What Happens When a Collection Agency Takes You to Court to Collect Debt?
- A judgment is one of the legal remedies that a collection agency or debt buyer has available in the debt collection process. Judgments are court orders that are awarded to collection agencies in the county where the account holder resides. Judgments are subject to two separate statutes of limitations, both of which vary by state. The first statute relates to the time frame in which the collection agency can legally take you to court to collect the debt, but the collector is only restricted if the account holder defends against the case. Judgments are commonly awarded to collection agencies by default, meaning that the account holder did not present a defense. The second statute relates to the length of time a judgment is valid.
- Each state has specific laws on civil judgment proceedings, but the defendant --- the account holder --- must always be notified in writing that a court hearing is scheduled. Notifications may be via the postal service or via a hand-delivered subpoena. The defendant typically has 30 days to respond to the complaint in writing and to obtain additional information from the collection agency regarding the suit. Defendants who do not show up in court to defend their case will receive a default judgment against them.
- Some states allow a specific time frame during which a default judgment may be appealed, but the window is often short. Summary judgments --- those rendered based on evidence by both parties --- may be appealed if the defendant acts in a timely manner and follows proper procedures. Each state has specific protocol for filing an appeal. Written notice that includes a written statement combined with a court transcript and the proper filing fees are common.
- Judgments give collection agencies and debt buyers more options for collection activities than phone calls, letters and negative entries in your credit file. Collection companies who take you to court and win a judgment may place a lien on your property, seize nonexempt assets, garnish wages and levy bank accounts. Also, judgments remain part of your credit file for the life of the judgment or for a minimum of seven years, whichever is longer. The lifespan of a judgment varies by state; some states allow for judgment renewals.