Is it true you don't have to pay a collection agency? (2023)

Is it true you don't have to pay a collection agency?

If you refuse to pay a debt collection agency, they may file a lawsuit against you. Debt collection lawsuits are no joke. You can't just ignore them in the hopes that they'll go away. If you receive a Complaint from a debt collector, you must respond within a time frame determined by your jurisdiction.

If you get a summons notifying you that a debt collector is suing you, don't ignore it. If you do, the collector may be able to get a default judgment against you (that is, the court enters judgment in the collector's favor because you didn't respond to defend yourself) and garnish your wages and bank account.

Negotiate a Settlement With the Creditor if You Can't Pay in Full. Those who don't want to or can't take out additional debt or pay a debt in full with cash reserves may be able to negotiate a settlement. This is when you agree to pay part of the balance and the creditor agrees to consider the account paid in full.

On the other hand, paying the collection account may stop the creditor or collector from suing you, and a judgment on your credit report could hurt your credit report even more. Additionally, some mortgage lenders may require you to pay or settle collection accounts before giving you a loan.

In most states, the debt itself does not expire or disappear until you pay it. Under the Fair Credit Reporting Act, debts can appear on your credit report generally for seven years and in a few cases, longer than that.

Don't ignore the notice. If you don't take action, judgment may be entered against you. If that happens, the creditor may be able to enforce the judgment by repossessing your goods to sell and get their money back.

Ignoring debt collectors' is never the best idea when it comes to dealing with an unpaid account. Sure, you could get lucky and they could give up, but the chances of this are very slim. Pretending they don't exist isn't going to work, they're still going to send letters and call you multiple times a day.

If you ignore a debt in collections, you can be sued and have your bank account or wages garnished or may even lose property like your home. You'll also hurt your credit score.

In almost all cases, the answer to this is no. More than a century ago, prison was a real risk for many types of ordinary household debt. In modern times, there's no possible way you could go to prison for non-payment of most types of debt.

Can a debt collector sue you?

Can a debt collector sue you? Yes, it's possible to be sued by a debt collector, typically when you're at least 180 days delinquent on your account. When this happens, it's important to act carefully but proactively.

In California, the statute of limitations for consumer debt is four years. This means a creditor can't prevail in court after four years have passed, making the debt essentially uncollectable.

Paying your debts in full is always the best way to go if you have the money. The debts won't just go away, and collectors can be very persistent trying to collect those debts. Before you make any payments, you need to verify that your debts and debt collectors are legitimate.

Despite it being against the law, many debt collectors respond to consumers' “refusal-to-pay” letters. These are letters written by a consumer to a debt collector that state that the consumer will not pay the debt it's trying to collect from them.

Taking action means they send you court papers telling you they're going to take you to court. The time limit is sometimes called the limitation period. For most debts, the time limit is 6 years since you last wrote to them or made a payment. The time limit is longer for mortgage debts.

You can stop calls from collection agencies by sending a certified letter asking them to stop calling. Debt collectors must send you a written validation notice that states how much money you owe, the name of the creditor and how to proceed if you want to dispute the debt.

Unlike wage garnishments, there's no limit on how much money can be garnished from a bank account. All the money in the account — up to the amount of the creditor's judgment — can be taken. A creditor can not garnish money from a joint bank account unless they have a judgment against both account holders.

You will probably be sued

If you continue to ignore communicating with the debt collector, they will likely file a collections lawsuit against you in court. If you are served with a lawsuit and ignore this court filing, the debt collection company will be able to get a default judgment against you.

You can't be arrested for debt just because you're behind on payments. No creditor of consumer debt — including credit cards, medical debt, a payday loan, mortgage or student loans — can force you to be arrested, jailed or put in any kind of court-ordered community service.

For most consumer credit debts, if you decide to make reduced payments, your creditors can't force you to pay more than you can afford.

What powers do debt collectors have?

What can a debt collector do? Debt collection agencies don't have any special legal powers. They can't do anything different to the original creditor. Collection agencies will use letters and phone calls to contact you.

You can dispute the debt or ask for more information from the debt collector. If you are unsure who you owe money to, or how much you owe, it's usually a good idea to learn more .

Under the FDCPA, it's illegal for a debt collector to come to your workplace to collect payment. The act prohibits publicizing your debts, and showing up at your job to collect your debt counts.

Debt collection agencies may not threaten legal action against the consumer if their debt has passed the statute of limitations. They can't threaten to file a lawsuit against the consumer, garnish their wages, or seize their property unless they explicitly have the right to do so.

According to Investopedia, collection agencies prefer to sue for amounts more than $1,000. So, if you owe $5,000, a lawsuit is highly possible. Even then, remember that lawsuits are costly and time consuming, which is not appealing to debt collectors.

In most cases, the original creditor will give you more generous terms for repayment than any debt collector will. The original creditor will also be happy to recoup the debt that they extended to you, at least most of the time. Paying the original creditor can also help your credit score in many cases.

It's much better to deal with creditors than debt collectors. Whatever the past-due debt is for – doctor bills, credit card payments, car loan – the creditor may still see you as a potential return customer. A debt collector's only interest is squeezing money out of you.

It is always better to pay off your debt in full if possible. While settling an account won't damage your credit as much as not paying at all, a status of "settled" on your credit report is still considered negative.

While debt collectors can't threaten you or mislead you, they can apply pressure to collect payment. This pressure can include daily calls, frequent letters, or talk about pursuing a lawsuit for payment on the debt — as long as they stay within the bounds of the law.

What should you not say to a collection agency?

Typically, a creditor will agree to accept 40% to 50% of the debt you owe, although it could be as much as 80%, depending on whether you're dealing with a debt collector or the original creditor. In either case, your first lump-sum offer should be well below the 40% to 50% range to provide some room for negotiation. 5.