Threatening Legal Action – The Collection Agencies Favorite Threat
Fear is the main tool bill collectors try to use when attempting to motivating people to pay debts. They are extremely quick to ‘suggest’ that they will litigate and start a wage garnishee or lien a property because if the person believes them it can save them a lot of time in recovering a debt.
They are trained to sound believable, the truth of the matter is that most collectors make $12/hr and know very little about the actual process of pursuing legal action for recovery of debt.
An important FACT that the collectors never tell anyone about is that the debt needs to be of high enough value where their commission (anywhere from 5 – 50% of the debt recovered) will warrant the cost the agency has to spend on legal costs.
Collectors will almost always say that “the costs are added to the judgment,” however only a percentage of costs are recoverable when someone obtains a judgment. The agency is actually making an investment ($100 – $3,500+) whenever suing someone on behalf of a creditor. They run the risk of getting an unrecoverable judgment. Considering how greedy and cheap collection agencies are known to be, it is safe to say this is a cost they would rather not waste money on.
The average debt that a collection agency could sue someone for is usually $5,000+ and the agency would have to have at least an 60% probability of recovering funds after judgment.
How does the collection agency estimate the chances of recovering a debt after judgment?
1. The province in Canada that you live in matters tremendously.
British Columbia, Alberta and Ontario are the primary provinces collection agencies sue people on behalf of creditors.
The reason being that property values are higher and secure employment is more common.
2. Property Owners
If you own a property (in one of the above provinces) you are far more likely to be sued by a collection agency than someone who rents. Most people do not fall behind on their mortgage payments and will eventually sell a home at a profit.
A judgment and property lien could be possible, especially if their is available equity and the debt is more than $5,000 to the creditor.
3. Secure Employment
Government employee’s of any type, oil workers, people employed in the financial industry are more likely to be sued by a collection agency on behalf of a creditor.
If you’ve had a secure job for the past 4-10 years and it is unlikely you would leave anytime soon, it is possible that the agency could attempt to obtain a judgment to garnishee wages for recovery of the debt.
People employed in retail jobs, or under 25 working any job they could easily leave are far less likely to be sued. This is due to the fact that a garnishee order is useless if the person holding a judgment doesn’t know where the debtor works.
The main purpose of this article is to clarify for people being called by collection agencies about $200 phone bills or a $2000 credit card debt that it is very unlikely a collection agency would go to the expense (approximately $600 – $3,000+ in Supreme Court – depending on the province) and risk losing money on suing somebody that does not have the ability to repay their debt.
We believe this is an unnecessary scare tactic that collection agencies use far too often and want to ensure people are properly informed of the actual chances of this happening. Their are thousands of accounts in collection agencies that remain unpaid, they could not possibly sue every account or even as many as 5% due to the high costs and risk involved of not recovering money.
Disclaimer: This article was written by a former ‘legal collector’ with experience in judgment recovery for creditors by collection agencies. However this should NOT to be construed as legal advice. If you have reason to believe you are going to be sued by a creditor or collection agency, you should consult a lawyer immediately.