Depending on the circumstances, a creditor’s lawsuit could cost you a portion of your wages, your checking account balance or even your home. Original creditors rarely sue debtors, preferring instead to turn delinquent debts over to collection agencies. A collection agency’s sole responsibility is recovering debt, and some collection agencies will go to great lengths to ensure that you satisfy your past financial obligations – even if the company has to force you to do so.
Debt Collection Lawsuit Time Limits
Any collection agency that purchases your debt has the right to sue you when attempting to recover it. The company does, however, have to sue you within a specific period of time. Each state maintains a statute of limitations for collection lawsuits. The statute of limitations begins 180 days after you default on the original account. The time limit for collection lawsuits varies depending on your state’s specific laws and the type of debt you owe. Credit card debts, for example, are usually governed by a shorter statute of limitations than unsecured bank loans.
While a collection agency can still file a lawsuit after the statute of limitations passes, doing so is illegal. You can file a lawsuit of your own against debt collectors that sue you illegally. Because the legal risk is high when filing a lawsuit against a consumer after the statute of limitations expires, few collection agencies do so. Thus, your chances of facing a collection agency lawsuit are greatest if the debt you owe is still within your state’s statute of limitations.
Amount Owed Determines Lawsuit Risk
Filing a lawsuit does not guarantee that a debt collection agency will actually recover the debt. Winning a judgment in court merely gives the company additional collection options. Because filing a lawsuit requires the collection agency to expend both time and money, you face the greatest danger of a lawsuit if you owe significantly high debts. All debt recovery companies’ policies vary, but you’re most likely to face a lawsuit if the amount you owe is greater than $1000.
Lawsuit Threats From Debt Collectors
Debt collectors frequently threaten to sue debtors that don’t pay off their collection accounts, but these threats are often empty. Individual debt collectors have no control over company policy and which debtors the company does and does not sue. Because debt collectors collect commission for the payments they solicit from debtors, collectors have considerable incentive to say whatever is necessary to make you pay off your debt.
Federal law maintains that lawsuit threats from debt collectors are only legal if the company has the legal right to actually sue you. Thus, if the statute of limitations in your state has already expired on the account and a debt collector threatens to file suit against you, you can file suit against the company for violating both your rights and federal law.
Whether or not a collection agency will sue is something all debtors with outstanding collection accounts have wondered at some point or another. Some collection agencies sue every debtor while others may threaten to file suit without any intention of actually following through. While you can’t prevent a lawsuit 100 percent of the time, evaluating the age of your debt and how much you currently owe helps you determine how high your general risk is of being sued by a collection agency.