Can a Credit Card Collection Agency Take Me to Court?

A collection agency acting on behalf of a credit card company to collect a delinquent debt may sue you if repeated attempts to recoup the debt fail. The consequences you face if the court decides in the agency's favor could cause you to lose some of your income, savings or property.

Garnishments

A collection agency that wins a lawsuit against you can get a court order to carry out a garnishment. The order allows the creditor to direct your bank or employer to turn over funds from your accounts or paycheck to the creditor to pay off your debt. There are limits on what a creditor can take from your bank account and paycheck. For example, the U.S. Federal Trade Commission indicates that veterans’ benefits and other government payments deposited into your bank account are exempt from garnishments. Employers generally can't turn over more than 25 percent of your earnings each pay period to satisfy a garnishment order.

Liens

A collector who wins a lawsuit against you also could place a lien on a car or home that you own. A lien would allow the collection agency to use your car or home as security for the payment of your debt. That means the agency would obtain the right to sell your property and use the proceeds to pay off your bill. However, the collector would have to remove the lien if you managed to pay the debt some other way.

Uncollectible Judgements

Sometimes collection agencies win court cases against people who owe delinquent debts to no avail. This occurs when the debtors are unemployed and don't own a home, car or other valuable assets that can be sold to pay off their debts. Still, Bankrate.com writer Justin Harelik reported that debt collection judgments are initially in effect for ten years, and collectors can renew them so that they remain in effect for up to 30 years. Therefore, debtors who start a new job or eventually accumulate valuable property could have their wages garnished or be forced to sell property to pay off a delinquent debt several years after a court judgment is issued.

Considerations

It's best to avoid a lawsuit by not ignoring an agency's collection notices for a debt you know you owe. Attempt to work out a deal if you can't pay the debt in full. Collectors often agree to take less than the full amount of a debt, and you could work out an agreement to pay 60 percent of what you owe or less, according to Bankrate.com writer Dana Dratch. You would likely have to pay a delinquent debt in full, along with late fees, if a collector has to sue you to recoup what you owe.

References

• U.S. Federal Trade Commission: Debt Collection FAQs: A Guide for Consumers
• Bankrate.com: What if You Just Ignore Your Debts?
• U.S. Federal Trade Commission: Creditors Seeking Federal Benefits in Your Bank Account? Understanding Your Rights
• U.S. Department of Labor: Wages and Hours Worked: Wage Garnishment
• Bankrate.com: Are Collection Agents Treating You Fairly? If Not, Fight Back!