[_Gabe_]

I used to work in 3rd party collections and we often were sent accounts resulting from this same situation.

Basically, it depends on the bank. My office would not litigate unless the debt owed was over 5,000 and the banks would not authorize us to litigate unless it was over 10k.

A few things to understand...it is illegal for a company to pressure a debtor by threatening legal action unless they intend to follow through on that threat. If they told you it was going to legal action unless you paid by xx date and they did not then that is a pretty serious violation of the Fair Debt Collection Practices act. It is illegal for them to communicate that a debt is owed to any third party or to ask for any information from a third party that is not directly related to locating you.

The bad news is that banks communicate with each other and you will be unable to open a checking account for 10 years and this matter will affect your credit history negatively in other ways.

If the bank does choose to litigate you can usually look to settle the debt for less than 50% of what is owed prior to litigation. Most banks will not litigate on checking accounts less than 10K because the demographic that allows that type of debt is generally uncollectable.

My advice is to determine if you are in a 1 party disclosure state (if you are you can record phone conversations without disclosing that you are doing so) and keep a record of all conversations with the bank. Let them call you and read up on the FDCPA...most 3rd party collectors do not follow the law properly and each offense that you can get on tape is a pretty clear cut $10,000 violation. Ongoing and willfull abuse of the law (such as repeatedly threatening litigation if they don't intend to file suit) can get you much more than that.