Can A Collection Agency Sue For Debt – Advice On the Legal Powers of Debt Collection Agencies

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.

The Process 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.

The Process 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.

For detailed guidance on debt cures see the step by step guide on ways to pay off debt at DebtAssistanceSite.com

Can Bankruptcy Stop Foreclosure and Repossession – Advice On How Bankruptcy Affects Foreclosure

Bankruptcy law in the US obviously differs in some respects from bankruptcy law in the UK, so I will cover both in order to provide useful information for residents in both countries. The UK legislation is slightly more straightforward, so I will look at this first.

Bankruptcy and Foreclosure - The UK Situation

If you are a UK resident and you file for bankruptcy, a Bankruptcy Trustee is appointed, who immediately takes over responsibility for all your assets. Any of these assets can then be sold off to pay back your creditors, and this includes your house, even if it is mortgaged or owned jointly with someone else. Whether your house gets sold or not will depend on various factors, including the size of your debts and what other assets you have.

The good news is that if you are the subject of repossession proceedings, your filing for bankruptcy will immediately stop the process of repossession. The process of repossession is not allowed to carry on until either the end of your bankruptcy or if the court gives your creditor clearance to continue the process. Filing Bankruptcy does not ssecure your home in the long term, but it does at least provide a breathing space.

In the UK there is an alternative to bankruptcy called an IVA (Individual Voluntary Arrangement) which has slightly less drastic consequences. However, an IVA does not legally stop repossession proceedings like bankruptcy. It may be possible to halt proceedings by getting an Interim Order to prevent further action until the IVA is in place, but this is not automatic.

The US Situation

The first thing to say is that there are different types of bankruptcy in the US. It is particularly relevant to this situation to understand the difference between Chapter 13 bankruptcy and Chapter 7 bankruptcy.

With Chapter 7 bankruptcy the responsibility for paying off your debts is taken on by the court, but in exchange for this, full control of your assets transfers to them, and as with UK bankruptcy, your property can be sold off to repay your creditors.

The alternative to this, however, is Chapter 13 bankruptcy, which is essentially an agreement you make through the court to gradually pay off your debts over an appropriate length of time. This is much more appropriate for the purposes of stopping foreclosure. How much of your debts you manage to pay off, and the size of the repayments you have to make, will depend on many factors. The more obvious of these include how much income you get and how much you owe.

If foreclosure proceedings have started against you, a very important point with regard to Chapter 13 bankruptcy is that the sale of your home will be stopped provided you can file for bankruptcy before the foreclosure sale date. Herein lies a problem, because changes to US bankruptcy law introduced in 2005 can sometimes make it impossible to file bankruptcy in time.

The change in legislation introduces the requirement that you cannot file for bankruptcy until after you have had credit counselling, and the counselling must be for not less than 180 days. The principle of undergoing counselling is not a bad idea, but if the foreclosure process results in a foreclosure sale of your home in less than 180 days, you will simply not have time to file for bankruptcy to stop it.

When foreclosure proceedings have begun, your options are fairly limited. The main choice you have is to either pay off what you owe in full (which seems unlikely) or file for Chapter 13 bankruptcy to halt the process. However, you must be aware that filing bankruptcy does not mean your home is then safe. It should be regarded more as a stay of execution! The problem will not go away and one way or another you will need to pay off your debts.

Declaring any type of bankruptcy should not be seen as any sort of easy option. It has serious and lasting consequences and should always be regarded as a last resort. Having your home about to be taken from you may very well be one of the few times that bankruptcy is a preferable option. So bankruptcy can indeed stop foreclosure, but only if you can do it in time, and only on a temporary basis. It is not a cure for mortgage arrears and is most definitely not a soft option.

For further information on a range of Debt Cures visit www.DebtAssistanceSite.com