What Do I Do If a Collection Agency Is After Me?

Credit cards can be tricky resources. If used properly, they can assist you in making purchases in a difficult time.

If used carelessly, they can lead you down the road to multiple collection proceedings and even bankruptcy.

Many debtors believe that they can continually spend using their credit card(s) and not have to face the financial consequences later should they decide to quit paying the bill.

However, this belief could not be further from the truth.

Credit Card Debt 101

In bankruptcy, two different types of debt are recognized: secured and unsecured.

Credit card debt is considered “unsecured” debt because it does not have an asset associated with it as collateral, like a house or car.

If you default on a debt that is “secured,” the creditor can take the property serving as collateral. However, if you default on unsecured debt, things get a little more complicated.

Unsecured debt is then divided into two groups; priority and non-priority. Credit card debt is normally put into the second category and is not given the same priority as past-due taxes, child support and alimony.

Credit card debt is either discharged via Chapter 7 or handled via a payment plan via Chapter 13 bankruptcy.

The mistake many debtors make is that they will never have to worry about their over-spending and charging.

They assume the debt will just disappear. That happens, but not always.

Sometimes the credit card company sells your past-due debt to a collection agency. It is at this point where the debtor tends to freak out.

Collections Proceedings

Collection agencies are aggressive.

They are hired to collect on a debt, and they mean business. You should expect countless and persistent calling.

You should also expect to receive notice that a lawsuit has been or may be filed against you to collect the debt. It is extremely important that you do not throw away the paperwork once it is received.

If you do not respond and assume that the judgment will not happen because of the existence of the bankruptcy in your past, you could very well find yourself subject to a default judgment and your wages garnished.

Contact an attorney immediately and ask how you should formally respond to the lawsuit.

He or she will be able to assist you in responding and coming up with defenses for your case.

If you do not have a defense, an attorney can at least be able to help you perhaps settle the debt with the collection company, if possible.

Possible Defenses

The first defense you may claim is that the debt was already dealt with and discharged properly in bankruptcy.  If that is the case, you should be able to quickly eliminate the problem.

Another defense could be either the debt was already paid or the statute of limitations for them to pursue collection of the debt has expired.

Another defense could be you were not properly served or the collection agency did not have standing to sue you or is suing the wrong person or entity.

Depending on how aggressive the collection agency is, another defense could be that they are violating the Federal Trade Commission (FTC) Fair Debt Collection Practices Act (FDCPA). This law prohibits debt collectors from using practices that are abusive, unfair or deceptive to collect your debt.

Lastly, you could attempt to prove that the charges on the debt are fraudulent, if applicable.

If you are not able to assert either of these defenses, it is at least worth speaking to an attorney to help you mitigate the damages or put together a payment plan that is reasonable given your financial situation.

The worst thing you can do is you ignore the debt completely. A default judgment could be obtained against you, and interest and fees on the judgment will continue to accrue until the judgment is paid in full.

You could end up right back where you started, facing additional collection measures and the possibility of wage garnishment or even further bankruptcy in your future.

Always call an attorney if you are not sure or have any questions about the legal ramifications of any debt proceedings filed against you and do so as soon as you receive notification that they exist.

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