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Sometimes finances spiral out of control. As accounts become more delinquent, collection agencies might contact you. It can even get to where you’re being sued. Being sued by a debt collector isn’t a pleasant experience. In fact, it can be downright frightening.
If you suddenly receive notifications of legal action, it’s disheartening to figure out how to respond. The good news is that there are things you can do to resolve it. In this article, we’ll talk about what to do when you’re in that situation.
Take a breath
Receiving notifications from a debt collector can be stressful. It might tempt you to put it on the back burner and forget it. Or the stress might threaten to overwhelm you. You should know that there are laws and processes that govern what debt collectors can do. They can’t show up at your doorstep tomorrow to take away your car.
Contacting a local attorney who works in consumer debt is also important. They can take the anxiety out of being sued by a debt collector. Many firms offer a free or low-cost introductory consultation and doing just that alone can help you feel better about the situation.
Check to see if you’re being sued by a debt collector
Sometimes collectors will contact you saying they will sue you if you don’t pay a certain amount. They might use the possibility of legal action to persuade you to pay, but in this scenario, you haven’t been sued yet.
It’s still important to contact them and talk about your options. But if you receive calls or texts saying they will sue you, ask that company to put it in writing.
All debt collectors are required to follow the Fair Debt Collection Practices Act. This means they can’t pose as attorneys, law enforcement, or say they’ve sued you when they really haven’t.
When you’re sued by a debt collector, you’re required to be notified in writing. If you’ve only received calls or emails, you probably aren’t being sued. Plus, if you really were getting sued by a debt collector, they’d just do it without beating around the bush.
Collection agencies are businesses. If they sue you, they need to make more money back than they spend on legal fees. This means the size of your debt can affect whether a collector will sue. It’s not a hard and fast rule, but most collectors will only sue on accounts that are $1500 or more.
That’s not to say that you shouldn’t try to resolve your account if your debt is below this amount. But if you only owe $800 and keep getting messages threatening legal action with no official paperwork, the collector might not take action.
For a debt collector to sue you, you have to be served legal papers. This process varies by state. In Texas, a sheriff or process server is required to serve you a physical citation either at your home or work. Or, you’ll be mailed a copy by certified mail.
Once this happens, you may receive solicitations from attorneys in your area who would like to take on your case. Many of these solicitations will include a case number which you can verify with your county online or over the phone. This is further evidence that the lawsuit is legitimate.
If you’re sued by a debt collector, don’t ignore it
If you’ve been served legal papers and are getting sued by a debt collector, don’t ignore it. That’s the worst thing you can do. When you’re served papers, you’re required to appear in court on a certain date.
If you ignore a legal suit by a collector, it doesn’t just go away. You’ll lose by default. Even if you don’t have a lawyer, just showing up to court is a lot better than ignoring it and losing by default.
If you go to the hearing, you can state your case and come to an agreement on the terms. If you lose by default, the collector gets to decide the terms outright. What this means is they can request to garnish your wages, put a lien on your bank account, or put a lien on other assets you own.
In Texas, they can’t collect on property that’s nonexempt, but collection laws vary in each state. A lien is a record of debt that becomes attached to an asset you own. It’s public record, and it’s like the collector telling the world you owe them money.
It’s another reason getting sued by a debt collector can be stressful. A lien on your car will be on the title. This makes it an unclean title. To the collector, there’s a good chance you’ll pay the debt to get your title clean, or sell the car and use some of that money to pay the debt and clear the title for the buyer.
Know how to handle it on your own
Even if you’re being sued by a debt collector, you can still work out a solution with them. The first thing to check is if you’re being sued by the original creditor or a debt buyer. Getting sued by your original creditor is less likely since institutions prefer to sell your debt to a debt buyer, but it can happen.
The papers they served you will list the organization who originated the lawsuit. If you defaulted on a Bank of America credit card but are being sued by another organization, that’s the debt buyer. Collection agencies can work on behalf of both original creditors and debt buyers.
Debt buyers might collect the debt themselves, or hire a collection agency to do it for them.
When you’re negotiating with a debt buyer, know that they don’t have access to all of your account history. They may have bought the debt from another debt buyer themselves. Information gets diluted, and sometimes all they know is your name, address, and balance.
The first thing to bring up in negotiations is any verifiable life circumstance that impacts your income. This can include unemployment, illness, disability, or being on a limited income from federal benefits.
The debt buyer or collector will not know this, and this can often be enough to get your balance lowered or dropped.
Debt buyers also know that they will not get people to pay the full amount. If you want to settle it outside of court, you can contact them and see what kind of payment plan they’ll accept. Even negotiating over the phone can help to get the settlement amount down.
Seek legal help
The most important thing you can do when faced with a lawsuit is to seek an attorney. If you’re being sued by a debt collector, you’ll want to talk with a consumer debt attorney. They deal with cases like this on a daily basis, and there’s a lot that a lawyer can do to help you.
They can suggest different defenses you didn’t think of. They can also help by organizing and writing your response and defense. Many offer free consultations. You may also qualify for free or low-cost legal help based on your income.
Settling outside of court
Collection agencies want to keep their costs down, so they can often be open to settling outside of court. Your lawyer can negotiate on your behalf outside of the courtroom and may get the lawsuit dropped.
This can keep details of the lawsuit private and prevent you from dealing with garnished wages or property liens. Being sued by a debt collector is a hassle and settling out of court can save you some headache.
Reducing the amount owed
Another thing an attorney can do is help reduce the amount the collector is suing you for. Collectors are happy to resolve a case, especially if they can get just some of what you owe. Plus, what you owe with this creditor may be more than what your original debt was.
An attorney can negotiate with the other side to lower your overall amount.
See if you can get a letter of deletion
Let’s say you know you’re getting sued by a debt collector and are in negotiations with them. There’s a chance you can arrange with the collector to give you a letter of deletion. If you’ve agreed to settle the account, either by paying in full or part, this may be an option.
After you pay off a delinquent account, it will remain on your credit report for up to seven years. Even though your FICO score gives less weight to paid-off accounts, there might be reasons to seek a deletion.
A collection agency can contact the three credit bureaus and delete your account after it’s closed.
This only applies to purchased debt though. The collection agency can only delete the account you had with them, not the account with your original creditor. Also, certain scenarios increase the likelihood of account deletion.
If you didn’t get a medical bill because it went to the wrong address, or your last utility bill wasn’t forwarded after you moved, and your debt stems from this, you have a higher chance of getting a deletion.
You’re also more likely to get a deletion if your debt is from the hospital or if the original creditor wasn’t a big bank. If you’re being sued by a debt collector of a smaller size, you’re more likely to be awarded a deletion.
This may not apply in every situation, but it’s worth looking into. Your consumer debt attorney can help with this during negotiation. And if a collector agrees to delete your account, remember to ask for the letter in writing.
Look into credit repair
The bad news is that paying off or settling a charged-off account doesn’t raise your credit score. If you’re being sued by a debt collector, the account has already been charged-off. Whether your account in collections has a balance of $5000 or $0, your score will be the same.
It already took the hit when the account went to collections. The only thing that would raise it is if the collection agency agrees to delete your account after you settle it.
Once the situation has been resolved, the next thing you should do is look into credit repair. The first place to start is with a good look at your full credit report. You can get a free copy of yours from each of the three credit bureaus.
Check it top to bottom for anything that’s inaccurate. Since a debt collector sued you, there’s a chance that multiple debt buyers had owned your account. And since your account is now closed, make sure there are no duplicate accounts under different collection agencies.
If you got a letter of deletion from the collector, you can verify that it has been deleted by checking your report.
Believe it or not, there is life after getting sued by a debt collector. And depending on the time it’s been since your account became delinquent, your score can recover.
A charge-off stays on your account for seven years, but as time goes on it has less effect on your score.
After you check your report, you might open a secured credit card. You can open one no matter how low your score is. You just put down a little money ($300+) as a security deposit, and that becomes your credit limit.
Remember, credit isn’t the enemy here. It’s how you use it. And using a secured card to safely manage new credit can boost your score. Other things you can include refraining from running your credit and paying down balances.
Just try to keep any paid-off credit cards open, as that will help with your credit-utilization ratio and increase your score.
We hope you found this guide useful. And again, if you’re being sued by a debt collector, we recommend you find a professional in your area who can counsel you on your options.
If you would like professional credit repair help, then please consider The Credit Agents. We have been helping individuals overcome the obstacle of bad credit for years. Our friendly agents are on hand to answer your questions.