If I Pay a Small Amount on My Debt, Can I Be Sued?

If I pay a small amount on my credit card every month, can the collections department still call me?

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Bill's Answer: Bills.com Resident Expert

The original creditor has the right to call you about the debt any time a contractual installment is late. If you are in arrears on your payments you can expect the internal collections department to call to see why you haven't brought the account up-to-date.

However, most major card companies will refrain from sending the account to outside collections (to avoid the cost to them) for at least three months, but more often, five or six months in arrears.

Common Non-Law, Legal Urban Myths

Your question brings up a phenomenon I see often in the consumer finance theater, "the common non-law."

I can’t tell you the number of times I have been told, "The creditor can't do anything if you make a payment every month on the debt." The rule is stated as if the amount is not really important so long as something is paid each and every month. This rule is nonsense and has no basis in law.

Another commonly held non-law is that if a defendant in a civil suit avoids service of process the plaintiff is totally stymied and cannot proceed. Again, this is nonsense.

Why are these misconceptions so commonly and widely held? I believe the first non-law grew out of the Great Depression when an Alabama lawyer began negotiating much reduced debt payments for his clients who had theretofore been assiduous in their debt payments, but could no longer pay those aggregate amounts each month. A private plan of repayment called for extremely reduced payments, and the creditor agreed not to seize property, garnish wages, and so on if the debtor made monthly payments. In very poor months the debtor could pay in the amount of his best effort, but he had to pay every month.

From the creditor's point of view, half the collection battle would be won if they could get debtors into a payment routine or, rather, rut. If creditors were not to be paid substantially in bad months, at least they could salvage some benefit from this repayment plan. After the plan was agreed to between the debtor and each creditor it could truly be said, "pay what you can — if you can't make the full payment, pay something each month and the creditor can't do anything to you."

These repayment plans spread throughout the country and became very popular. Instead of getting nothing, creditors were getting something. Years later this grass-roots semi-solution became the conceptual basis for Congress' amendments to the Bankruptcy Act when it introduced the unprecedented type of bankruptcy known as a Wage-Earner's Repayment Plan, or Chapter XIII (13) — with strong support from the creditors and bankers.

Collections Laws Today

So, we can start with the fact that creditors have a conditional right to contact you in the regular collections manner simply because the account is in arrears. But for other regulatory regimes, you will be contacted by an internal collector to pressure payment from you.

However other regulatory regimes exist at the federal and state levels. All regulatory schemes exist by governmental action, but none are private (that I know of) by, say, trade association rules or other private means. Most states do not have a comprehensive regulatory scheme, only a collection of prohibitions against collectors resulting from ad hoc abuses and the regulations passed in response to such abuses. These collector statutes usually came about when some especially egregious act by a rogue collector resulted in specific consumer injury, giving collection methods an exceedingly unfavorable press.

Other states, such as California, simply incorporated the federal statute into the state law in its entirety. California made one huge addition to federal law by providing that the restrictions on consumer contact apply equally to original creditors. The federal statute known as the Fair Debt Collection Practices Act (FDCPA) applies only to third-party collectors, so it would not keep your creditors from contacting you. (See Collections Advice to learn more about the collections process.)

Recommended Course of Action

Contact a well-connected organization, the National Association of Consumer Advocates (NACA). This is an association of lawyers across the country who practice consumer protection law. NACA has developed a network that should provide a referral for you to an experienced attorney in your state who can speak with you and definitively answer any questions you might have regarding this debt.

Most initial consultations are provided free of charge. Specifically, you should ask the attorney if there are any laws or regulations in your state that could prevent collection activity in your situation, and if making small payments each month extends any degree of protection. A wide ranging discussion should help you plan ahead knowing all of your alternatives.

For more information about consumer debt, and the various options that may be able to help resolve it, I encourage you to visit the Bills.com debt help page.

I hope this information helps you Find. Learn & Save.




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Comments (20)

Madina R.
East Westland, MI  |  October 06, 2012
I have a student loan with Genesis Lending and I am suppose to pay $80.00 a month and can only afford $40.00 a month. I get only $700 in Social Security. Can the student loan take me to court if I'm at least paying something on the student loan?
October 08, 2012
I have two reading assignments for you that will answer your questions about student loans and Social Security benefits:
  1. Discharge a Student Loan
  2. Creditor Garnish Social Security Benefits?

Also, reread the original article above, which discusses the central issue in your question.

Rebekah Y.
Summit, NJ  |  April 09, 2012
I am working and recently had my hours reduced, so therefore my pay has been decreased. I had emergency surgery in Nov 2011 and recieved bills from the doctors and being that I was not able to pay in full I set up a payment plan with them and put it in writing agreeing to pay each month. I have made my payments even paying more than what I agreed to, to try and reduce my balance as soon as possible. Now the office is telling me that they are sending me to collections. Are they allowe to do that considering we had a writen aggrement? Please help me, Thanks
April 10, 2012
The answer depends on the terms of your written agreement. In general, if you meet your obligation under the terms of the contract, then you should not be sued. I recommend that you speak with an experience consumer law lawyer who can review your documents.
Leo A.
New York, NY  |  March 01, 2012
A friend borrowed $2,000 from me and now she doesn't want to pay it back. Since I told her I am going to small claims court, she started sending me a check for $50. Can this stop the process? Or can I normally proceed?
March 02, 2012
Depends. What payment schedule did you two agree to originally? Did you two agree the friend would repay you in a lump sum? Or over several years? If you agreed to a lump sum, the $50 payment is still a breach of the contract. If you agreed to plan where he or she would repay the debt in four payments (to pick a number) then the $50 payment is still a breach.
Jolie R.
Wheat Ridge, CO  |  February 13, 2012
Hi, I have a quick question. I am attending college right now and I am past due on my tuition payments.I have been paying them 100 to 150 dollars a month but they are still threatening to put it through collections. I don't make enough money to pay the full 3,000 off at one time. Is there anything that you would suggest I do? Can they really put it through collections, if I am making an effort to pay it off. I live in Colorado by the way.
February 13, 2012
The debt could be turned over to collections if you can't work out an acceptable solution with the college.

Your best course of action is to try to work out a payment plan. Be willing to make a full financial disclosure, to show the college why you can't afford to pay more than you are.
Kat D.
Sheridan, WY  |  February 09, 2012
I have been making regular payment to the collector on past medical debt. The last time I asked my balance it was higher than the beginning bill and I found out they had been only applying money to my interest. Now that it is over a thousand higher than what it was to start with and I have continued to make my payments I have recieved a letter stating they still have the right to collect in full. What can I do about this? I do not have the money to pay in full.
February 09, 2012
Your present strategy, which is based on your good intentions and a reliance that the creditor will respond accordingly is getting you nowhere, unfortunately. You need a different strategy. My advice?
  1. Read the Bills.com resource Debt Settlement Advice to learn how to negotiate a settlement yourself.
  2. Visit the Bills.com Debt Coach for no-nonsense, no-obligation, personalized advice on your debt resolution options.

Please return here to tell us how you plan to resolve your debt.

Elizabeth S.
Findlay, OH  |  November 11, 2011
My husband has student loans from several years ago that he has defaulted on. The loan was from Sally Mae. Last year he received notice from Sally Mae that he was in default and they would take his tax return, which they did. Shortly after that he received notice from a collection agency saying he owed student loans. We spoke to that company's lawyer and started making payment of $80 per month for 7 months. Then two of the checks we sent were never cashed. This lawyer sent us a letter stating another company had bought the loan and they were no longer handling it. This lawyer returned those last two un-cashed checks to us. A few weeks later we received notice from this new collection agency that they wanted payment on the loans. However at this time our income had dropped and we were not able to make payments. Yesterday my husband got a call at work from yet another 'new' collection agency, stating that if he did not start making payments, his wages would be garnished. We called this company today, to try to work out a payment plan. This co. told us they wanted 1000 down and 150 payments per month. We said that was impossible. Then then asked us for our income and to tell them of all the bills we pay. When all the bills are paid, groceries, gas, etc. we have between 20 to 30 left at the end of the month. They told us we have 500 left per month after bills according to there calculations and we need to pay 75 per month starting today or they will garnish. We told them that is ridiculous and said we can send them 25 per month starting today, then in march when one of our payments drop off, we can pay 75 per month. They told us this is unacceptable and he will start being garnished immediately. Don't they have to file suit and take us to court so we are able to argue against it? And don't they have to send us court papers in the mail? We have never received anything in the mail stating who this company is and that they took over the loan. What type of legal recourse do we have? We want to take care of this as much as we can, but not put ourselves out on the street to do it.
November 13, 2011
Since you have been contacted by a number of collection agencies, validate your debt. Make sure that you are dealing with the right people.

Find out what type of student loans you have. There are different procedures for federal student loans (administrative wage judgment) and private student loans (court judgment). Read Bills.com's article about stopping garnishment on student loans.
Madeline H.
Stockton, CA  |  September 06, 2011
"Is there a law in California that states if you pay at least $5.00 toward a debt that shows you are attempting to pay back your debt . Therefore Collection Agencies , Lawyers etc. should not be harassing you ?"
September 07, 2011
Harassment is not allowed, but you do not prevent collectors from aggressively collecting on a debt just because you paid them $5.00. If you don't pay your bills as you agreed to pay them, you should expect to receive collection calls and letters.
November 16, 2009
Please see What Are My Debt Resolution Options? for a comparison and contrast of your options. I would put default out of your mind as a viable long-term strategy.
Kathy .
November 16, 2009
My situation is this - I have a small business that needs revolving credit. I own 3 properties which are either upside down or wouldn't sell because of where they are (depressed area) or the many other properties for sale aren't selling. My problem is I am $103,000 in credit card debt. I have been able to pay all my bills and the minimums on the CC's. This changes this month, because the cards are maxed because they lowered my limits. I have called credit counseling. They couldn't get me the rates I have now (they are really low). The consolidation would cost me more than I can pay now. I can afford to pay everything but the credit cards. My FICO has taken a hit because of the high balances and debt to credit limits but it's still around 700.Should I default or do I have another option?Please advise.
November 14, 2009
You mentioned you are on a "fixed income," that you are 69 years old, and that you receive a "state income" check, so I will assume that you are receiving a pension or Social Security retirement benefits. If this is the case, and your retirement benefits are your only income, the creditors cannot levy the contents of your bank account. You need to contact your bank and tell them to make a notation on the account that your pension or social security benefits are deposited into that this account contains only funds from those sources, and may not be levied. I urge you to contact the county bar association and ask them for the name of the organization in your area that provides legal services to low- and no-income people. Make an appointment with an attorney or paralegal in that organization and bring all of the letters and other documents regarding your debts and the money seized from your account. Ask the attorney or paralegal if you are "judgment proof" and what steps you can take in your state to prevent future collection actions, including cease-communication letters.
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