What to do if a collection agency is trying to collect on a voided contract?

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What to do if a collection agency is trying to collect on a voided contract?

I joined a gym two years ago that quickly went out of business and apparently my contract was sold to a different gym in town. I was under the impression the contract was void when I started getting bills from this new gym. I tried talking to the owner but they wouldn’t listen to what I had to say. Long story short – I refused to be bullied into paying and how I have a $300 bill in collections. I shouldn’t have to pay. I’ve already had this erased from my credit score but the collection agency keeps calling and telling me they are going to start looking at my assets. What should I do?

Asked on June 16, 2012 under Bankruptcy Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

Your credit score has no legal effect--it is a convenient tool for lenders, but does not determine whether or not a debt is valid. Similarly, it does not matter what your impression was, or whether you refuse to be bullied or not. All that matters is whether or not the contract was ever properly terminanted or voided, and also whether or not it was properly sold to the other gym. That is not a question that can be answered from the detail you have provided; it depends on the specific language of the contract; the time frame or line between the first gym going out of business and the second one taking over; how the second gym took over; etc. It may be that you do not owe this amount, but you cannot assume that: therefore, given that lawyers cost money, it may be difficult to resolve this without an attorney, and that you could end up liable anyway, it may be that the most practical answer is to pay the $300. If you refuse to, then since  it's probably not cost effective to hire an attorney, start by reviewing the contract to see what happens under it if the first gym went out of business and whether the contract could be lawfully sold to another gym.


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