What happens when you pay the original lender after being sued by the collection agency depends a couple of variables, whether the original lender still owns the debt and what actions you take after discovering who truly owns the debt. By acting quickly, you could walk away from the lawsuit not owing the collection agency anything.
Assigned or Sold
If you paid the original lender after having been sued by the collection agency, you may have made a mistake in doing so. The collection agency could have a valid gripe against you. Considering that you paid the original lender, you admit that you owed the debt. The original lender likely assigned or sold your account to the collection agency. If the collection agency bought the debt from the original lender, your legal obligation to pay the debt transferred from the original lender to the collection agency. Even if you paid the original creditor, the collection agency has a valid claim against you in this instance.
Contacting Original Lender
You can determine whether the original lender assigned or sold your account to a collection agency by calling the original lender and inquiring about your account. If you find that the original lender has an in-house collection agency, explain in your answer to the lawsuit that you already paid the original lender. You can also move to dismiss the lawsuit. If the original lender merely assigned the debt to an outside collection agency, the original lender still owns the debt. Therefore, your payment to the original lender should have satisfied your account. On the other hand, if the original lender sold the debt to the collection agency, the collection agency owns the debt. That means that you had a legal obligation to pay the collection agency instead of the original lender. The outcome of the lawsuit may require you to pay the collection agency.
Whether you find that the collection agency can still hold you on the hook for the debt or if the collection agency does not have a leg to stand on, you must answer the lawsuit. If you fail to answer the lawsuit, the collection agency will obtain a default judgment against you. Even if you did not legally owe the collection agency money before, you will owe the collection agency after it obtains a default judgment. Armed with a default judgment, the collection agency could attach your property or even garnish your bank account to pay the judgment.
A collection agency benefits from the lack of response to its lawsuit and your failure to appear in court. That assures them default judgments. On the other hand, if you stand up and fight a collection agency, you may end up not owing it anything. Imagine that a collection agency bought your delinquent credit account along with other accounts from the same lender in bulk. When you asked the agency to validate the debt, it could not provide proof that you owe anything. A court would not likely award this collection agency a judgment against you. A plaintiff must back up its claims with evidence in order to obtain a favorable judgment.
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