Collections Advice

I have some big debts. What can creditors do to me? What are my rights?

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Legal Advice
Bill's Answer: Answered by Brad Stroh

Thank you for your question about your debt, how the debt collectors will pursue collections, and what options you have.


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.


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.)


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 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 resource State Consumer Protection Laws and Exemptions for an overview of each state’s rules.


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 resource State Consumer Protection Laws and Exemptions for an overview of each state’s rules. Also see the 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.



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Comments (167)

Bruce D.
Fresno, CA  |  April 08, 2014
I did a volunteer surrender on a car in late 2012. After the car was sold at auction I had a balance of $2568.00. I spoke with the finance company and we agreed I would pay $200 by the 15th of each month and after 3 years would reevluate the loan. I never missed a payment and in Dec 2013 I wrote them a letter telling I was going to miss my Dec. payment so I could buy Christmas for my grandchildren and would resume my payments in Jan.2014. I sent a payment on Jan. 9th and another on Jan.26th to catch up on my payments. In early Feb. I got both of my Jan checks back with void stamped on them. I called to find out why and they said since I missed 60 days without a payment the account had been turned over to a third party for collection. I did not miss 60 days between payments cause I made my payment the 15th of Nov 2013. 60 days would have been Jan.15, 2014 and they sent that check back to me with it stamped were the received it on Jan 13th. I have both checks that they sent back to me. Now on my credit report they have the account charged off and I have mot received anything from a collection agency. I believe Alphera Financal Services just wanted to get rid of my account and they just stabbed me in the back. Is there anything I can do to correct this short of cashing out which I won't dp because I wasn't trying to beat them out of their money. Waiting your response and thank you.
April 09, 2014
A creditor is free to sell a collection account for any reason. Rather than look at Alphera Financial Services' actions as a negative event, let's look at it a little more objectively.

We know original creditors sell collection accounts for pennies on the dollar — some more and many for less. Let's assume for the sake of argument Alphera Financial Services sold your account to a collection agent for 10 cents on the dollar.

I'll assume you started your $200 payment plan in January 2013, and the balance was $2,568. You didn't mention an interest rate, which makes the rest of my calculations a bit hazy, but I'll be close enough to convey my idea. After 11 payments of $200, your balance should have been cut to $368, plus a small amount for interest. Let's say the balance was $450.

The collection agent bought your account for about $50, although I hasten to add it has the legal right to ask for the face value of the account ($450). When the collection agent contacts you, explain all of these facts, and that you want to settle the matter once and for all. Offer it $70, and negotiate up from there.
Bryan N.
Chariton, IA  |  December 20, 2013
I reached a settlement payment amount each month with the original creditor through a collection agency. It went through the court and was then so ordered. I make the payments on time each month but the original creditor is still sending me bills with a different balance on them. Now they sent me a statement saying they are transferring servicing of loan to a different part of their company. Aren't the original creditors supposed to correspond through the collection agency? I have spoke with the collection agency and they have assured me that once it's paid in full they will issue a statement as such. I'm worried the original creditor will still keep sending bills once it is paid. Your comments on this would be appreciated.
December 23, 2013
Issuers often lose track of accounts in collections. Unfortunately, it's something consumers have to "clean up." My advice here is two-fold.
  1. I recommend that you contact someone at whatever telephone number is on your most recent correspondence and tell them what you are experiencing. Have your personal info and account number available as well as any paperwork you received from the court. Make sure you record the person's name with whom you speak. Also make sure the person KNOWS they took your name (this helps with the person feeling accountable to address this once they hang up).
  2. Check your credit reports at to make sure your payments to the current collection agency are being reported correctly. If there is anything concerning about the way this debt is being reported, then please write me back and and I'll see what I can recommend.
Keller T.
Midland, TX  |  December 18, 2013
I was in final month of a one year lease. This was my third lease with this apartment and never an issue. We talked twice over a month out that I could not afford increase for a new lease and I would move out. With 3 weeks left I was told "get out now", so I did and paid for that week. Months later a collection agency notified me I was reported as a "skipper" and the complex stacked on a ton of charges and are adding interest. I see now I made a terrible mistake in not putting it in writing as the collection agency pointed out. I've offered partial payment just to get it settled but they won't settle and have already posted on my credit. I received a letter from the apartment complex stating I owe nothing in two different email addresses but the collection agency said that means nothing and I still owe. I'm getting daily calls, what options do I have left?
December 19, 2013
Have you tried speaking directly with the apartment complex? They may tell you that this is all a mistake, especially when you have correspondence from them that you don't owe the debt.

If that doesn't work, then your best option is to speak with a lawyer. The fact that you paid for one week and they cashed and accepted the check gives credence to your claim that your departure was mutually agreed upon. The emails from the apartment complex give further strength that you don't owe the debt.

Take the time to dispute the debt with the credit bureaus, supplying the emails that state that you don't owe the debt.
Jessica S.
Fountain Hills, AZ  |  November 08, 2013
I had to turn in a car I had with an ex (who never, ever made one payment on time). Before I turned it in, I had a buyer interested. I made an offer to the bank, they denied and did a counter offer. Buyer didn't want to pay more. So I turned it in. Its been over two weeks since they sold the car and I haven't received anything from the bank. I also work two jobs as PRN, which is not guaranteed work, you just work whenever they have hours, and I work one part time job on the weekends. Can they try to garnish my PRN/part time jobs? Can they come after me for less than the offer I had in?
November 11, 2013
There's no rigid time schedule lenders must follow after a borrower returns a vehicle in a voluntary repossession. You may hear from the lender tomorrow, next week, or two months from now.

Let us fast-forward in time and the lender sells your vehicle at an auction, and the amount it fetches is less than the balance of the loan. This shortfall is called a deficiency balance, and you and any co-signers have liability for this amount. The lender can pursue you and the co-signer using your state's court system. If it files a lawsuit against you and you do not defend yourself adequately, the lawsuit will result in a judgment against you and any other co-signer(s). With a judgment in hand, the lender can ask the court to garnish your wages, put a levy on your bank accounts, and pursue other remedies.

I assume you work pro re nata, which means "as needed" and not part of a set schedule. The judgment-creditor (the lender) can garnish your wages according to federal and your state's laws. See the wage garnishment article to understand your rights and state exemptions for wage garnishment in your state.

Regarding the offer the lender rejected, talk to a lawyer in your state who has consumer law experience to learn if there is any case law supporting your theory that you have liability only for the difference between the offered amount and the balance due, and not the difference between the balance due and the auction amount.
Alicia W.
Riverview, FL  |  October 10, 2013
I have a motor home and it's upside down by a substantial amount. I went to the bank and they said they will sell it at auction and come after us for the balance. We are elderly and can no longer afford to keep it much less able to take it out anymore. We are current on the payments. My home is paid off. Will they come after my house? What are my options? Is there anyway we can get out of paying the remaining balance? Thanks
October 11, 2013
You described the steps a lender will follow after it repossesses a vehicle. It has the legal right to pursue you if the price the RV fetches at an auction is less than the balance due on the loan. See the article RV Repossession and especially the comments following the article to learn how fellow readers have dealt with this issue.

You indicated you reside in Florida. Consult with a Florida lawyer who has wills, trusts, and estates experience to learn if and how you can set up a trust to help insulate your property from a judgment-creditor's lien. Florida has generous homestead laws, which may make it difficult for the judgment-creditor to attach a lien to your property, but I want a Florida lawyer to explain to you how the homestead rules may apply here.
Eric B.
Ladysmith, WI  |  August 03, 2013
Capital One has a judgment against me in NY. I live in Wisconsin. It has been 4 years since I have heard anything on this debt and there is nothing on my credit report about this debt anymore. Also the amount owed has seemed to double on the judgment. What options do I have available should I ask them to validate the debt?
August 05, 2013
What is your motivation for wanting to contact the judgment-creditor?

The cliché, "Let sleeping dogs lie," applies here. If, as you mentioned, the judgment-creditor has not contacted you for 4 years, and the judgment does not appear on either your Equifax, Experian, or TransUnion credit reports, then the last thing you should do is encourage the judgment-creditor to dig through its files and open yours. It may decide to domesticate the New York judgment in Wisconsin and try to garnish your wages, levy your bank accounts, place a lien on any real property you own, or ask the sheriff to seize your personal property.

Under either New York or Wisconsin law, a judgment has a lifetime of 20 years.
Ana R.
Manheim, PA  |  January 21, 2013
I received a court order, which says I have a bench warrant because of failure to appear at court. I called the court house and they said I had to contact judge office when I did they said I needed to contact the attorney, so when I called him he said this was for a credit card debt which is about 10 years old I believe. I am in PA and am so scared. I am a single mother of 2 and I can barely make ends meet. This lawyer told me that if I can't pay he is not canceling the warrant. I don't know what to do. Now he sent me a interrogatories in aid of execution. I have nothing. I don't own a house or my car. I work to survive and do the best I can to support my girls. Now this guys is basically saying if I don't pay, he will issue a sheriff sale. I don't even know what to do.
January 21, 2013
Consult with a Pennsylvania lawyer who has consumer law or civil litigation experience immediately. If you cannot afford a lawyer, call your county bar association, or look online, and learn the names of the organizations in your area that help low- and no-income people in your area. Make an appointment with one of these organizations, and bring all of the documents you have regarding the debt, including the court order to your meeting. The lawyer you meet will discuss what I am about to mention below.

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.
Jaime B.
No Miami Beach, FL  |  November 30, 2012
I'm from another country and got transferred in March 2012 to the US by my company. In May when I received my social security number I applied for two leases thinking that I will stay for at least three years. On October they made a lay off and now I'm leaving the country. I don't want to pay for a car I won't be using. What are the possible actions for them to take against me if I don't pay the difference of what they are able to sell it in an auction and of what it is owed? Could they take money out of my US bank account to cover it even when it is in another bank? How would this affect my entry to the US in the future? How can I protect myself? Would you be albe to help/protect me and how? How much would you charge for your services.
December 05, 2012
James, we are a consumer finance Web site that aims to empower consumers to make sound financial decisions. We are happy to offer some advice (not legal advice, though, as only an attorney can properly do that).

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.
Adam B.
November 03, 2012
My question s about non-federally guaranteed private student loans. have not defaulted on the ridiculous sum yet, but plan to. I live in Ohio now and went to school in Ohio when I took out the loans. I plan to move to PA where wages cannot be garnished if I am not mistaken. I plan to use an overseas bank account. I do not own and property, house, car etc. I own nothing. My credit s already terrible and I do not care. What can they do to me with a judgement given I am essentially "judgement proof" ?
John Q P.
South Elgin, IL  |  June 21, 2013
They will try to garnish your wages unless you can pay yourself cash.
June 24, 2013
A creditor may choose to sue you and get a judgment even though you are judgment proof today. However, you may earn income, be gifted an asset, or receive funds in a bank account during the life of the judgment that changes your status. In many states, creditors can renew judgments, so, unless you plan to stay judgment proof for a very long time, you may facing some form of collections should the private student lender file a lawsuit against you that you do not oppose.
Lisa M.
Garden City, MI  |  June 20, 2012
I dont know what to do. I went on a road trip three years ago with a guy I was dating and he got me to open up a Best Buy card. I didnt think I would get approved because at the time I was over drawn on my bank account by $700 and I as maxed out on both credit cards I have. The guy said he was going to pay and he never did. I dont work because Im on KIDNEY DIALYSIS every single day and I have a 6 year old daughter to raise alone. I only make $600 a month all together. Im on SSI. The money is not there. I dont have a house, or a car to borrow money off of. I cant go and take out a personal loan for all my bills because my credit score is too low. THe collection lawyers send letters to my grandmothers house once a month. The total amount owed is $4400. Orginally spent was $1800. I only make $7000 a year on disability. If I had the energy to work I would, but I cant until I get a kidney transplant.
June 20, 2012
Lisa, it is clear that you can't afford to pay right now. The collectors can choose to sue you to obtain a judgment. If they do, you should be aware of the rules protecting your SSI from garnishment. This kind of creditor cannot garnish your SSI.

No one other than you is responsible for your debt. Don't let any collectors pressure your grandmother into paying.
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