Finance Solution

Collection agencies prefer not to sue consumers. Although a lawsuit is often a quick path to debt recovery, its always a gamble for the company if an individual opts to fight the lawsuit in court.

Those at the greatest risk of being sued by debt collectors are those with large debts or accounts on which the statute of limitations is about to expire. Once the statute of limitations on a given debt expires, all creditors are forever barred from using legal force to recover the debt. Lawsuits are always a last resort.

1. Wage Garnishment

The most common consequence of losing a lawsuit to a collection agency is having your wages garnished. This occurs when the debt collector requests a writ of garnishment from the court that awarded it an official judgment following the ruling. Provided the company knows where you work, it can pay the sheriff a nominal fee to deliver the writ of garnishment to your employer. Once your employer receives the court order, it has no choice but to garnish your wages and send the garnished amount to the collector each pay period.

2. Bank Account Seizure

If the company doesn’t know where you work or you aren’t currently employed, it will still request a writ of garnishment from the court, but this time it will have the writ delivered to your bank.

Your bank will freeze the funds in all checking and savings accounts with your name on them. This includes joint accounts that you share with other individuals. Bank account freezes usually last for around 20 days, but this can vary depending on your state. After the freeze period your bank will remove the amount you owe from your bank account and hand it over to the collector. Certain funds are exempt from this process, so be sure to file exemption claims with your bank if any of your accounts contain exempt funds.

3. Property Liens

Sometimes a collection agency cannot locate either your employer or your bank. In this case, the company can review the land records in your area to determine whether or not you own any property. If it discovers that you do, in fact, own property, it can file a writ of execution with either your county’s Land Records office or the Secretary of State’s office to place a real estate lien against your home. The real estate lien gives the collection agency the right to seize your home as collateral for the unpaid collection account.

Collection agency lawsuits aren’t as common as some people believe, but as the U.S. economy worsens, debt collectors feel the strain. Thus, the more the economy suffers, the more likely collection agencies are to file lawsuits against consumers.

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