Being Sued by a Debt Collection Firm
October 15, 2009 10:10 AM   Subscribe

I have gotten two collection letters from law firms, one of which I found out is suing me. I am with a debt settlement firm and I would like to settle but they will not talk with my debt settlement firm. What are my options? I do not want to go to court and would like to settle these debts. One is for $9K and another for $1.7K
posted by WRivera125 to Law & Government (4 answers total) 4 users marked this as a favorite
I would think as a basic starting point you would need to collect some information/documents that indicates exactly why you cannot pay the full amount you owe -- there needs to be some incentive on both sides to settle, and if they think you have the capacity to pay the entire debt, they have little incentive to not go after the whole thing.
posted by modernnomad at 10:14 AM on October 15, 2009

Whatever you do, if you have a court date scheduled and are unable to settle before that date, get a lawyer and show up in court, otherwise they can and will get a default judgment against you and garnish your wages.

They are taking the initiative to sue you. If you legitimately owe them the money and you have income and thus are "able" to pay them back, they aren't going to settle for much less than the full amount.
posted by hamsterdam at 10:55 AM on October 15, 2009 [1 favorite]

A default judgement is assured if you do not show up in court. Other than that... I think some bad advice here so far.

We don't have enough info to say what the party suing you will or will not do in any given circumstance. The most relevant documentation to collect concerns any paperwork on the original debt and anything you received from the collection agency or court. Until the validity of the debt itself and the party owed is established, I'm 99% sure ability to pay doesn't enter into it. Plus, you don't want your financial records ending up in the "clutches" a collection agency. Ditto any verbal statements they may record over the phone concerning your employment, assets, etc. These guys are suing you -- don't do their job for them, ok?

(As an aside -- don't debt consolidation firms get a cut of any settlements made, or something like that?? Maybe that is why this collection agency won't negotiate with them? In my experience, collection agencies that sue you want to settle out of court. It's cheaper. I don't have any experience with debt consolidation firms, so just something to think about.)

And to give you some ideas on where to start and what you might be in for:

#1. Get a lawyer.

A lawyer can assess your documentation and advise you on your options. They can file motions before the court date to dispute the claim (i.e. - it's not your debt, papers filed or served incorrectly, agency suing doesn't have authority to collect on said debt, etc. etc.) Your lawyer can negotiate a settlement. In my experience, the settlement should include a payment plan. YMMV.

Worst case? Getting a lawyer and notifying this agency you have obtained legal representation will keep them from contacting you directly. It may also give the agency immediate incentive to settle:)

Furthermore, this agency bought your debt for pennies on the dollar. They are now suing you for the full debt + interest + legal fees. Even if you do legitimately owe someone money, getting a lawyer will ensure that you end up paying a fair amount to the right folks in the right way.

#2. You make the court date and represent yourself.

By way of a worse case example... I know someone who showed up to a court date, admitted the debt was his, but told the judge he could only afford to pay $25 per month installments on the debt. It worked, and the guy doesn't have to worry about wage garnishments or further litigation as long as he makes payments on time. I'm not sure, however, if the interest is still accruing on his debt. This is something you might want to consider.

In any event, there are legal aid advice available in civil court if you are being sued, these folks can direct you on what to do before you appear before a judge. Call the court for details on how to access the legal aid people.

#3. You might want to call them up and negotiate directly and before you get a lawyer.

I have done this successfully with a collection agency prior to a court date. When you phone (their number is on the lawsuit!) be careful what you say. Plead poverty, but don't be specific.

This is a bad idea if (a) you don't feel savvy enough to handle the negotiation (b) the amount you actually owe has been dramatically inflated prior to filing the suit. In case of either (a) or (b) -- #1. lawyer.


I'm sure I missed hundreds of options and possibilities. I am not your lawyer, I haven't seen your documentation. I'm just trying to give you some examples of possible outcomes so that you can overcome any feelings of overwhelm and deal with this responsibly.

In any event, you might want to at least consult with an independent attorney not attached to your debt settlement firm. The 9K debt can quickly double in the hands of disreputable collection agency. Don't let that happen.

Good Luck.
posted by jbenben at 12:28 PM on October 15, 2009

This is why "debt settlement firms" are at best a little sketchy, because there's nothing that requires the creditor or their agents to work with them.

You need to ditch these guys and find yourself a legitimate non-profit credit counseling agency. They will help you craft a debt management plan, and because they are approved for work with consumers by the credit industry itself, they will be able to work with your creditors. The basic rule of thumb is that you should try to pay off your debts over five years (60 months). If this is doable, you can get reduced interest rates and pay at a pace that matches your budget. If this is not doable, you are insolvent and should seek bankruptcy (and you should, honestly, it's better in the long run).

But debt settlement is tricky (among other things getting the debt discharged the right way on your credit report is a challenge) and is not something any creditor is required to take up. If you have paid an upfront fee to this firm, you probably got ripped off.
posted by dhartung at 7:39 PM on October 15, 2009

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