Credit Card Debt Free

Credit Card Debt - Can a Collection Agency Sue For a Credit Card Debt?

The short answer to the question is yes. Anyone can sue for anything if they fill out the paperwork and pay the filing fee. However, most collection companies are dealing with thousands of debtors and litigation can be costly and time consuming. Collection companies are in business to make money and so they must weigh several factors before deciding on a legal remedy.

To understand the powers of a collection company, we first have to understand the relationship between the collection company and the original credit card company. There are two standard operating agreements between collection companies and original creditors: the collection company can buy outstanding accounts at a discounted rate or the credit card company can simply assign its interest in the outstanding debt to the collection company. Either way the collection company steps into the shoes of the original creditor and usually inherits all rights in the debt that the original creditor had. Therefore, the collection company can sue you if the original credit company could have done so.

Just because a collection company has the right to sue, does that mean they will? This question is a lot more complicated than it sounds. If a collection company prevails in a lawsuit against a debtor, they gain more legal ways to collect on the debt, i.e. garnishment etc. While they gain more rights with litigation, it can be expensive and impractical for a collection company to do so. For instance, in certain circumstances the collection company may be forced to sue you where you live. That means having to send someone to your local court and then waiting for a trial. Can you imagine them having to repeat that process for thousands of customers?

So can they sue? Yes. Will they sue? Probably not. What does that mean for you? A good debt settlement service can use this knowledge to negotiate a good settlement for you.