Some consumers in New Jersey may have had the experience of receiving a bill from a collections agency without ever having been informed that they owed money. They might wonder whether this is legal, and the answer is that it often is. But there are steps a person can take to prevent this from happening.
Financial institutions that regularly extend credit are required to notify customers up to 30 days after a bill goes to collections. This exempts bills from places such as hospitals and cell phone companies. Furthermore, the provision about notification 30 days afterward provides a loophole for other types of businesses.
Doing this is known as "parking," and it is one way for creditors to attempt to collect without ever having to go to the trouble of seeking out the customer who owes money. Often, this will be triggered by an individual applying for mortgage or another line of credit. Unfortunately, even paying the bill promptly as soon as the individual is aware of it does not remove the negative hit to the credit report.
Regularly pulling credit reports and following up on any unfamiliar unsecured debts is one way to help prevent this. Debts may be disputed with the credit reporting agency or the creditor.
In some cases, such as in the case of hospital bills, these debts might be significant. A person who is struggling to pay off a debt might be considering filing for bankruptcy. This could be the case whether or not the individual was aware of the debt before it went to collections. Those who are in this type of situation may wish to consult an attorney to discuss their options. An attorney may be able to provide advice regarding the consequences of this form of debt relief and the eligibility and other requirements..