What to do after being sued by collection agency?
April 23, 2008 8:21 PM Subscribe
My friend was served by a collection agency. She owes the money but doesn't have it. What's she do now?
I recently met a nice gal who's made some of the stupidest financial moves ever. The most pressing problem is $4000 of debt with a collection agency. She's been unable to pay for months, yet instead of calling the collection agency she's simply ignored the statements. Today they sued her for the debt + attorney's fees.
She has no money and no assets. Even if they go to court and a judgement is made against her in this amount, she'll have to get on a monthly payment plan like she is now. This isn't really worth much to the credit agency, so I'm thinking they'd be willing to drop the case as long as she acknowledges the debt is real and she starts paying again.
So where to go from here? I thought of debt consolidation, but read some articles that said those services aren't all they're cracked up to be. Plus I didn't see any of them say anything about what to do once you've actually been served. Is it a bad move to call the collection agency directly and try to work something out? Or now that she's actually been served does she pretty much have to go to court?
I recently met a nice gal who's made some of the stupidest financial moves ever. The most pressing problem is $4000 of debt with a collection agency. She's been unable to pay for months, yet instead of calling the collection agency she's simply ignored the statements. Today they sued her for the debt + attorney's fees.
She has no money and no assets. Even if they go to court and a judgement is made against her in this amount, she'll have to get on a monthly payment plan like she is now. This isn't really worth much to the credit agency, so I'm thinking they'd be willing to drop the case as long as she acknowledges the debt is real and she starts paying again.
So where to go from here? I thought of debt consolidation, but read some articles that said those services aren't all they're cracked up to be. Plus I didn't see any of them say anything about what to do once you've actually been served. Is it a bad move to call the collection agency directly and try to work something out? Or now that she's actually been served does she pretty much have to go to court?
IANherL. That said - if the debt is for 4K, then it was sold to the collections agency for far less. the credit card company has already written her off as a bad debt, and collections agencies buy those bad debts at an incredible discount. Yes, they will still deal with her. More importantly - because they bought her debt at a much lower rate, they will still make a profit even if she negotiates a much lower payment. What she ought to do is call the law office on the summons, and negotiate a payment plan. (She must get everything in writing). She could also show up for the hearing and do the same thing, but that seems far more humiliating and stressful, so she should bite the bullet and get a plan set up and the hearing off the calendar now. What she must NOT do is ignore this any longer. Down that road lie judgments and orders to garnish her wages. If she gets on this, she will be fine.
posted by moxiedoll at 9:06 PM on April 23, 2008 [2 favorites]
posted by moxiedoll at 9:06 PM on April 23, 2008 [2 favorites]
It would also be good to get familiar with your rights: http://en.wikipedia.org/wiki/Fair_Debt_Collection_Practices_Act
Collections agents routinely break the law while trying to collect debts.
posted by meta_eli at 5:35 AM on April 24, 2008
Collections agents routinely break the law while trying to collect debts.
posted by meta_eli at 5:35 AM on April 24, 2008
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Bottom line is the financial institutions want their money back, and *usually* prepared to make a deal - even at this late stage.
With no assets they can bankrupt her, meaning that the court will decide how much she has to pay back and over what period. IF she fails in this the court can impose a penalty.
For 4k this usually doesn't happen, so apart from having a crap credit rating that will affect her deeply once she actually grows up and takes debt seriously- wants a car, sofa, telephone account, credit card, internet connection, lease, hire a video etc, she can blissfully ignore it.
Are their many debts or one debt? Get her to start paying the smallest ones first. Debt consolidation can be good, but I doubt she would be eligible- if she was she'd be too risky and the interest would be too high. So I doubt it's an option.
posted by mattoxic at 8:50 PM on April 23, 2008