.
- Statute of limitations - this is how long the debt can be collected. This is determined in each state, such as Arizona's debt statute of limitations. but is usually between 3 and 10 years. The statute clocks start when your debt goes delinquent. If you make a promise to pay, the statute clock is restarted.
If you can prove the debt is past the statute of limitations will a collection agency sue for 5,000 and the case will be dismissed. There is "zombie" debt that never gets dealt with but resold over and over. Keep all records so that you can prove that this debt has shown up over and over. Before you promise to pay or make a payment, ALWAYS check that the debt is correct. - Expense Versus Potential Collections - because of the cost, most collectors use the court system as a last option. Use this to work out a settlement or a payment plan.
- State Filing Fees - if your debt was acquired in a state with lower filing fees, you are more likely to be sued.
- Financial Situation - if you can show them that there is nothing to be gained by suing you, they may consider not suing. Just keep your personal or financial information, like bank account numbers private! Keep in mind that wage garnishment is a very real threat.
- Type of Debt - depending on most credit card companies, you stand a very good chance of being sued for any amount. However, they may be very willing to negotiate a settlement. It depends on which of most creditors the credit card companies you are with. Credit card bills and accumulated debt are the most common forms of debt in the US.
- Judgement Proof - if you have no income or income that is protected, you may not be seen as unusable.
Judgment Proof Income
The following are generally not tarnish.
- Federal monies
- Social Security and Supplement Social Security Income (SSI)
- Veterans’ benefits
- Federal, civil service, and railroad retirement benefits
- Student loan and financial aid disbursem*nts
- FEMA aid
- State monies (in general)
- Public assistance
- Workers compensation
- State retirement benefits
- Unemployment benefits
- Disability benefits
- Other income depending on state laws
- Child support
- Alimony
- Certain insurance benefits
- Retirement and pension benefits
Learn about protecting your judgment-proof money by reading this article.
If you believe the collection agency has acted unethically or illegally or if you want to beat the debt collector in court, you can report them to the Business Bureau. Furthermore, if they violate the Fair Debt Collection Practices Act (FDCPA), you can sue a collection agency.
Debt collectors can sue for the maximum amount owed on the contract. Often if there are large balances due and no other means of getting paid back, many debt collectors may go after more than what's owed as long as it falls within the parameters of your state law.
What is preventing them from suing after they get what they're owed?
Creditors are not always able to get the full amount owed from a debtor, but they still need to be paid something so their accounts don't go delinquent and lawsuits aren't necessary. The process begins by evaluating not only what was originally requested of the debtors, but also any settlements offered at lower than what was initially demanded if there are any such offers available.
If you find a collection agency suing you after they've received their due or want insights on how to win a debt collection case, you can file a complaint or even counter-sue.
If settlement agreements have been accepted without coming up with enough funds to pay off balances due immediately then it's important to take these into account when determining monthly payment requirements under new repayment plans. Talk to the creditor because a second lawsuit on the same debt usually does not end well for you.
Considering Bankruptcy
Getting sued for a debt can feel overwhelming. You may be wondering if declaring bankruptcy is your best option. Here's an overview of how bankruptcy works:
Chapter 7 Bankruptcy
- Liquidates eligible assets to pay creditors, remaining debts discharged
- Typically completed within 4-6 months
- Best for those with low income/high debt
Chapter 13 Bankruptcy
- Establishes 3-5 year repayment plan approved by bankruptcy court
- Monthly payments to creditors, remaining debt discharged after completion
- Best for those with regular income
Bankruptcy stops collections lawsuits and garnishments while your case is pending. This provides immediate relief. However, bankruptcy damages your credit and not all debts can be discharged.
Responding to a Lawsuit
If you are sued by a debt collector, you must draft an "Answer" to the court within 30 days. Here are tips for responding:
- Gather evidence to dispute the validity or accuracy of the debt. Request validation.
- Overview of the discovery process. This is where both sides share evidence related to the case.
- Thoroughly read the complaint and respond to each point. Provide any documentation.
- Do not admit responsibility for the debt or make payments. This can hurt your case.
I think having an attorney draft your Answer is highly recommended given the complex legal terminology. Reach out for a free consultation.
Coping with Stress
Getting sued can negatively impact both your financial and mental health. Here are tips for coping with stress:
- Talk to friends/family and ask for support
- Prioritize self-care like exercise, meditation, sleep
- Seek free credit counseling and financial advice
- If needed, consider speaking with a therapist
Debt collection lawsuits happen. But you have options and support systems to get through this. Contact our credit counselors for free sessions.
