Can a Collection Agency Sue You?

Know What Legal Action Can Be Taken Against You for Unpaid Debts

A business owner looks over the details of a lawsuit filed against her company.

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Many people think they have no obligation to pay a third-party collection agency. After all, it’s not the original company you created the debt with. Once you default on the original credit agreement and the business sells the debt to a collection agency, that agency has the right to collect on that debt — assuming the collector operates legally. A collection agency may even be able to sue you for an outstanding balance.

Some debts become time-barred after a certain amount of time. This time period, known as the statute of limitations, depends on the type of debt you have and varies by state. For the majority of debts, the time period ranges from three to six years. Once a debt is time-barred, it’s no longer legally enforceable. There are some things you can do to revive the debt and restart the clock for time-barred debts. If you make a payment on the debt, enter into a payment arrangement, or even acknowledge the debt is yours, you can restart the time period for a debt collector to sue you.

Note that the statute of limitations on a debt is different from the credit reporting time limit. In some cases, debts that have become time-barred may still be listed on your credit report. In others, debts that are no longer on your credit report may still be legally enforceable.

What to Do If a Collection Agency Sues You

If a collection agency sues you for a debt, it’s in your best interest to talk to an attorney who can help you weigh your options and defend you in court. Some attorneys even offer free no-obligation consultations to advise you on your rights.


The worst thing to do if a collection agency sues you is to ignore the lawsuit. Ignoring a lawsuit summons can hurt you in the long run, even if the debt is time-barred.

If you’re sued for a debt that’s outside the statute of limitations, you may be able to have the lawsuit dismissed if you have proof that the debt is no longer enforceable. However, failing to show up in court gives the collection agency a chance to win a default judgment against you. This means the court has ordered you to pay the debt.

A collection agency who wins a judgment against you may be able to ask the court for permission to garnish your wages or levy your bank account. The judgment will be added to the public records section of your credit report and your credit score could take an additional hit.

Dealing With Collection Attorneys

Some attorneys act as debt collectors and contact consumers on behalf of their clients. Some people may confuse attorney letters with official legal notices, especially since letters are printed on a law firm’s letterhead. Note that a lawsuit summons is an official document sent by the court and must be served in a certain manner, depending on the laws in your state.

Can Debt Collectors Sue You for a Small Balance?

You might assume that some debts are too insignificant for debt collectors to care about, but debt collectors may sue you for any balance — large or small. It’s the debt collector’s discretion whether to sue for the debt. Some aggressive debt collectors use lawsuits to collect outstanding debts when other methods are unsuccessful. Debt collectors may be more likely to sue in states where filing fees are lower.

Collectors may be less likely to sue you if you are judgment-proof — if you do not have any income or assets or you live in a state that does not allow wage garnishment.


Note that having low income or few assets doesn’t necessarily make you judgment proof. If a collector wins a judgment against you, they may be able to get any amount of income you do have.

Even if a collection agency can no longer sue you, they can still make efforts to collect the debt from you. That includes calling you, sending letters, or reporting the debt to a credit bureau if the debt is within the credit reporting time limit.

The best way to prevent a debt collector from suing you is to pay the debt or make arrangements to pay the debt. Keep copies of any agreement you create so you have the proof for your records.

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  1. Consumer Financial Protection Bureau. “What Is a Statute of Limitations on a Debt?

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