Having a debt collection agency phoning you up every hour of the day is bad enough, but being sued by them is something altogether more serious. In most cases, a collection agency will be chasing a debt on behalf of the company that the money is owed to. The debt is still owed to the original company and the agency is just working on a commission basis.
In these circumstances the threat of taking you to court may just be intended to worry you into paying up. However, you should be aware that you can actually be sued for a debt you have not paid. While the legal action has to be on behalf of whoever the debt is actually owed to, that company may be asking the debt collection agency to move forward with the legal proceedings on their behalf.
It is also quite possible that a collection agency might sue you directly, and if this happens, it almost certainly means that they have bought the debt from the original organisation that you owed the money to. In this situation you then legally owe the money to the debt collection agency, not the original company you borrowed the money from.
Buying debts is not at all uncommon, and happens a lot. The process is usually that the collection agency will pay a fraction of the total value of the debt to the company, then try to recover as much of it as they can. This allows the original holder of the debt to get rid of it while getting something back for it rather than nothing. The collection agency then have to recover as much as they can above the amount they paid for it, otherwise they do not make any money.
So depending on the circumstances, either the original company that you owe money to, or a debt collection agency that you have never heard of, can sue you to recover a debt. They will do this if they think it is in their interests and likely to be the course of action that gets them the most money back. Being sued and having a court order against you is definitely something to be avoided if at all possible, and there are options available to you that can help to prevent this.
When you are in serious debt and being threatened with court action, your choices are rather limited and many people start thinking about bankruptcy, which is a very serious decision. Another, far less drastic option, however, is to contact a professional debt advisor about the possibility of a debt management plan. These are also known as debt consolidation plans or programs and are available in both the US and UK. This should not be confused with a debt consolidation loan, which means borrowing more money. These plans involve no further borrowing.
When a debt management plan is set up, an experienced negotiator will deal with your creditors on your behalf, to agree new terms for paying back what you owe. It normally means freezing or reducing interest charges or any late payment penalties and setting up new repayment terms which make it possible for you to pay the debt back. The result of this is that you only have one affordable payment to find every month, and your creditors stop hassling you as they have to go through the debt management company instead.
If you do choose to explore this option further, take care to approach at least two companies to compare offers, as they do vary a lot. Be careful about which companies you approach as there are an awful lot to choose from, and unfortunately some are much better at taking hefty fees from you than they are at negotiation good deals on your behalf. It is very important to deal only with reputable and well established companies who have a track record of having successfully helped many other people.
Read reviews and recommendations for reputable debt management companies in the UK and US. K D Garrow has worked as a senior manager with significant financial responsibility for the last twenty years. His Debt UK/US website offers free, unbiased advice on a range of debt related issues, including IVAs UK, bankruptcy, credit card settlement, etc.