If you are making payments to a business on a monthly basis

The creditor has no proper reasons to send your account to collection as long as you are making payments. But it varies from one company to another. One more reason of doing this will be if they are not getting the minimum payment on your account.

If I were you, I will continue to pay the creditor as long as the money is posted to the account. If they intend sending the file to the CA whom I don't want to deal with, they won't get a legal case here because the judge will find the account current from my side. The creditor has to prove in the court that the debtor is avoiding payments, which is not true here.

Technically, any time an account is in default, the creditor can perform collection activities, including sending it to a collection agency and/or court. A judge cannot make a subjective decision based on your "good faith" -- a judge has to make a judgement based on fact, namely: 1) what did you promise to do in the contract, 2) what did you actually do. If you didn't follow the contract, then that is a breech of contract and he has to rule in the plaintiff's favor.

Some states get picky about and require a notice of default and right to cure. But Illinois, for instance, I can sue you if you're one day late.

I would call the creditor and ask what minimum monthly payment they will require to keep it from going to a collection agency.

I think they can do whatever they want but as long as you are making payments in good faith they are barking up the wrong tree

it is only because they can. not because you have done anything wrong. they are just being greedy.