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No one likes receiving collection phone calls from collectors. If your finances are not in good shape, it is very likely that you will receive many calls from one or more telephone collectors. Collection agents are not necessarily bad people; most are just doing a job. Some seem to take a wicked joy in yelling and threatening, but for the most part, collectors follow a script.
After a few days or weeks of fielding collection phone calls, you may not think much about the phone calls. Many people change their phone numbers, use an answering machine, or just hang up, all of which are reasonable strategies.
You should be aware that collection agencies will respond to your non-response actions. Once a collector reports to your supervisor that you are not responding to collection efforts, there is a good chance your account will be turned over to the legal department for legal action.
In my Atlanta bankruptcy practice [http://www.atlanta-bankruptcy-attorney.com/have_i_waited_too_late_.html], I interact with collection attorneys on a regular basis. Law firms that specialize in collections operate as paralegal-driven volume practices. Often, the owner of the law firm also owns the collection agency, so there is no real cost to turning an account over to the legal department. The collection agency owner/attorney probably bought your account along with hundreds of others for a substantial discount. For example, the credit card division of a retail store might sell accounts that are 90 days past due for 30 cents on the dollar. If the collection attorney can recover 60 cents on the dollar, he will double your money.
Collection law firms often file dozens of lawsuits per month. In most cases, the defendant—that is, the person who owes the money—doesn’t respond, either because he doesn’t know how or because he has no basis to oppose the lawsuit. If you do not respond to a lawsuit within a certain period of time (usually 20 to 30 days after receiving notice), the creditor’s attorney has the right to request a default judgment. You only need to file a one or two page pleading stating that you have not responded to the lawsuit as required by law and therefore the plaintiff is entitled to a default judgment. The state court judge will then issue an official court order creating a judgment against you.
A lawsuit has the potential to get you into a lot of trouble. First of all, a judgment is a secured debt, which means that any of your personal property, including future wages, can be garnished to satisfy the judgment. Second, a judgment works like a lien against any real property you own, which means that when you try to sell your home, any pending judgments will cloud your title. Third, a judgment works as a negative mark on your credit. A judgment will seriously affect your credit score since it reflects a debt that ended in a judicial process.
Finally, most judgments will continue to accrue interest. I have seen situations where an unpaid judgment racked up several thousand dollars in interest over a period of years. When the debtor decided to sell his house, he wasn’t happy to learn that the old $6,000 unpaid credit card bill judgment he had ignored over the years had ballooned into a $20,000 lien he had to pay to the closing.
Judgment creditors have the right to satisfy their liens by garnishing your wages or by seizing the funds in your bank account. If you ignore a lawsuit, the case against you defaults, and a judgment is entered, you may first find out you’re in big trouble when your next paycheck is reduced by a large garnishment deduction, or when your paycheck rent bounces because all the money in your checking account has been seized by the judgment creditor.
If a sheriff’s deputy or process server comes to your door, you should seek legal advice immediately. Bankruptcy may be an appropriate consideration to remove the debtor and pay them off over time. Negotiated deals, sometimes at a discount, may also be available. Ignoring a lawsuit or ignoring the issuance of a judgment is never a good idea and will result in serious and long-lasting problems.