When dealing with collection agencies, nothing is scarier than the prospect of a lawsuit. Unfortunately, debt collectors aren't known for their ethics and will often say whatever they need to say to coerce you to make payments--including threatening to sue you. So how do you know if a collection agency actually plans to sue you or not? There is no surefire way to tell, but there are certain signs to look for that can tip you off to an impending lawsuit.
1. The Statute of Limitations is Approaching
After the statute of limitations or "SOL" passes, it technically isn't legal for a collection agency to sue you. Because lawsuits are a last resort, debt collectors will do everything in their power to ensure that you pay up before the SOL arrives and the debt is no longer enforceable. If it becomes clear that isn't going to happen, a smart collector will file a lawsuit against you before the SOL arrives. Keep track of the SOL on your debt and if you suddenly start receiving lawsuit threats around that time, take them seriously.
2. You Got a New Job and You're Paying off Debt
Think your employment record is private? Think again. New jobs often appear on your credit report and, if you owe money to a collection agency, you can rest assured that debt collectors are monitoring your credit report religiously. If your credit report shows that you have a new job and/or are paying off other creditors, the collection agency will go to great lengths to get a piece of the action--and that may just include a lawsuit.
3. You Have a Large Amount of Unpaid Debt
Suing debtors costs money. Although collection agencies can include attorney fees in the lawsuit, they may or may not be able to collect on that debt. Because the collection agency has to pay its attorney up front, it generally isn't worth the collection agency's time to sue you over a paltry amount. Just to clarify, a debt of $5000 is a lot more likely to land you in a courtroom than a debt of $200.
4. The SOL Hasn't Expired and You Blocked the Collection Agency From Contacting You
When used correctly, a cease and desist letter can be an invaluable tool to protect yourself from debt collector harassment. When used incorrectly, however, it can put you in a dangerous position. Just to clarify, a cease and desist letter informs the collection agency that it can no longer contact you. Federal law requires collectors to honor cease and desist letters from debtors. The problem arises when the collection agency can no longer contact you. If it cannot contact you, its only option to collect the debt is to file a lawsuit. This is only true, of course, if the statute of limitations has not expired. Once the SOL expires, the collection agency isn't supposed to sue you anyway--regardless of whether you ban it from contacting you or not.
5. Your Account Has Been Referred to a Real Attorney
Collection agencies are infamous for having in-house lawyers that write letters as empty as they are threatening. If you receive notification that the collector has sent your account to an outside attorney, take note. Googling the attorney should give you a good idea of what he/she does. Forums are also invaluable when it comes to getting information about whether the attorney follows through with his/her threats. Once your account is referred to a real attorney, tread carefully.
Can a Collection Agency Sue After the Statute of Limitations Expires?
Send a Cease and Desist Letter to Debt Collectors
Debt Collection Lawsuits: The Statute of Limitations Defense
The Debt Collection Lawsuit Threat