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If you owe money to a company and you are behind with your repayments, they may well use a debt collection agency to try to collect the money from you. A collection agency is not the same as a Bailiff (UK only), as debt collection agencies have no rights to enter your home or take your possessions. All a debt collection agency can do is chase you by telephone, write to you and call at your home in an attempt to get payments from you.
This is an important distinction to make for UK residents. What Bailiffs do is to enforce legal orders from the Courts or government departments. By law they can enter your home and take your property to auction off to repay your debt. Unsurprisingly, Americans would have no truck with the idea of someone coming into your home to take your goods - the powers of Bailiffs in the UK is a hangover from medieval times. Debt collection agencies, on the other hand, are private organisations that charge for the service of collecting debts, and the principles of collection are largely the same in both the UK and US.
Can A Collection Agency Sue For Debt:
That Depends Whether They Own The Debt Or Not
If you genuinely owe money, then the person or organisation you owe money to has the right to sue you by taking legal action against you through the Courts. Typically a company will try a debt collection agency first, and then consider legal action if that does not work. Any subsequent legal action will be on the part of the original creditor, but they may still use the collection agency to progress the matter on their behalf.
A debt collection agency can only sue you if your debt is with them, not a third party creditor. Some debt collection companies buy bad debts for a fraction of their value and make their money by trying to recover the full amount of the debt. If the company you originally owed money to sold the debt to such a collection agency, then that agency could indeed sue you to recover that debt, because the debt now legally belongs to them.
Can A Collection Agency Sue For Debt:
Just Because They Can, Does Not Mean They Will
Even if you are chased by a debt collection agency and are threatened with legal action by the agency or the original creditor, it is by no means certain that they will go ahead and sue you. Whether they take legal action will depend on many things, the overall governing factor being whether they think they are going to end up better off by suing you or not.
There are costs involved in legal action and the process can be slow, so if the debt is relatively small, or if they think you really haven't got the money to pay, they may decide to cut their losses. Bear in mind that only a small proportion of debts end up being settled through the court, and that even if the court finds in their favour, there is still no guarantee they will get the money.
Can A Collection Agency Sue For Debt:
The Legal Process of Being Sued
The exact process of going to court will vary depending which country or state you live in, but essentially you will be required to appear in either a small claims or higher court (US) or a County Court (UK). The first thing you should always do if you are being sued is to take legal advice. The principles in the US and UK are very similar, but I will outline them separately in the interests of clarity.
Being Sued For Debt In The UK
Suing for debts in the UK is done through the County Courts, where the claimant makes a "Money Only Claim". On receipt of this the court will send you a claim form to complete and return. If such a claim is upheld by the judge, a County Court Judgement is made against you, setting out a repayment plan that you have to stick to.
Your finances ought to be taken into consideration, and repayments based on what you can actually afford. Once the County Court Judgement has been made, it is very important to stick to the repayments specified, otherwise there are much more serious legal actions that can then be taken to recover the debt.
Being Sued For Debt In The US
You will receive a court Summons and a Complaint (stating how much they say you owe). It is important that you take notice of these and that you attend court on the specified day. Failure to do so will result in the court judging in favour of the company suing you. Prior to this you are free to contact the company you owe money to and see whether a settlement can be agreed.
If you can't reach a settlement, then you will need to attend court. If you do not agree with the amount being claimed (or that you owe the money at all), you must attend court to fight your case. When you inform the judge that you are contesting the case there will need to be a "trial" which may well be on another date.
You should also consider whether you wish to enter any defences or counterclaims. A defence should be based on legal reasons why the claimant is not entitled to any or part of the money claimed. Counterclaims might be for something like a violation of consumer protection laws by the creditor. The lodging of a valid defence or counterclaim can increase the likelihood of the claimant dropping or settling the claim if they think the case is going to be lengthy and costly to fight.
Can A Collection Agency Sue For Debt - Conclusions
Anyone who you owe money to can sue you to recover it. This will only be a collection agency if they have bought the debt from the original company that you owed it to. It is obviously preferable to avoid letting things get this far in the first place. No debt is impossible to deal with. It may take time and be painful for a while but you can deal with any debt crisis yourself if you take the proper step by step approach.
