Thank you for your question about your debt, how the debt collectors will pursue collections, and what options you have.
Charge-off
When a debtor stops paying on a debt, a creditor will attempt to contact the debtor on the telephone and via the mail. When the number of days since the most recent payment reaches 120-180 days, the account is no longer considered current and the creditor is required by generally accepted accounting principles to “charge-off” or “write-off” the debt. Writing-off a debt does not mean the debtor is no longer responsible for the debt, or that collection efforts cease.
The charge-off date has almost nothing to do with the statute of limitations for debts. To learn more about the distinction between these issues, read Charge-Off & Credit Report.
At the charge-off point, the creditor will transfer the debt to a late-accounts department, or has the option to sell the debt to a collection agent. The collection agent will buy the debt at a discount. However, the collection agent has the right to collect the entire balance due plus interest.
Debt Validation
If a collection agent a debt it states you owe, you have the right to do what is called debt validation. If the debt is many years old or you do not recall the debt, validate it.
Fair Debt Collection Practices Act
Collection agents often use aggressive tactics, when contacting the debtor. Collection agents are know to threaten to call the debtor’s employer, file charges with the local sheriff, or say they will park a truck in front of the debtor’s house with a sign that reads "Bad Debt" on it. All of these tactics and many others are illegal under the Fair Debt Collection Practices Act (FDCPA). Start here to learn the rights consumers have in collections under the FDCPA.
Judgment
A creditor -- a debt collector that owns a debt account is a creditor -- has several legal means of collecting a debt. Before the creditor can start legal collections, the creditor must go to court to receive a judgment. A court (or in some states, a law firm for the plaintiff) is required to notify the debtor of the time and place of the hearing. This notice is called a "summons to appear" or a "summons and complaint." In some jurisdictions, a process server will present the summons personally. In others the sheriff’s deputy will pay a visit with the summons, and in others the notice will appear in the mail. Each jurisdiction has different civil procedure rules regarding proper service of notice. (See Served Summons and Complaint to learn more about this process.)
Summons
If you ever receive a summons, you should do as it instructs! This is not a social invitation that you can ignore. In the hearing, the judge will decide if the creditor should be allowed to collect the debt. If the debtor fails to appear, the judge has no choice but to decide on behalf of the creditor.
Therefore, if you receive a summons, the first thing you should do is contact the law firm representing the creditor. Open a negotiation to see if they are willing to settle the debt. If not, it would be wise to respond as indicated in the summons. If there is a hearing, attend it and present your side of the story to the judge. Use facts, tell the truth, dress appropriately, and show the court respect. The court may or may not decide in your favor, but at least you will have exercised your right to be heard.
The court may decide to grant a judgment to the creditor. A judgment is a declaration by a court that the creditor has the legal right to demand a wage garnishment, a levy on the debtor's bank accounts, and a lien on the debtor’s property. Which of these tools the creditor will use depends on the circumstances. We discuss each of these remedies below.
Wage Garnishment
The most common method used by judgment creditors to enforce judgments is wage garnishment, in which a judgment creditor would contact the debtor’s employer and require the employer to deduct a certain portion of the debtor’s wages each pay period and send the money to the creditor. However, several states, including Texas, Pennsylvania, North Carolina, and South Carolina, do not allow wage garnishment for the enforcement of most judgments. In several other states, such as New Hampshire, wage garnishment is not the "preferred" method of judgment enforcement because, while possible, it is a tedious and time consuming process for creditors. In most states, creditors are allowed to garnish between 10% and 25% of your wages, with the percentage allowed being determined by each state. See the Bills.com article Wage Garnishment to learn more about wage garnishment.
Levy Bank Accounts
A levy means that the creditor has the right to take whatever money in a debtor’s account and apply the funds to the balance of the judgment. Again, the procedure for levying bank accounts, as well as what amount, if any, a debtor can claim as exempt from the levy, is governed by state law. Many states exempt certain amounts and certain types of funds from bank levies, so a debtor should review his or her state’s laws to find if a bank account can be levied. See the Bills.com resource State Consumer Protection Laws and Exemptions for an overview of each state’s rules.
Lien
A lien is an encumbrance -- a claim -- on a property. For example, if the debtor owns a home, a creditor with a judgment has the right to place a lien on the home, meaning that if the debtor sells or refinance the home, the debtor will be required to pay the judgment out of the proceeds of the sale or refinance. If the amount of the judgment is more than the amount of equity in your home, then the lien may prevent the debtor from selling or refinancing until the debtor can pay off the judgment. Again, every state has its own rules about property liens, so debtors with a judgment against them who own property should review their state’s laws to learn creditor can and cannot do to enforce its judgment. See the Bills.com resource State Consumer Protection Laws and Exemptions for an overview of each state’s rules. Also see the Bills.com Liens & How to Resolve Them article to learn more.
Debt Resolution
If you have a judgment against you, consult with an attorney licensed in your jurisdiction to learn how the judgment will affect you, based on your individual financial circumstances and your local rules.
It is not too late to contact the creditor or the law firm that either represented the creditor or bought the debt, and present them a settlement offer. Even with a judgment in place, the law firm must spend money to try to collect the debt. Getting a wage garnishment, levy, or lien takes time, and time to a law firm is money. The law firm may settle for a lump-sum payment. See "Debt Negotiation and Settlement Advice" before opening negotiations with a creditor. See "What Are My Debt Consolidation Options?" to learn more about your rights and options for resolving the debt.
Important! Get all settlement offers in writing before sending a check to the law firm or collection agent.
I hope this information helps you Find. Learn & Save.
Best,
Bill
Manheim, PA | January 21, 2013
January 21, 2013
You seem surprised by the court's order. If you are, then you did not receive an adequate notice of the summons and complaint filed against you several months ago. If you did not receive a notice of this lawsuit, then it is likely the plaintiff (the creditor that filed the lawsuit) did not follow Pennsylvania civil procedure rules and give you a notice of the action. Talk to the lawyer you meet about filing a motion to vacate the judgment against you. If you file such a motion, and the court believes your motion, the court will throw out the judgment against you, and possibly sanction the lawyers who failed to follow your state's civil procedure rules.
If you can get the judgment vacated, the creditor may choose to file a second lawsuit against you. However, this time, it will give you an adequate notice. When you receive a notice of the lawsuit, consult with a lawyer about raising a statute of limitations defense.
If you received a notice of the lawsuit and ignored it, then you may not file a motion to vacate the judgment on the grounds I just mentioned. However, there may be other reasons to vacate the judgment, which your lawyer will explore.
If you have no grounds to attack the judgment, then discuss your options for responding to the interrogatories. Do not ignore the court's order. Take action and talk to a lawyer.
No Miami Beach, FL | November 30, 2012
December 05, 2012
Your creditor could sue you and that could lead to a judgment. With a judgment, your US bank accounts could be in jeopardy. A creditor can pursue debts for people living outside the country, but that usually happens over very large debts. A consumer debt is unlikely to cause problems re-entering the country.
The best way to protect yourself is to speak with your creditor, explain that you were laid off and that you are leaving the country, and try to work out some kind of settlement or payment plan on the remaining balance.
November 03, 2012
Garden City, MI | June 20, 2012
June 20, 2012
No one other than you is responsible for your debt. Don't let any collectors pressure your grandmother into paying.
Woodville, CA | June 14, 2012
June 14, 2012
T/o Irondequoit, NY | May 05, 2012
May 07, 2012
Toledo, OH | April 14, 2012
April 14, 2012
Phoenix, AZ | April 12, 2012
April 12, 2012
- Resolves the debt permanently
- Strikes the derogatory from your credit report, which
- Has a positive impact on your credit score
Some collection agents and original creditors will claim a pay-for-delete violates the FCRA. That excuse is nonsense, and is not based on law. Some may have a policy to avoid pay-for-deletes, but a company policy is not the same as a federal law.
Dallas, TX | April 09, 2012
April 09, 2012
Just because the SOL has passed and the debt has fallen of your credit report does not mean that you can't be sued. It means that you need to use the SOL as an affirmative defense, should you be sued. My guess is that the collector was hoping to scare you into paying.
Grand Prairie, TX | March 23, 2012
March 23, 2012
First, arm yourself with information about your state's collection laws. You mentioned Texas. You need not worry about wage garnishment for a private student loan, which is not an issue for you as a Texas resident. (Also, there's the matter of your being unemployed at the moment.) However, if you were employed and your loan was federal, then it would be an issue. If you have joint accounts with anyone, close them now.
Second, learn to negotiate your debt issue. You may not have the funds to negotiate a settlement today, but when you are employed, use the opportunity to resolve the debt.
Finally, realize you will eventually find work, and these dark days will pass.
Grand Prairie, TX | March 23, 2012
March 23, 2012
In my opinion, you have nothing to gain at this time by calling TERI or its collection agent to engage in a conversation. When TERI's collection agent eventually contacts you, validate the debt.
Let us assume for the sake of argument TERI's collection agent files an action against you in Texas for breach of contract because you defaulted on the loan payments. You mount a defense, but it is unsuccessful, and the court gives TERI's collection agent a judgment. It cannot use the judgment to garnish your wages because Texas law forbids wage garnishment for this class of debt. Instead, the judgment-creditor gets an account garnishment on your joint account. "Wait a minute," you may say, "that's my spouse's money in there!" Too bad! The account is yours, too, and there is no prohibition on levying joint accounts.
Joint accounts are more trouble than they are worth. Close your joint accounts, and open two new accounts at the same bank or credit union. Use the bank or credit union's on-line account-to-account transfer function to share money between the accounts as needed. You need not take this action immediately, but keep this in mind should TERI's collection agent file an action against you.
Grand Prairie, TX | March 23, 2012
March 23, 2012
Regarding the "make arrangements to retire your obligation" it appears the collection agent is offering you to discuss a settlement for less than the full balance due. You have nothing to lose by listening to their offer.
Grand Prairie, TX | March 27, 2012
P.S. Is there any warning sign if they do levy our bank account? Do they give you notice or just hijack the account? Thank you again! You're a life saver.
March 27, 2012
If, on the other hand, you have no access to funds for a settlement, then validate the debt immediately. Follow the hyperlink just mentioned to learn how.
It is unsafe to assume you will receive prior notification of an account levy. Some states require prior notification so the judgment-debtor can file for an exemption. However, many Bills.com readers report judgment-creditors forget this step.
Grand Prairie, TX | June 04, 2012
June 04, 2012
Please see the Bills.com resource How Do I Validate Debt? to learn what a proper validation is, and your options for your next steps.
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