Many debtors erroneously believe that they don't have to face the consequences of their over spending. That if they stop making payments, financial institutions will simply forgive their debt.
While these companies may decide to “write-off” the debt if they firmly believe that you are never going to pay, this does not mean that the debt magically disappears, in fact, more likely they are simply going to sell the debt to a 3rd-party debt collection agency.
What happens after the debt is sold to a collection agency?
When your debt is sold to a 3rd-party debt collection agency it’s time to prepare yourself for some very aggressive debt collection tactics. For instance, while Visa or a hospital may not have time to have their representatives call you several times a day to demand payment, a 3rd-party debt collector will.
Although the collection agency is barred from certain illegal debt collection tactics, this does not mean that you will not be consistently harassed. And if you do not respond, you should anticipate a lawsuit against you and a judgment for collection.
What happens if the collection agency files a lawsuit?
Failure to respond to a complaint will result in a default judgment against you, and the creditor will have the right to garnish money out of your paycheck, seize money from your bank account, or obtain a judgment lien to seize your property.
There may be times when you are sued that you have no options or defenses. Other times, however, you will need to contact a collections defense lawyer and fight the lawsuit.
Defenses against a lawsuit may include:
Proving you already paid the debt.
Proving the summons was not served properly.
Proving the statute of limitations for the debt has expired.
Proving the collections agency violated the Fair Debt Collection Practices Act.
Proving the collection agency did not have standing to sue you.
Proving the agency was trying to collect fraudulent charges that you did not charge.
Proving the collection agency was suing the wrong person.
Proving the debt the agency is trying to collect has already been discharged in bankruptcy and you are no longer responsible for repayment.