If you are behind on your credit card payments, a collection agency may come after you for the money you owe. But can they sue you for $5,000? Unfortunately, the answer is yes.
The minimum amount a collection agency can sue for is $1,000, but no maximum amount exists.
So, if you owe a collection agency $5,000, they could potentially sue you for the total amount. If a collection agency sues you, it is crucial to take action immediately.
You only have a limited time to respond to the lawsuit, and the collection agency may win a judgment against you if you do not reply.
Here are some steps you can take if a collection agency is suing you:
- Sometimes collection agencies will sue for debts that are not owed, so make sure to request for proof.
- Not replying to the lawsuit will make things worse for you.
- If you cannot pay the total debt, negotiate with the collection agency.
- You should never take filing for bankruptcy lightly, as it will significantly impact your credit score.
Can Debt Collectors Sue You?
Yes, debt collectors can sue you or threaten to sue you. Debt collectors will send you a written notice within five days of the first time they get in touch with you.
If you receive court summons or complaints, then this means they have sued you.
Not responding to the lawsuit that has been filed against you or the court might enter a default judgment against you.
Will a Collection Agency Sue you for $5,000?
Yes, a collection agency is highly likely to sue you if you have $5,000-$10,000 in credit card debt. In fact, the minimum amount that they can sue you for is $1,000.
The amount can be more or less depending on the age of the debt, your written agreement, etc. Credit card debts taken to courts are very common so make sure you pay your bills on time.
If your case is taken to court and you are found liable, then you might have to pay even more to the collector in the form of penalties. 1
What To Do If A Debt Collector Sues You?
If a debt collection agency has sued you, then here is what you can do to tackle the situation:
1. Find Out If The Debt Is Valid
The first step is to figure out if the debt is owed. This may seem like a no-brainer, but sometimes collection agencies will sue for debts that are not owed.
If you’re not sure whether the collection agency’s accusation is valid, you can request proof from the collection agency.
A valid debt should have documentation, such as a billing statement or credit card agreement. The debt may not be valid if the collection agency cannot provide this proof.
2. Respond To The Lawsuit
Once you have ensured that the debt is valid, you must respond to the lawsuit. You should do this as soon as possible, as you only have limited time to respond.
If you choose to ignore the lawsuit, the collection agency will likely win a judgment against you.
Make sure to respond to the lawsuit even if you do not have the money to pay the debt.
If you do not respond to the lawsuit, the agency will almost certainly win a judgment against you, and they will be able to garnish your wages or put a lien on your property.
3. Negotiate With The Collection Agency
If you cannot pay the total debt, you may be able to negotiate with the collection agency. They may be willing to settle for a lower amount if you can pay it all at once.
You might also be able to negotiate a payment plan. This will allow you to pay off the debt over time, which may be more manageable than paying it all at once.
4. Consider Filing For Bankruptcy
If you cannot negotiate a settlement or payment plan, you may want to consider filing for bankruptcy.
This will stop the collection agency from trying to collect the debt, and it can also discharge the debt altogether.
You should never take filing for bankruptcy lightly, as it will significantly impact your credit score. You should speak with an attorney to see if it is the right option.
5. Wait For The Statute Of Limitations To Expire
In most US states, the debt statute of limitations is between three and six years. This means the collection agency has limited time to sue you for the debt.
Once the statute of limitations expires, the collection agency can no longer sue you for the debt. 2
Answering a Debt Collection Lawsuit
What Will Happen If I Get Sued?
If you do not show up in court, lose the suit, can not defend the lawsuit, or get sued, then here’s what can happen to you:
- A default judgment may get levied against you.
- The court can have you arrested for not showing up.
- The court may size your assets.
- Can garnish your bank account or wages.
- Can face a fine of up to $1000.
- The court may face damage charges against you. 3
How To Settle Your Debt With Collection Agencies?
What Can I Do To Stop Debt Collectors From Contacting Me?
There are two things that you can do to stop debt collectors from contacting you:
1. Collection proof debtor letter
If you are a veteran, if your income is below a certain level, or if your source of income comes from federal or state funds in the form of Social Security, pension, etc., then you can send a Collection proof debtor letter.
This will make you “Collection proof,” and the collection agency will not be able to collect any money or the full amount that you owe.
2. Stop contacting letter
Another thing that you can do is send them a stop contact letter. This letter will tell them that:
- You will not pay the debt.
- You are unable to pay the debt.
- And the collection agency should stop contacting you.
After sending them a stop contacting letter, they will not be allowed to contact you.
What Can a Debt Collection Agency Not Do To You?
A debt collection agency cannot:
- Use obscene language,
- Harass, you are a member of your family,
- Force you to pay,
- Contact people you know,
- Use envelopes and postcard that tells it is from a debt collection agency,
- Make false claims to be a lawyer,
- Threaten to harm your property or your reputation,
If you are wondering what to do when a debt collection agency threatens you in the above manner?
You can file a complaint against them to Federal Trade Commission, Consumer Financial Protection Bureau, etc. 4
If a collection agency is suing you, it is vital to take action as soon as possible. While the process may seem intimidating, it is important to remember that you have rights.
With an attorney’s help, you can ensure that the collection agency is following the law and that you are getting a fair outcome.
Does a debt collector need to have a license?
Yes, debt collectors are required to have a license. And also, a debt collector living in Illinois must have a license with the Illinois Department of Financial and Professional Regulation to work legally.
Will I still have to pay the debt if I sell it to another company?
Transferring your debt ownership does not mean that you do not owe the debt. If the creditor sells the debt legally, you will still owe the debt to whoever purchased it.
How can I save myself from getting sued by a debt collection agency?
To save yourself from getting sued, you should first and foremost pay your bills on time and avoid getting into such situations in the first place.
However, if you have received an initial letter of warning, then get in touch with the collection agency, try to set up a payment plan, or negotiate with them. 5
Amit Gupta is the founder of National Planning Cycles, a company that helps startups, individuals, and small businesses with their financial planning. He has a vast amount of experience in the finance sector, having managed Google Play accounts for some of the world’s most successful unicorns. Amit is an expert in his field, and he uses his knowledge to help others achieve their individual goals.
The National Planning Cycles is committed to producing high-quality content that follows industry standards. We do this by using primary sources, such as white papers and government data alongside original reporting from reputable publishers that were appropriate for the accuracy of information while still being unbiased. We have an editorial policy that includes verifiable facts with due credit given where applicable.