When a collection agency or company attempts to recover past-due payments from creditors, this is known as debt collection. If you haven’t made loan or credit card payments and those are severely past due, in that case, a debt collector may contact you.
Whether you cosigned a loan or you are an authorized user of someone else’s credit card, you might be approached by a debt collection agency seeking payment for money owing to you.
This form of debt is secured or backed by an asset. This is done to mitigate the liability associated with lending. Mortgages, car loans, and title loans are also forms of secured debts. If you are far behind on payments or otherwise default on a secured debt, the lender has the right to foreclose or repossess on the asset. If this occurs, the asset will be auctioned to recoup costs. What happens, then, if the price received for the asset does not cover the asset’s cost? If this occurs, the lender will pursue you for the debt’s remaining balance of the debt.
In an unsecured debt, there is no asset to be used as collateral. When you are behind on your payments, your assets are usually not taken. Without a court order, the lender cannot take the assets. As a result, the lender can appoint a debt collector to contact the credit bureaus to confirm your deferred payment report to them. Some examples of unsecured loans could be payday loans, hospital costs, school loans, and court-ordered child support.
The Procedure of Debt Collection
The debt collection approached may vary depending on the company acquiring the debt. Some organizations specialize in a particular kind of debt, such as medical debt or student loan debt. Others may be dealing with debt that dates back a few years. Others can refuse to comply with debt if the statute of limitations has passed, which varies based on where you live.
Collection agencies will pursue old debt as soon as it is a few months past due, and they can pursue it forever after that. It depends on the collection agency, the amount you owe, and the kind of debt you have.
If you have outstanding past-due debt, the original creditor will usually notify you via written notices and phone calls. For example, if you defaulted on an old student loan, the lender would try to reach you to get the account current. It will eventually stop if it is unable to persuade you to pay what you owe. This is typically where the debt collector takes over from the main creditor.
Debt recovery agencies and collectors can contact you using the details on file. Your current address, phone number, and even relatives’ contact details are all included. Debt collectors can use personal banking records, such as savings and investment accounts, to decide if you have the financial ability to pay a debt. To recover old debts, some states allow wage garnishment.
Consulting a Debt Collection Attorney
Some warnings that you may need a debt collection attorney if you’re in debt include:
- Creditors call your home or workplace regularly.
- Inability to repay debt at this time
- A creditor has threatened to sue you.
- Collectors treating you unfairly
You may also want to think of consulting a debt collection lawyer who will help you limit or avoid debts, so you don’t have to deal with debt collectors.
Role of a Debt Collection Attorney
If you’re a debtor or a creditor, a debt collection attorney can help you in both ways. A lawyer may help you devise plans to recover funds you’ve loaned out or defend yourself from overbearing creditors. Your lawyer can help you with paperwork or defend you in court.