They will attempt to contact you to work out a payment plan. If you do not cooperate with them, they will eventually take the case to court and get a judgment against you. The judgment will allow them to garnish your wages and/or place a lien on any property that you own (your personal residence would be exempt). The judgment will last for 10 years, so when you do get a job they can start garnishing your wages. It will also show up on your credit report. Most banks would never lend you any money with an outstanding judgment, so you could forget about borrowing money again.

I would suggest when the law firm contacts you, you explain to them that you are out of work and you start paying them once you get a job. Maybe even, as a sign of good faith, sell something you own and reduce the debt.

I am a loan officer, and part of my job is collecting on past due payments. I am willing to work with people as long as they keep in communication with me. Too many people just bury their heads in the sand and think the problem will go away. So if you are upfront and forthcoming with the law firm, I’m sure they’ll work with you while you look for a job.

To answer one of the questions above, no they can not garnish unemployment.

A “lawyer” is no more than a collection agent who is trying to collect from you. Sometimes collection agencies work under the license of an attorney. They might just be scaring you.

An attorney can sue, but only if he is licensed to practice law in your state. Will he? That would depend on the size of the debt and their ability to collect from you.

For starters, send the collection agency a “Debt Validation Letter”. Make them verify that the debt is yours and that they have legal right to collect.

Include a paragraph stating that they cannot contact you again until the debt is validated. Send the letter by certified mail and keep copies for your records.