Clients are commonly surprised to receive a court summons despite making regular payments to a collection agency.

“I thought they couldn’t sue me if I was making payments!”

The truth is, if the account is overdue you can be sued.  Unless you have a formal payment agreement in writing with the bill collector, you can be sued at any time regardless if you are making monthly payments.

IS THERE WRITTEN PAYMENT AGREEMENT?

The only way to prevent a debt collector from filing a lawsuit is to obtain a written payment agreement.  The agreement does not have to be on a fancy legal form.  Any writing showing the terms of a payment arrangement will do.  A letter or an email from the collection company is sufficient to prove a payment agreement is in place.  It just has to be in writing.  As the saying goes, a verbal contract is not worth the paper it is written on!

CAN I GET A WRITTEN PAYMENT AGREEMENT AFTER I’VE BEEN SUED?

Yes, you can still ask for a written payment agreement after a lawsuit has been filed.  Creditors may balk at the request for an agreement, but if you tell them your only option will be to file bankruptcy if they will not agree to a payment, they may offer a payment agreement, sometimes called a Stipulation.  If you have been sued you should contact the creditor’s attorney and request an agreement.  Contact the collection attorney here.

WHAT IS A CONFESSION OF JUDGMENT?

Very often a creditor will offer a payment agreement if you agree to sign a Confession of Judgment.  A confession of judgment is an admission that you owe the debt and it is enforceable in court.  Such agreements frequently state that the creditor will not garnish as long as a stated monthly payment is made on time each month.  Creditors frequently agree not to file the confession of judgment with the court as long as payments are made on time.  Once a Confession of Judgment is filed with the court it has the same power and effect as any other judgment.  It becomes a judgment in the public record and it may appear as a court judgment on your credit report.  So, the major benefit of signing a confession of judgment is that it may prevent garnishments if payments are made as agreed and it may keep a judgment off your credit report. However, signing a confession is very dangerous if your ability to make the payments is in doubt.

WHAT IF THE COLLECTION COMPANY SAYS THEY WILL NOT ACCEPT PAYMENTS?

Collection companies frequently say they will not accept payments.  They often say you must pay all the debt immediately or they will sue.  Nonsense!  I’ve never seen a collection company reject a payment.  If you owe the debt and need to make payments, send them payments.  I recommend paying a debt collector with money orders and not with cash or personal checks. (When you use a personal check you are basically telling them where to garnish.) You may still get sued by making partial payments, but at least the balance is going down. If you do get sued file a written response to the lawsuit so you can get an extra 60 to 90 days to finish the payments. You are basically in a race to see if the debt can be fully paid before they can get a court judgment.  The sooner you start making payments the better.

WHAT IF I CANNOT AFFORD TO PAY THE DEBT?

When you know you cannot fully pay a debt regardless of how much time they offer to pay it, then you need help. Seek out a professional bankruptcy attorney to review your options.  When it comes to legal matters, delays can be very costly.  Get your case reviewed immediately.

Image courtesy of Flickr and Orin Zebest