Debt Collectors Increasingly Sue over Small Debts, Even Under $1,000
Debt collectors are increasingly willing to pursue legal action – even suing – over relatively small debts, possibly impacting a wider range of consumers than previously thought. While lawsuits over notable balances are expected, recent trends show creditors taking legal action on debts as low as a few hundred dollars, especially when collection attempts are ignored.
This shift means consumers shouldn’t assume a small debt is insignificant. Balances in the $1,000 to $5,000 range are frequently targeted, but even debts under $1,000 can lead to a lawsuit, depending on the creditor and state laws. Ignoring collection attempts dramatically increases the risk of being sued and facing the long-term consequences of a court judgment.
Why This Matters: A lawsuit, even for a small amount, can damage your credit score, lead to wage garnishment, and create significant financial stress. Understanding your options and acting proactively is crucial to protecting your finances.
Here’s what to know about debt collection lawsuits and how to respond:
* Debt collectors can sue over small amounts: While not always common for debts under a few hundred dollars, creditors often view lawsuits as a viable option, especially when other collection methods fail.
* Ignoring the debt makes it worse: Repeatedly ignoring collection notices and calls significantly increases the likelihood of a lawsuit.
* You have options to avoid a lawsuit: Several strategies can help resolve debt before it escalates to legal action:
* Debt settlement: A debt relief company negotiates with creditors to settle balances,often for 50% to 70% of the total. Though, it can temporarily hurt your credit and have tax implications.
* debt Consolidation Loan: If you have good credit, a debt consolidation loan can combine multiple debts into one lower-rate loan, simplifying payments and reducing interest costs.
* Professional Consultation: credit counselors and debt relief specialists can assess your situation and recommend the best course of action, including settlement, management, or bankruptcy.
* Act quickly: The sooner you address the debt, the more control you’ll have and the better your chances of avoiding a lawsuit. Negotiating with debt collectors or exploring debt relief solutions proactively can prevent the situation from escalating.
Edited by matt Richardson
