If you're dealing with calls and letters from debt collectors, it's important to know how likely they are to file a lawsuit over your unpaid balance.
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In the current economic environment, where Americans owe a record $1.21 trillion in credit card debt and credit card rates are sitting at record highs, a lot of borrowers have found themselves facing collection calls and potential lawsuits over their unpaid debt. And, as more accounts fall into serious delinquency due to inflation and other economic issues putting stress on people's finances, even more are at risk. But while debt-related lawsuits are among the most common civil cases in the U.S., they can still have long-lasting effects on your finances.
So, if you've fallen behind on credit card bills, or if you're struggling to make the payments on your medical debt or a personal loan, you may wonder when or if a debt collector will take you to court, especially if the balance in question seems trivial. After all, many people assume a debt lawsuit will only be filed if you owe a substantial balance. That's not always the case, though. Debt collectors may file suits over surprisingly small amounts, depending on the type of debt, the agency involved and even state laws.
That's why it's important to understand when legal action becomes likely and what you can do before it reaches that point, especially if your debt has already been turned over to collections. So, what is the lowest amount a debt collector is likely to file a lawsuit over? That's what we'll detail below.
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What is the lowest amount a debt collector will sue for?
There's no single threshold amount that triggers a debt lawsuit. The decision to file a lawsuit usually comes down to three main factors:
The size of the debt relative to collection costs
Debt collectors weigh the potential recovery against the costs of suing you, including court filing fees, attorney costs and the effort required to collect after winning. For small balances, filing a lawsuit and dealing with the related costs often isn't worth it. However, because many collection firms handle large volumes of cases using standardized processes, even smaller balances can be profitable to pursue.
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The type and age of the debt
Unsecured debts like credit cards and personal loans are more commonly litigated because they're easier to prove and collect. Medical debts, on the other hand, may be less likely to result in a lawsuit, especially if they've been sold to secondary collectors. And, older debts, especially those beyond the statute of limitations in your state, can't legally be sued for, though debt collectors may still contact you about them or threaten legal action to try and compel you to pay.
State laws and local court practices
In some states, small claims courts allow lawsuits for amounts as low as a few hundred dollars. For example, a debt collector might sue for a $750 credit card balance in a jurisdiction with minimal filing fees and high default judgment rates. In other states, court costs or stricter documentation rules make small debts less worthwhile to pursue.
In short: Debt collectors typically start considering lawsuits for amounts around $1,000 to $5,000, but there's no strict rule. If your debt is within that range, or if you've ignored collection calls or letters, you could be at risk of being sued.
How to deal with overwhelming debt before a lawsuit is filed
If you're behind on payments but haven't been sued yet, you still have time to act. Taking steps early can help you avoid court, reduce your balance and protect your credit. Here's what to consider:
- Communicate with your creditor or debt collector: Ignoring calls and letters won't make the debt disappear. In fact, it increases the risk of a lawsuit. So, rather than ignoring it, contact the creditor or debt collector and ask about your payment options. Some will accept reduced settlements or waive interest if you can make a lump-sum payment.
- Consider a debt management program: Debt management programs, which are available through credit counseling agencies, let you consolidate multiple credit card debts into a single monthly payment while working to lower your interest rates. Your counselor will negotiate with creditors on your behalf, and you'll pay the agency each month until your balances are cleared, which is typically within three to five years.
- Explore debt settlement: If you owe more than $7,500 to $10,000 and can't keep up with the payments, debt settlement could help you resolve your debt for less than you owe. With this approach, a debt relief company negotiates directly with creditors to settle your balances, often for 50% to 70% of the total. Keep in mind, though, that debt settlement can temporarily hurt your credit and may have tax implications.
- Look into a debt consolidation loan: If you still have a solid credit profile, a debt consolidation loan could help you combine multiple high-rate debts into one lower-rate loan. This option can make your payments more manageable and reduce your overall interest costs.
- Consult with a professional: If your situation feels overwhelming, you may want to speak with a credit counselor or debt relief specialist. They can assess your options based on your income, debt type and credit profile, and help you decide whether settlement, management or even bankruptcy is the best path forward.
The bottom line
Debt collectors can and often do sue over relatively small amounts, especially if you've ignored repeated attempts to collect the money owed. While lawsuits over a few hundred dollars aren't common, balances in the $1,000 to $5,000 range are often fair game, depending on the creditor and your state's rules.
If you're at risk of being sued, acting quickly can help you avoid the stress and long-term damage of a judgment. Whether that means negotiating directly with debt collectors, joining a debt management program or exploring a debt relief solution, don't wait to act. The earlier you act, the more control you'll have and the easier it will be to protect your finances before a lawsuit begins.
Edited by Matt Richardson
