What Happens When a Debt Is Sold to a Collection Agency

When an account or loan becomes delinquent, there are instances where a bank or other lender will opt to “sell” the delinquent account to a debt collection agency. This is often because the lender views the debt as a sunk cost and wants to try and obtain some funds to help cover the loss. This is where a debt collection company will appear and purchase the delinquent account at a discounted rate. Once the purchase is complete, the debt collection company will release the proverbial hounds to try and collect from you, or they will file a debt collection lawsuit.

Why Creditors Sell Debts

Most creditors specialise in lending money and collecting it. They don't specialise in chasing debts which are in arrears, or trying to find people who are not paying. Instead they usually employ the services of debt collection agencies or sell the debt on to debt purchasers.

What Happens when a Debt is Bought by a Collection Agency

There are an array of debt purchasers in the United States. In fact, there are some fairly large companies that specialize in purchasing debts and devoting resources to try and collect unpaid debts from consumers across the country.

The practice of debt purchasing can be fairly lucrative since a debt collection company is often able to purchase debts for substantially less than their face value, but the debt purchaser is allowed to collect on the full balance. For example, if a lender is selling a delinquent account with a $5,000 balance, a debt purchaser might offer $500 to purchase the account. The debt purchaser can then turn around and seek to collect on the full delinquent amount of $5,000. This is where debt collection companies can generate large profits.

If My Delinquent Account was Sold, Do I Owe the Lender Anything?

If your debt is sold to a debt purchaser like a debt collection agency, you will owe the purchaser money, but you will not owe the original lender anything. It is also worth noting that the debt purchaser is required to adhere to the same rules and regulations as the original creditor when attempting to collect on the outstanding debt. You also retain the same legal rights. For example, a debt collection company cannot arbitrarily or unilaterally spike the interest rate on the delinquent loan or account.

Notice of Debt Being Sold

Your original creditor should notify you when they decide to sell your debt to a third party. You'll also likely receive a letter from the purchaser of the debt explaining who they are and that you need to pay them now.

If you are receiving multiple phone calls and correspondence from a debt collection company, it is important to be proactive and take the steps necessary to protect your rights. This is why it makes sense to utilize the resources and information available through SoloSuit.

What is SoloSuit?

SoloSuit makes it easy to respond to a debt collection lawsuit.

How it works: SoloSuit is a step-by-step web-app that asks you all the necessary questions to complete your answer. Upon completion, you can either print the completed forms and mail in the hard copies to the courts or you can pay SoloSuit to file it for you and to have an attorney review the document.

>>Read the FastCompany article: Debt Lawsuits Are Complicated: This Website Makes Them Simpler To Navigate

>>Read the NPR story on SoloSuit: A Student Solution To Give Utah Debtors A Fighting Chance

If you need assistance on how to best respond to a debt collection lawsuit, consider utilizing SoloSuit. What is SoloSuit? Take a moment to review these FAQs to learn more.

(How to stop receiving calls from Covington Credit)

Takeaways on What To Do If a Debt has Been Sold to a Collection Agency

Here are some key points on what you need to do if you learn that your debt, or delinquent account, has been sold to a collection agency:

• Respond to the debt collector's lawsuit (if they escalate the matter to litigation)
• Assess the allegations in the Complaint to see if there are any viable defenses to challenge the veracity of the lawsuit
• If an adverse judgment is entered against you, consider reaching out to the debt collector to try and negotiate a lower amount.
• Review your different checking and savings accounts since there is a chance a debt collector could try to seize your funds and/or garnish your wages.

Best of Luck!

How to Answer a Summons for Debt Collection Guides for Other States

Here's a list of guides for other states.

All 50 states.

Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri

Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah; File a Motion to Satisfy Judgment Vermont Virginia Washington West Virginia Wisconsin Wyoming

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Being sued by a different debt collector? We're making guides on how to beat each one.

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