A lot of people think if they ignore a debt collection letter, then it might just go away. Sometimes, it’s true. Some creditors may walk away if you do not respond to multiple demand letters. But, there is a chance they may not.
Some creditors take a financial approach to the collection of bad debt. These creditors have preset limits and guidelines for the methods and lengths in which they pursue bad debt. Factors that might impact their decision may include the average receivable or the cost of pursuing the debt. One creditor might not consider a lawsuit to recover less than $1,000, but another might. A creditor with many $1,000 claims might need to pursue suit as opposed to a creditor who has a singular balance of $1,000 they can write off.
Depending on the creditor and the nature of the underlying debt, the creditor may report the debt to the credit bureaus before walking away. If you don’t want your debt to affect your credit score, you may want to rethink your strategy of not responding.
A creditor can also place a hold on future services, refusing to provide services or goods until you satisfy past dues. They can also place a hold on releasing documents. Some creditors have a right to place a lien or legally withhold certain documents. Recently, the New York state prevented the State University of New York (SUNY) from withholding transcripts despite repayments status in arrears. A creditor can also write the debt off and issue you a 1099, requiring you to report the amount written off as income.
Unfortunately, you can’t predict a creditor’s future actions on an uncollected debt. All you can do is guess.
Responding to a Demand Letter
If you ignore a debt collection letter, you open yourself up to all of the scenarios above. In that case, you may choose to respond to the letter. Other times, people choose to respond because there was a true breakdown or lack of communications with the creditor due to unopened or undelivered mail. It happens. In this case, responding allows you to take advantage of the opportunity to engage in conversation or settlement negotiations with the creditor or their agent and resolve any outstanding disputes, issues, and balances.
By responding to the collection letter, your voice can be heard. Documentation to substantiate your position can support your position. Sufficient documentation may even stop the creditor or their agents from escalating the claim to “legal.”
If you disputed the claim, you may avoid a common debt collection claim found in most summons and complaints, “the account stated,” by merely objecting to demands for payment.
If you need assistance with a debt collection matter, contact our firm for a consultation.
