Most people are familiar with debt collection notices. These letters, which are usually sent by debt collection companies, are sent when a person defaults on their credit card bills, student loans, or even utility bills. Debt collection companies are third parties that creditors and lenders hire to collect on unpaid debts.
It is important to know that you are still liable for the debt even after it has been purchased by a debt collection company.
However, it is not uncommon for people to want to avoid paying their debt, and they may ignore debt collection notices as a result. While no one can force you to read these notices and take the requested action, there are consequences to ignoring debt collection notices.
These consequences are outlined below so you know what you are facing when you throw out those debt collection notices.
The Impact on Your Credit Score
Debt collection companies will report all accounts to the credit bureaus such as TransUnion and Equifax. When they do, that action can have a negative impact on your credit report for many months, and perhaps even years. Depending on the type of debt, your credit score will drop and you may have already felt this impact if the debt involves an unpaid credit card or a loan that has gone into default. This is because when you do not pay these types of debts, the late payments and charge-off from the credit company will affect your credit score even before a debt collection company starts sending you notices.
This is one reason it is so important to pay off your debt. Even though a paid debt may remain on your credit report for a period of time, paid debts are considered much more favorable than unpaid debts. This is very helpful when you are trying to obtain new credit. You should review your credit report regularly to determine if there are debts on your report that are not yours, and also so you know which debts you have yet to pay off.
Anyone who has unpaid debts knows just how ferocious debt collectors can be when they are trying to recover unpaid debts. After all, they cannot make a profit unless they recover the debt that has gone unpaid. While debt collectors are governed by the Fair Debt Collection Practices Act, not all companies abide by the laws contained within the law. Under this Act, debt collectors can only call during certain periods of time, and they cannot contact you more than once a day. Additionally, once a debt has gone to a debt collection company, you may no longer have the option to pay the original creditor.
You can send a cease and desist letter asking the debt collection company to stop contacting you about a certain debt. However, debt collectors typically only hold a specific debt for a period of a few months. If you do not pay within that time, another debt collection agency will take over the debt. Depending on how many times your debt changes hands, you may have to send cease and desist letters to several debt collection companies before you repay the debt.
Difficulty Obtaining More Credit
Debt collections are a serious delinquency and they tell other lenders and creditors that you cannot always pay back the debt you have taken on. Lenders and creditors will consider you a borrower with high risk, so, if you apply for new credit, there is a good chance you will be turned down.
While this is not always a big deal when you are applying for a credit card or a line of credit, it becomes a much bigger deal when you are trying to purchase a home. If you have unpaid debt collections on your credit report, it becomes incredibly difficult to obtain a mortgage.
High Interest Rates
Having debt collections on your credit report does not necessarily mean that you will not be able to obtain new credit in the future. A creditor or lender may approve you for new credit but due to the high risk your credit report presents, you may have to pay a much higher interest rate. The high interest rate compensates the lender or creditor in the event that you do not pay the new debt.
If you are not applying for new credit but rather a service, such as cable or a cell phone, the company may ask you to pay a security deposit in advance. However, the deposit will be returned to you after a certain period of time as long as you make timely payments each month.
Difficulty Obtaining Employment
It is not uncommon for an employer to check the credit history of employment candidates. This is especially true if you are applying for a job that will require you to handle money, or an upper-management job.
If you have debt collections on your credit history, it could make it more difficult to obtain this type of employment.
As long as the statute of limitations has not expired on your debt, debt collection companies can take legal action against you in an attempt to recover the debt. If a debt collector files a lawsuit against you and is successful in court, they can secure a judgment that allows them to garnish your wages or take other action against you.
Even if you believe the statute of limitations has expired on your debt, it is still in your best interest not to ignore the summons. Any time a debt collector takes legal action against you, it is important to speak to an attorney who can advise on your case.
Our Florida Debt Defense Lawyers Can Protect You Against Legal Action
If a debt collector has already taken legal action against you, or you fear they soon will, our debt defense lawyers in Fort Lauderdale are here to help. At Loan Lawyers, we know the defenses available in debt collection lawsuits and we will use them to build a strong case for you. Call us today at 954-807-1361 or fill out our online form to schedule a free consultation and to learn more about how we can help.
Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 2,000 homes from foreclosure, eliminated more than $100,000,000 in mortgage principal and consumer debt, and have recovered over $10,000,000 on behalf of our clients due to bank, loan servicer, and debt collector violations. Contact us for a free consultation and find out more about our money back guarantee on credit card debt buyer lawsuits, and how we may be able to help you.