How does the debt collection process work on an unsecured loan?

I am 105K in debt(mortgage, student loan, car and the unsecured loan) and lost my former job due to lack of work. I got a new job but I am out 15K/yr. Through much juggling, I am paying off everyone except the unsecured loan on which I am paying 30/month(they want 260/mth) and they are unhappy I am paying them so little and threatening to sue me. I am trying to sell the house to pay off the mortgage and the personal loan and this is still at the original lender level. I am hoping I will get to work with a collections agency first since I can offer them the 30 I am now paying the creditor and when I sell the house I can pay the bill in full and have the credit bureau remove the blotch from my credit by showing evidence of payment. Do they go to collections or sue first?If they do sue,will they garnish my wages or freeze my checking account(no savings) or both? How does the debt collection process work on an unsecured loan?

How does the debt collection process work on an unsecured loan?
The debt collection process





When you default on a loan or pay less than your contractual agreement – for instance, you have to pay a set percentage of the amount owing on credit cards or a minimum payment – your account will be passed to the firm’s own internal debt collection people. They will contact you to try to recover what is owed and to check your circumstances.





Most banks and financial organisations prefer – at least initially – to handle debt problems themselves. However, if the situation continues for any length of time or they are unable to come to an agreement with you, or you ignore their letters and/or phone calls, they may pass the debt on to a collection agency or try to recover their money some other way.





Any debt collection agency used by your creditors must work within the same legal restraints as the original financial organisation and cannot, for instance, try to demand money under threat of physical violence.





Often the letter you receive will indicate that you have to pay the full outstanding balance of the debt with a threat that if you do not, further serious action will be taken. Some people get frightened by this but it is essential you respond indicating why you cannot pay the full amount and sending a copy of your budget and repayment proposals.





Provided that you maintain the proposed payments, update the information in your budget when asked by your creditors to do so and provide evidence (like bank statements and payslips) when they are requested, most creditors should be prepared to help. However, if you do not voluntarily make payments to reduce your debts or keep to your repayment arrangement, the original financial organisation or the collection agency may apply to get a County Court Judgment(s) against you. In this case you will usually be sent a claim form. This gives you an opportunity to respond – either by defending the claim if you dispute it (using the form known as an N9B) or by offering to repay the debt by instalments (using the N9A form which has to be completed with the same sort of information that is included in your budget). In most cases, provided you complete this form, your proposals are realistic and you keep up the payments, no further action will be taken.





If you wish you can attend a hearing and explain your circumstances and present your personal budget but this is not normally necessary as long as you have returned the relevant paperwork within the time allowed and your budget is a realistic one. Failure to keep up the payments agreed can lead to further action. If you are employed and fail to make payments to a CCJ, an attachment of earnings order may be made against you. That means the instalments due will be taken directly from your salary by your employer before the balance is passed on to you.





If you are under a judgment(s) from the Court and fail to keep up payments, the creditor also has the right to instruct bailiffs to recover the amount due. This is the likely course of action if you are not working or are self employed and fail to keep up the agreed payments. Bailiffs might also be sent if you fail to reply to any letter from the Court that seeks further clarification of your position
Reply:There are other more successful options. Call me 678-613-8260 Report Abuse

Reply:Wow. First, I suggest that you speed up the process of selling your home a bit, i.e. undercut other sellers in your area. The housing market has been on a tear for the last ten years, and the collapse of the subprime market, which has been in the news lately, means that the housing bubble is bursting. Many economists are likening it to the Tech Bubble in stocks in 1999-2000. This means that the longer you have your house on the market, the less it will be worth, and values will be dropping at a very fast rate. To see what I mean, look at this chart, prepared by a Yale economics professor, and keep in mind that what goes up must come down: http://www.speculativebubble.com/images/...


Second, I highly doubt that they will sue you. They will likely send your case to a collection agency, who will formulate a plan for you to pay the debt off. Actually, if they are constantly threatening to sue you, you may be able to SUE THEM for harassment. Usually, the creditor would simply sell your debt to a collection agency. I have never heard of anyone being sued by a banking institution for defaulting on a small loan like that... And rest assured, you are certainly not their only worry right now. Depending on how deep your bank is in the subprime sector, which many banks were deep into, they may be in danger of going belly up. I suggest you seek the advice of a reputable debt consolidation service before you begin worrying too much about being sued, garnished wages, and frozen savings accounts.





I just saw your add%26#039;l details... This is how the debt collection process works: If the bank thinks it will recover more money by suing you, they will do so. If they think they will recover more money by selling your debt to a collection agency, they will do so. Unless the people running your bank are complete idiots, they will not sue you for two reasons:





1. Lawsuits cost money. Even if they have a salaried lawyer, which most small banks do not have, that lawyer must divert his or her time from other causes to work on suing you. If they do not have a salaried lawyer, a lawsuit would be very expensive for them, and $105k sounds like it%26#039;s on the smaller end of the spectrum - i.e. not really worth it.


2. On top of that, I%26#039;m sure they know about the current condition of the housing market, as it%26#039;s common knowledge amongst financial institutions, economists, the FED, etc. If they DID sue you, what do you think they would be suing you for? Your house, of course! And assuming they won the lawsuit, by the time they did, it%26#039;s very likely that the house would have lost a substantial amount of value. Then they would have to pay substantial fees to sell it AND it would lose more value while it was on the market, etc... The bottom line is that acquiring a home right now is not a desirable position to be in.





So it%26#039;s probable that the bank is simply using scare tactics to get you to pay by whatever means necessary, and they probably have no intention of suing. What you should find out is whether the bank has a sub prime portfolio or not, and how many loans are currently in default. If the bank has a large number of loans in default, they are not going to sue EVERYONE for obvious reasons. What is the name of the bank? Are they a publicly traded company? You might just want to IM or email me...
Reply:to answer your direct question... the debt is still with the original creditor, which is good. they may not be happy with the reduced payment, but as long as you are paying someting it does show intent. it is still a blotch on your credit but shows effort on your part. the collection process is similar in most cases- if your creditor sells your account to a debt collector, they will contact you and start making payment demands. it will usually take several months before a debt collector will pursue further action, such as suing you in court. the can%26#039;t garnish wages or freeze assets without a court order. keep doing what you%26#039;re doing- at least it shows you are not trying to evade your debt.
Reply:PLease contact me, is there any equity left in your home? Is it going into foreclosure? WHat are you willing to settle for to get yourself out of debt?

lily