Can debt collectors sue you while you’re in a debt resolution program?
Key takeaways:
How likely are debt collectors to sue you in a debt resolution program? Learn how to navigate debt resolution and reduce your stress. collectors can sue you while you're in debt resolution—but some debt resolution companies may provide help.
Lawsuits are filed for about 15% of collection accounts.
Debts may still be negotiated after a lawsuit has been filed.
Having past-due collections on your accounts is stressful. Of course, you'd pay these bills if you could. Starting a program to get rid of your debts is a positive step in the right direction. Will creditors respect what you're doing?
Let's find out.
When can debt collectors sue you?
Debt collectors usually don't sue.
Before they sue, federal law says the debt collector must send you a written debt validation notice. This notice should tell you how much you owe, the creditor's name, and how to dispute the debt or get more information.
Debt collectors can file a lawsuit anytime after providing this information if you don't dispute the debt.
You get 30 days to dispute the debt or ask for more information in writing. (A letter requesting more information is called a debt validation letter.) Receiving a dispute or debt validation letter within 30 days forces collectors to stop collection activity. They can't file a lawsuit until they've replied to your dispute by verifying the debt.
If the debt collector sues you without providing a debt validation notice, you don't get an automatic win in court. But you may be able to sue the collector for violating the Fair Debt Collection Practices Act (FDCPA). That's the federal law that clearly spells out what debt collectors can and can't do. A lawyer can review the facts of your case and advise you.
When do debt collectors have to leave you alone?
The law is strict about when and how debt collectors can contact you. They have to inform you about the debt, but they don't get to contact you at inconvenient times or places or call too often.
"Inconvenient time or place" means whatever you say it means. If debt collectors call you at work or contact you via email, all you have to do is let them know it's "inconvenient" and that you want them to stop.
You can also tell them not to contact you at certain mailing or email addresses or phone numbers.
"Too often" means:
More than seven times within seven days.
Within seven days of speaking with you about a specific debt.
Unless you agree, they can't contact you before 8 AM or after 9 PM.
Unless you agree, they can't message you on social media.
Keep notes about any conversations, including times and dates. Note that in some states, original creditors, like your credit card company, may be able to keep contacting you.
What is a debt resolution program?
Let's talk about debt resolution and how it relates to those potential collection efforts.
Debt resolution is an agreement with your creditors. The goal is to get them to accept an amount that's less than you owe and forgive the rest. If you enroll in a debt resolution program, an expert negotiator will do all the work to reach agreements with your creditors.
Debt resolution can be extra helpful with collection accounts because debt collectors often buy the debts for much less than you owe. They can accept less (sometimes much less) and still make a profit. On the other hand, collection agencies hired to collect for a creditor may not be generous.
Debt resolution professionals are experienced in dealing with both types of collections accounts.
What happens when you enroll in a debt resolution program?
You meet with a debt consultant (online or on the phone) when you enroll in a debt resolution program. Together, you'll review your finances and devise a plan you can afford.
Taking that first step to address your debt puts you on the road to a better financial situation.
Most unsecured debts can be enrolled in debt resolution—including credit card balances, medical debt, unsecured personal loans, and collection accounts. You and your consultant will decide which of your debts to enroll.
Most people don't have a lump sum of money on hand to offer creditors, and most creditors won't entertain settling debt as long as you're making payments. So you'll probably choose to stop paying one or more of your creditors. (Missing payments can negatively affect your credit.) Instead, you'll put that money into an account that your debt resolution company sets up. It's your money, and you control it. This account is a place where you can build up funds for making settlement offers. When there's enough saved up to make a reasonable offer, expert negotiators will start working with your creditors to resolve your debt. Once they reach an agreement and you approve it, the account will be settled. The debt resolution company's fee is paid from the same account.
Here's where it can get sticky. Missing payments can result in debt collectors contacting you aggressively. Those efforts could include lawsuits. The debt resolution company can't stop your creditors from pursuing you for payment.
But the situation isn't completely black and white. Here's what happens.
What should you do if a debt collector sues you?
If you're sued, you'll get a summons and a complaint. The complaint tells you what they're suing over, and the summons tells you how to respond to the complaint and how much time you have to respond. If you're not in a debt resolution program, you're responsible for answering the summons in time to preserve your rights. You might want to consult an attorney.
If you're enrolled in a debt resolution program, you might already have help standing by—as some debt resolution companies may provide some legal assistance as a part of the program.
For example, here at Achieve, while we aren't lawyers or licensed to practice law, we do want to ensure that the debt can still be negotiated if any enrolled accounts go into litigation. We've partnered with a network of attorneys, the Legal Partner Network, who specialize in negotiating debts. If any enrolled creditor files a lawsuit against a member, we may engage a Legal Partner Network attorney who'll try to negotiate a settlement with the creditor.
The focus of the attorney is to try to get the creditor to settle the lawsuit and resolve the debt. However, the attorney won't represent the member in court or file paperwork.
The cost of the Legal Partner Network service is included in the Achieve Resolution program (without any subscription or service fees) and is available to members who make all their deposits on time and in full.
There's a big difference between filing a lawsuit and getting paid—debt collectors know this. Even if you're sued, the situation's not over yet.
When you're deep in debt, it's hard to get out. Creditors and debt collectors are going to do everything they can to collect. But if you take steps to deal with your debt and stick to the plan, you'll make progress.
Frequently asked questions
How likely is it that a collection agency will sue?
Most debts don’t result in lawsuits. A collector’s decision to sue depends on a few factors:
How much you owe—if a collector has one debt or several debts totaling more than $1,000, you’re more likely to be sued
How much it costs to file a lawsuit in your court system—lower court costs encourage lawsuits for smaller amounts
The size of the agency—big national firms are less likely to sue for lower amounts than small local companies
Their ability to contact you—if the only way for them to communicate with you is via a lawsuit, they’re more likely to file
Their location—out-of-state collectors are required to sue in your state, so they are less likely to sue for small amounts
Your resources—if you have real estate, a job with wages to garnish, or a good credit rating to protect—you're more likely to be sued
The age of the debt—newer debt is more likely to end up in court. Debts too old to be collected are less likely to start lawsuits
According to a 2017 Consumer Financial Protection Bureau report, about 15% of consumers reported being taken to court for debts in collection. But the frequency varies—people with one account were sued just 6% of the time, while 35% of those with five or more accounts were sued.
Do creditors have to work with debt resolution companies?
Creditors don't have to work with debt resolution firms. However, many are willing to settle the debt if they believe you can’t afford to pay the entire balance. They’d prefer to collect what they can rather than write off the entire balance.
Collection agencies and debt buyers are also often willing to negotiate debt if it means getting paid faster. Every time a creditor contacts you, it costs money. Collectors want to get what they can from you as soon as possible.
Besides, debt buyers may have paid as little as five cents on the dollar for your account. If they can settle quickly for a fraction of what you owe, it’s still a good day for them.
Some creditors have a policy against negotiating debt. So while it makes sense to hope for the best, you should understand that some collectors may not be willing to settle with you. In that case, you may still be able to negotiate a payment plan or other concessions.
What are the things debt collectors can’t do?
Even if the debt is legitimate, there are still rules the collector has to follow.
They can’t come to your workplace to collect payment. They can contact you at work as long as they don’t reveal to your coworkers that there is a debt. And they have to stop if you ask them to.
They can’t harass you with repeated calls, threats of violence, publishing information about you, or using abusive or obscene language.
Debt collectors can't arrest you for debt or threaten to have you arrested.
They can’t say they’re suing you if they don’t plan to file a lawsuit.
Debt collectors can’t pursue you for debt that they can’t prove you owe.
They can’t post public messages on social media about your debt.
If you believe a debt collector violated the Fair Debt Collection Practices Act, you can file a complaint online with the Consumer Financial Protection Bureau or sue the collector for damages.
