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Do Collection Agencies Ever Give Up on Debt Collection?

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In a Nutshell

Professional debt collectors and collection agencies make money by collecting money. If they don’t collect, they don’t make money. So, they can be relentless and rarely give up. That’s why it’s important to know your rights if you are being pursued by a debt collector and to understand what options are available to you.

Written by Attorney Kimberly Berson
Updated April 27, 2021

Collection agencies are firms that are hired by businesses and lenders to recover money that is owed on an overdue bill or loan. They are professional debt collectors who make money by collecting money. If they don’t collect, they don’t make money. So, they can be relentless when trying to collect a debt. They will rarely walk away from a delinquent account.  That’s why it’s important to know your rights if you are being pursued by a debt collector and to understand what options are available to you. 

What Happens If You Cannot Pay Your Bills and Default On Your Debt?

If you don’t pay your credit card bill, a medical expense, a student loan payment, or any other bill, the creditor, or (the you owe money), will usually send a written notice letting you know that your bill is overdue and needs to be paid. 

If the debt remains unpaid, the creditor will declare your account in default. In most cases, a default triggers late fees and possibly a default interest rate. A default interest rate is usually at a much higher rate than the initial interest rate on the loan. 

The creditor may report the default to credit bureaus, such as Experian, Equifax, or TransUnion. This will negatively affect your credit score and your credit score will be lowered on your credit report. People with low credit scores have a difficult time getting a mortgage to buy a house, a car loan to purchase a car, or getting additional credit cards. 

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What Is The Debt Collection Process?

At first, the debt collection process is usually handled internally by the creditor. Letters will be sent to you and telephone calls may be made to try to collect the debt. If the debt remains past due for several months, they may turn it over to a collection agency. 

The debt collection agency will take over the debt collection process. They will reach out to you to try to get you to pay what is past due. They will also try to get information from you regarding your property. For example, they may try to find out your bank account information.  Some creditors may decide to go right to court to recover the debt and start a lawsuit against you for non-payment of the bill rather than hiring a collection agency.

What Are Collection Agencies And Debt Buyers?

Collection agencies are businesses that are hired by the original creditor to collect delinquent debts. They collect all types of debts, including medical bills, credit card bills, student loans, cell phone bills, utility bills, or personal loans. 

Collection agencies are aggressive and will communicate with you in any way they can. They will send letters and emails to you demanding payment. If they have your phone number, they will make phone calls and send text messages to you. 

The more persistent they are, the more likely they are to get money from you or information from you about your assets. If the original creditor believes the debt is uncollectible, they may charge off the debt, and sell it to a debt buyer. 

The debt buyer will become the debt collector and continue to pursue the debt collection process. A collection agency may also be a debt buyer. When an account is sold to a debt buyer, it can be reported on your credit report as a collection account. Collection accounts will lower your credit score. Collection accounts can remain on your credit report for seven years and this will affect your personal finances.  

What Is The Federal Debt Collection Practices Act (FDCPA)?

The Fair Debt Collection Practices Act (FDCPA) is a federal law that makes it illegal for debt collectors to use deceptive, unfair or abusive practices in collecting a debt. The FDCPA restricts the debt collector’s actions so they can’t harass you. They’re forbidden from calling you obscenities and threatening to harm you. They’re not allowed to call you at work or to contact you before 8 a.m. and after 9 p.m. They cannot mislead you. For example, they can’t send you a document that resembles an official government document to pressure you into making a payment to them. The FDCPA also requires the debt collector to make certain disclosures. 

For example, they must send a validation letter to you which states what the debt is and how much you owe. If you don’t believe you owe the debt or need additional information, you can request more information from them. 

If you believe that a debt collector is engaging in unfair, deceptive, or abusive debt collection actions, people in this situation usually notify the state attorney general, or the Federal Trade Commission (FTC), or the Consumer Financial Protection Bureau. 

The debt collector can face penalties if they are found to have violated the FDCPA. Before sending money to a debt collector or giving them any personal information, verify who they are and that you owe them a debt. There are people that pose as debt collectors to fool you into giving them cash. So, be careful not to fall victim to a debt collection scam.

What Can I Do To Stop The Debt Collection?

One option is to settle with the debt collector. If the debt collector accepts less than the full amount owed, you may be required to pay income tax on the portion of the debt that is forgiven. Debt settlement agencies may solicit your business and promise that they can help you. But, in many cases, they do more harm than good.  Many people find it difficult to make the payments that are required under the payment plan negotiated by the debt settlement agencies. 

A debt management plan is another option. Under this plan, the interest rate on your debts may be lowered. However, you will need a steady income to keep up with the payments. This is why a debt management plan is not a good option for many people. 

Is There A Time Limit To Debt Collection Such As A Statute Of Limitations?

Debt collectors have a certain time limit in which they can bring a collections lawsuit against you. This time limit is set by law and is called a statute of limitations. The time limit varies from state to state. For example, in New York, a debt collector has 6 years from the date of default to sue to collect most debts. The date of default is usually 30 days after the last payment made. 

Some debts may have a shorter limit in which a debt collector must start a lawsuit to collect a debt. For example, the time limit to collect a medical debt in New York was recently reduced from 6 years to 3 years. 

A creditor may continue to try to recover the debt from you after the statute of limitations has passed. What they can’t do is start a lawsuit after the statute of limitations has run out. If a debt collector files a lawsuit after the time limit has run out, this is a defense you can raise in the lawsuit. On rare occasions, the debt collector will stop collection efforts when the statute of limitations has run. 

Restarting and Extending the Statute of Limitations

Debt buyers may buy debt even though the statute of limitations has passed. Since the debt they purchased is “bad” debt or old debt, they usually pay pennies for it. Debt collectors may trick you into agreeing that you owe the debt because, in some states, this could extend or revive the statute of limitations. Also, if the debt collector agrees to give you additional time to pay your debt, this may extend or toll the statute of limitations. 

For example, John owes Bank One the sum of $500 and John lives in a state where the statute of limitations to collect a debt is 6 years. If Bank One gives John an additional four months to pay the $500, the statute of limitation may be tolled (paused) or stopped from running. If John fails to pay in four months, Bank One will be given an additional four months to start a collections lawsuit against John. 

In some states, if you make a partial payment on the debt, the statute of limitations is revived or it starts all over again if you default. In other states, a partial payment will only pause the statute of limitations. 

What Can You Expect in A Collection Lawsuit?

Debt collectors will usually hire law firms to start a lawsuit to collect the debt if it remains unpaid. You are being sued if you receive a summons and complaint. The summons will require you to answer the complaint by a certain date. If you don’t respond to the complaint, a default judgment will be entered against you. A default judgment will require you to pay a certain sum of money to the creditor. 

In the answer to the complaint, you may raise affirmative defenses. For example, one defense may be that the statute of limitations has passed or the time to file the lawsuit has run out. If you don’t believe you owe the debt because you have been a victim of fraud or identity theft, you may raise this as a defense to the action. 

If you raise this defense, you must show proof of this. A defense to the action could result in the lawsuit being dismissed or may reduce the amount you owe to the creditor. If the debt collector violated any of the provisions under the FDCA, this may also be raised as a defense. 

What Happens If A Judgment Is Entered?

If a judgment is entered against you, you’ll  be required to pay a certain amount to the debt collector.  If you don’t pay the judgment, the debt collector can go after your assets to pay that judgment. For example, the debt collector could:

  • Garnish a percentage of your wages to satisfy the judgment;

  • Put a lien on your personal property and try to get a sheriff to sell your personal property to pay off the judgment;

  • File the judgment in the county you own real property, and then the judgment will become a lien on your house. When you sell your house, you will have to pay that judgment to remove the lien;

  • Freeze or levy your bank account and use a portion of those funds to satisfy the debt.

Can Bankruptcy Help With Collection Lawsuits?

Bankruptcy is a great option to help you deal with collection lawsuits and debt collectors. A bankruptcy filing will automatically stop most collection actions. As soon as you file a bankruptcy petition, the automatic stay comes into play. The automatic stay prevents debt collectors from seeking to collect a debt and stops collection lawsuits. 

A debt collector that continues to send you letters or make phone calls to you after you filed for bankruptcy, and they know about the filing, can face penalties. Most debts, such as credit card debt and medical bills, can be discharged in a bankruptcy proceeding. This means you will not be legally responsible to pay the debt. 

Debts that are discharged through bankruptcy don’t result in negative tax consequences. So, unlike a debt settlement where you might have to pay income tax on the portion of the debt that is forgiven, you don’t have to pay income tax on debts discharged through a bankruptcy case. 

If a judgment becomes a lien on your property, it will remain a lien on your property after you file for bankruptcy. A judgment lien will not be discharged or wiped out through bankruptcy unless specific requirements are met and a separate motion is filed with the bankruptcy court. 

So, most people choose to file for bankruptcy before a judgment is entered and becomes a lien on their property. People can file bankruptcy petitions without a lawyer. However, some people choose to seek help from a bankruptcy lawyer when filing for bankruptcy.

Let’s Summarize...

If you’re confronted with a debt collector, be careful of what you do and what you say. They

are not there to help you. Most of the time they don’t go away even if the debt is old, and the time to bring a lawsuit against you has passed. Although it may be tempting to seek help from a debt settlement agency or to agree to a debt management plan, in many cases, they don’t work. 

Bankruptcy can provide you with relief from debt collectors and debt collection actions. If you’re worried that you can’t file bankruptcy because you can’t afford a lawyer, don’t be. There’s nothing that says you have to have a lawyer for a personal bankruptcy case. Upsolve offers a free online tool to eligible individuals who want to file bankruptcy on their own.

Written By:

Attorney Kimberly Berson


Kimberly Berson is an attorney with over twenty-five years of legal experience and a specialty in bankruptcy law and bankruptcy litigation. Additionally, Kim is an instructor in the paralegal certificate program at Hofstra Law School where she teaches Bankruptcy Law, Contracts La... read more about Attorney Kimberly Berson

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