Can a collection agency sue you?

Is it possible for a debt collection agency to sue someone? Credit card debt is an overwhelming situation that many Americans live with making it very important to learn to manage credit responsibly. If you are like the almost 10% of Americans who are behind on bills, you may be wondering if a collection agency can sue you. Collection agencies are one of the few industries that are on the rise and hiring at an increasing rate. One study shows that employment at collection agencies is up 23%. Though this is good for the collection agency industry, it is not necessarily good for consumers.

How Collection Agencies Work

A rise in the employment rates at collection agencies only shows that there is an equal rise in the number of past due accounts being handed over to collection agency for debt collection. Here is basically how it works. If you have debt, such as credit card debt, and you fail to make your payments, you will first be contacted directly from the company you owe money to.

If you do not respond to the company after several attempts in writing, via phone calls, and through e-mail, your debt will be turned over to a collection agency. The collection agency agrees to try and collect your debt in exchange for a portion of the debt they collect from you. Their only payout is to make you pay.

Once your debt is turned over to a collection agency, you can no longer negotiate with the company to which you initially owed the fee. They are relying solely on the collection agency to get money from you. You can make arrangements with the collection agency or you can ignore their pleas. But you should know that they will not give up easy. They will contact you at home, at work, and on your cell phone several times a day.

Collection Agency Lawsuits

So this leads us to the question, can a collection agency sue you? The answer is yes. According to U.S. law, any party can sue another party at any time. However, collection agency lawsuits are rare and this is why. Most courts will not accept the lawsuit because the collection agency is acting as a third party in the case.

If the company you owed were to sue you directly, the court would allow the lawsuit to proceed; but, in most cases, lawsuits from a third-party do not hold up in court. In addition to this, it is costly to file and proceed with a law suit and the collection agency only gets paid if they collect your debt. Collection agencies also know that you are most likely on their list because you are in a tight financial situation and suing you will result in little payout.

There is one exception to this. If you make an agreement with a collection agency, either in writing or though a recorded conversation, and do not do what you have agreed to do then the collection agency is no longer a third-party. It may seem the easy thing to do just to get the collection agency off you back for a while, but if you make a verbal or written agreement and violate it, you can be sued.

Again, this is rare, but if you own a large amount and you have broken an agreement, it may be worth it for the collection agency to sue you. The one thing that collection agencies are not allow to do according to U.S. law is use a law suit as a threat. Threatening people to try and get paid is illegal and if this happens, you can report the agency to you state government.

Avoiding Collection Agencies

The best way to avoid this type of situation is to handle your credit cards and your finances overall in a responsible manner. There are often many roads you can take before going down this path. You can work with your creditors directly. Many credit card companies have payments plans they will allow you to be a part of if you lose your job or face other financial issues.

Making your payments on time is very important as well. If you know that you will not be able to make a payment, call well before the due date and ask for an extension. Or you can set up a direct withdraw with the company for a later date. This gives the company so reassurance that you will try to make your payment in a timely manner.

Do not bury your head in the sand. There are credit counseling agencies as well as local agencies in your community that can help you get out of the negative situation you are in before your debt is turned over to a collection agency. Being responsible with your bills and managing your debt are sure ways to avoid having the deal with a collection agency and all that comes with it.