Wednesday, August 11, 2010

The Debt Collection Lawsuit Threat

A debt collection lawsuit threat is a figurative gun, and just like any weapon it can frighten people into doing things they wouldn't normally do. Like paying a collection agency a large sum of money.

No one wants to get that dreaded summons in the mail from a debt collector, giving them a matter of days to either pay up or duke it out in court. Better to be prepared ahead of time, however, than to be left caught in the headlights not knowing which way to turn.

Know the Difference Between a Threat and the Real McCoy

Sure, the FDCPA specifically states that a collection agency cannot use threats against consumers if it doesn't actually intend to follow through with the threat. Unfortunately, if a collection agency can sue (and that doesn't mean it will) it can legally send you piles of letters threatening an immediate lawsuit if you don't pay off the debt or agree to a settlement. This is standard collection procedure for everyone. Got that? You aren't special and you probably aren't in any more danger than anyone else is who happens to owe money to a collection agency.

A lawsuit threat is legal armed robbery.

When Collection Agencies Threaten to Sue

Collection agencies rarely use the threat of a lawsuit right off the bat. They'll feel you out first by sending you a few letters and calling you around the clock. Some collection agents will be polite and some will be downright abusive, since different personality types respond more favorably to different forms of persuasion. 

Eventually, if you hold out for long enough, the collection agency will pull out the big gun: the debt collection lawsuit threat. In most cases, the company has no intention of actually suing you. Your account, however, has become a liability and is probably dangerously close to being labeled "uncollectable." Everybody who holds out for long enough will get a debt collection lawsuit threat unless their debt is being held by one of the few collection agencies in America that actually play by the rules. 

How to Identify an Empty Lawsuit Threat

Empty lawsuit threats usually appear in one of two ways:

1. A letter from the collection agency stating that if it does not receive payment by a certain date it will pursue legal action against you.

2. A letter from a supposed collection attorney stating that he/she has been hired to pursue legal action against you on the collection agency's behalf. 

Usually letter number one comes first and, if you don't respond, they'll send you letter number two. 

Is that lawsuit threat really from an attorney? 
Empty lawsuit threats just keep coming. If a collection agency actually intends to sue, it will send you a court summons – not stacks and stacks of threats. 

This isn't to say that no debt collectors ever sue. They do, and given the current state of the economy, those lawsuits are becoming more and more frequent, but the vast majority of lawsuit letters from collection agencies are only empty threats. 

Who's In Danger of a Collection Agency Lawsuit?

Some individuals are at a much higher risk of a debt collection lawsuit than others. Granted, just owing a debt to a collection agency places you in some degree of danger. I'm not going to lie to you and tell you it doesn't. Meeting any of the following conditions places you at higher risk of a debt collection lawsuit:

1. You owe the collection agency more than $1000. The more you owe, the higher the risk.

2. The statute of limitations on your debt is about to run out. 

3. Your debt was charged off within the past two years

4. You sent the collection agency a Cease and Desist letter. It can't contact you to continue its attempts to collect and often has no choice but to sue. 

I know that #2 and #3 appear to contradict each other, but they don't. Your risk is highest soon after the original creditor charges off the debt and right before the SOL on the debt expires. Your risk is lowest during the interim period in between. 

Remember, receiving a court summons notifying you of a debt collection lawsuit isn't the end of the game – you just haven't hit your home run yet.


  1. me and my husband have paid lexington 79.00 a month each for the last five years has our credit score improved? NO in fact were you aware that the debt junk buyers are owned by the credit reporting agencies? dont believe me go to the ny stock exchange they fraudulently put debt on your credit report with no verification! lexinton sends out one letter a month!!!! go to find out how you can remove bogus debt and fight debt junk buyers and win!!!!!

  2. I have gotten a letter from a lawyers firm trying to say that I owe this debt and if they don't here from me in 30 days and are saying that the debt is valid what do I do next

    1. If you have yet to receive a summons, you may want to respond via a debt validation request. Scare tactics aren't uncommon in the debt collection industry. Without more information on the situation (your state of residence, the amount of the debt, when it first went delinquent, etc.) I can't give you any specific answer. I strongly suggest that you do some research regarding how to respond and fight a debt collection lawsuit just in case you get a summons.