Fair Capital
Credit reporting: One action a collection agency may take if a debtor fails to pay is credit reporting. A collection company may report unpaid debt to one or more credit bureaus, which could negatively impact the debtor's credit score and creditworthiness. A lower credit score can make it more challenging to borrow money or secure loans in the future and may even affect one's ability to rent an apartment or get a job.
Legal action: Often, a collection agency will file a lawsuit against a debtor to obtain a judgment. If the court rules in favor of the agency, the debtor may be ordered to pay the debt plus additional fees and interest.
Small claim: A collection agency may sue in small claims court to recover a smaller debt (which varies by state). When a collection agency files a small claim, it hopes to obtain a judgment, allowing the agency to garnish wages or seize funds from a bank account to satisfy the debt.
Garnishment: When a collection agency obtains a judgment against a debtor, the agency may be able to garnish the debtor's wages or seize funds from their bank account to satisfy the debt. Garnishment is a legal process allowing a debt collector to take a portion of a debtor's income or assets to pay off a debt. The amount of income or assets that can be garnished depends on the laws of each state and the type of debt.
Property liens: A debt collection agency may file a lien on one's property. As a result, the agency has a legal claim to the property and might be able to sell it to recover the debt. Liens can be placed on real estate, such as a home or other property, or personal property, such as a car or other valuable assets.
Passport revocation: Delinquent tax debt may lead to an individual's passport being revoked or denied.
License suspension: If a debtor holds a professional license, such as a medical or legal license, they may risk losing their license if they have unpaid debt that is reported to the relevant licensing board.
Avoiding a collection agency will not result in the debt going away; instead, it may result in additional costs and consequences. If you cannot pay the debt fully, don't hesitate to ask for a payment arrangement. Remember, debt collectors have feelings too, and most reputable debt collection agencies, like Fair Capital, will try to work out a solution with you.