What Can Debt Collectors Do When You Don’t Pay Up?

If you are like most people, the truth is that you probably never planned for your debt to go unpaid and spin out of control. You signed a promissory note or otherwise agreed to a lender’s terms. Your intention was to make every payment on time and to satisfy your debt in full.  And then…

Something happened to change your financial circumstances. Maybe you lost your job. Maybe you or a family member became ill. Maybe you failed to follow a budget and you got in over your head. Despite your initial intentions, your debt went into default and now you are faced with the alarming situation of being chased by debt collectors.

Avoid the Temptation to Hide

There is no doubt it’s very stressful whenever you fall behind on your bills. As a result, a lot of people make the mistake of trying to ignore the debt collectors. Unfortunately, pretending that your defaulted debt does not exist could come back to bite you in a lot of unpleasant ways.

What Debt Collectors Are Allowed to Do

Although debt collectors are regulated by both state and federal statutes, there are still a lot of legal collection tactics which they can employ to compel you to pay. You agreed to pay the debt when you borrowed the money, after all. It is a debt collector’s right to try to collect (provided that the follow the law when doing so).

Here are a few of the things a debt collector may legally do to you when you fail to pay.  

1. Put on the Pressure

As long as a debt collector does not violate the law, it is completely acceptable for them to pressure you to pay. Unless you request a creditor to stop contacting you (in writing), then you can expect frequent collection phone calls and collection letters. In fact, debt collectors are even allowed to call you at work (unless you inform them you cannot receive calls there) and can call your friends and family to try to track you down if they do not disclose that you owe a debt.

2.  Credit Bureau Reporting

One of the most common ways a debt collector will try to persuade you to pay is by reporting negative information about you, in the form of a collection account, to the credit bureaus. When a collection account is added to your credit reports it could damage your credit scores and might make it difficult for you to qualify for financing in the future.  

3. They Can Sue You

If you default on your debt and fail to pay it back, a debt collector may opt to sue you. It is important to show up to your court date and at least try to defend yourself (preferably with the help of an attorney) if you ever get hit with a collection lawsuit. If you ignore the lawsuit and you may lose by default. In the event that you do lose the lawsuit the court will enter a judgment against you and that, too, might find its way onto your credit reports.

4. Garnishment, Levies, and Liens

Once a judgment is entered against you, a debt collector may be able to persuade the court to allow wage garnishment or even a bank account levy in an effort to collect the funds which they were awarded when you were sued and lost. A lien could potentially be placed against your property as well. Whether or not these next steps are allowed is going to depend on both your state of residence and typically the decision of the court. However, you should know that if you lose a collection lawsuit you could potentially be in for a whole new world of financial hurt.