Hello. Your post raises questions that need to be asked and answered. One issue is that you state a collection agency is contacting you and you also state that the primary creditor, a bank, is contacting you. I suggest you first view the helpful materials at the Minnesota Attorney General website and then contact an attorney for assistance as need be.
Do seek legal counsel for your personal legal issues and needs. This post is not legal advice and does not create an attorney-client relationship. This post is to be considered general information which may or may not apply to your personal situation.
Yes, you be sued on the contract (your account agreement). Banking is regulated enough: the law does not require the bank to jump through your suggested hoops before suing you for breach. Now, if a third-party agency threatens to take an action that it does not intend to take, or cannot take, then you may have a colorable claim under federal law.
From what you describe (bank was relatively nice but the collection agency is playing hardball), it sounds like the bank may have charged off the debt and sold it to a collection agency or junk debt buyer, and it's this new entity who is threatening to sue. If you really don't have the full amount right now, maybe you wait it out and see if the collection agency will really spend the time and effort to sue over such a small sum of money. The short answer is yes they can sue you. But the question is will they.
It does appear that the collection agency is who you're dealing with now. They most definitely can bring a claim against you for the amount that you owe. One thing you may want to try and negotiating the amount down with the bank. The trouble there is you're going to need to find someone at the bank who has that authority. Most tellers or customer service people won't be able to help you with that. It will take some patience on the phone, but you should continue to ask to be pushed up the ladder and talk to some supervisors. Make sure you're clear that you didn't have notice and you want to pay back most, but not all, of the debt owed. Or simply go to the bank, explain your situation and ask to talk to a manager. My best guess is they won't negotiate the amount down very far, but you may be able to save a couple hundred dollars if you explain the situation and can pay that money back up front. You don't want to wait until the collection agency brings suit and gets a judgment against, which can create a lien on your property. Good luck.
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