Can You Be Sued by a Collection Agency?

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Debt Management

LONDON – Part of a functioning modern developed society is the regularity at which financial commitments are made. No matter the reason for our debt, we know we’re ultimately obligated to pay it back. When we can’t, there are consequences. To start, lenders usually send the debt to a collection agency.

But beyond that, what if we still can’t—and don’t—pay? What do those consequences look like? Decimated credit score, fines, consumer house arrest, an ugly lawsuit, jail? Let’s dive in below.

Consequences of Not Paying a Collection Agency

One thing any person with a debt in collections can expect is a barrage of calls and letters from debt collectors. Even with rules against creditor harassment, the frequency might take a toll on emotional health. Thankfully, you can put an end to the calls with a few different techniques:

Choosing not to pay a collection agency also dings your credit report. However, it’s likely that your credit was already impacted as your debt went unpaid, racked up interest and was sent to collections. But not all is lost: paying a collection will also show up on your credit report, which looks better than an unpaid collection and gives you a more favorable chance of borrowing in the near future, particularly if you want to get a credit card or buy a house.

Because debt collections stay with your credit until the end of the credit reporting time limit (as long as seven years), you’re deemed a higher-risk borrower until then. Creditors will offer you higher interest rates to cover your risk. Utilities or phone bills might charge you upfront security deposits as well. Unpaid collections can be seen by any employer that runs a credit report on you. This might not affect you depending on the type of career you’re looking to have but might come back to hurt you when applying to large companies or high-level positions.

So, we know that not paying a debt collection can stay on your credit report for up to seven years, limit your borrowing ability, affect your job search, and potentially cost you more in interest rates. These might not be that important to some people. After all, the debt is still unpaid, and you’re a (relatively) free person in society.

But that’s assuming you did not get sued, which, you easily could. A small debt like $100 might seem safe from a collector lawsuit, but collection agencies can sue for any amount of money, and they have. If you’ve been working with a debt relief company before getting sued, some companies (like Freedom Debt Relief) have established connections with law firms that can try to settle the debt before anything reaches court.

Bottom Line: You can be sued by a debt collector at any time, and for any amount. If you are sued, don’t ignore it. Consult with an attorney. Collectors can garnish your wages if they win a judgment on you. If you think your debt is so old that it’s no longer enforceable, still seek legal assistance.

Having debt in collections is stressful, but you can relieve some of the anxiety by knowing your rights, the options available to you and the consequences of each decision.