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The process of debt collection usually starts with the original creditor contacting you to make you aware that you are late with your payments, and of the amount they feel you owe. If you ignore them, the letters may become more and more urgent, perhaps even threatening to refer the debt to a collection agency or legal firm. Sometimes the creditor may offer to settle the debt for a much lower amount than you owe. Remember that most debts, especially credit card debts, continue to accrue late fees and interest. Some creditors make offers as low as 25% of the original amount, and if you have the money it may be a good idea to just pay at this stage.
If you don't pay, ultimately the creditor will inform you that they will charge-off the debt if you don't pay by a certain date. This in general will happen 6 months after you became delinquent. Even after charge-off, the original creditor may still own the debt and continue to try to collect from you.
Big credit card companies often have their own legal department which may actually go ahead and sue you, instead of assigning the debt to a collection agency or an outside legal firm.
Many of the rules that protect the consumer from collection agencies don't apply to the original creditor. If the debt is assigned to an external collection agency then the rules are in force.
If the original creditor totally gives up on the debt, they will sell it for pennies on the dollar to junk-debt-buyers. The new owner has the right to try to collect the full amount plus any interest and penalties, but has to abide by collection agency rules.
Every time a new owner or new collection agency takes the debt, the process begins anew. This means you can ask again, for instance, for debt validation from the new owner or the next collection agency.
The initial contact from a collection agency is usually by mail, although in some occasions they might contact you by telephone. If they do, don't speak with them. Within the first 5 days of this initial contact they have to contact you in writing telling you
-The amount you owe.
-The name of the current creditor.
-Advise you that you have 30 days to dispute the debt in full or in part, and
that if you do, they will verify the debt in writing.
-Advise you that, upon your request within 30 days, they will provide the name
and address of the original credit.
If within the 30 days you request validation, the collection agency must stop all efforts to collect until the debt is validated.
The first written notice must include the so-called Mini-Miranda: "This is an attempt to collect a debt. Any information obtained will be used for that purpose". However, the inclusion of the Mini-Miranda in a voice mail message may be in violation of third-party disclosure prohibitions, which forbid the collection agency from disclosing the debt to anyone but the debtor.
If you decide the debt is yours and you want to pay (and can pay), try to negotiate with the collection agency a payment plan you can stick to. You have the upper hand here, really, because you know they bought the debt for pennies on the dollar, and the truth is, they only want your money and don't really want to go through thru the process of a lawsuit.
If the creditor files a lawsuit, you will be served a summons and complaint. Don't ignore it because you will be giving the creditor an advantage and ultimately, if you don't respond or show up in court, it will result in a judgment by default being filed against you.
If there is a judgment, the creditor will attempt to locate your assets and employment information and there may then be levies, garnishments, liens, etc., against you.
Certain monies are untouchable by creditors. One of them is your social security benefits. Even if your account has been frozen and you prove that some or all of those monies are exempt, they won't be able to touch them.
Your first knowledge of the fact that your bank account has been hit may be a letter from the bank. Armed with a judgment, the creditor can further use legal options to take monies from your bank accounts, up to the amount owed. If they want to hit the account a second time they must pay the bank's fees and sheriff's fees.
It should be noted that the bank generally has no right to freeze any monies beyond the amount of the debt.