What to Expect When Your Debt Goes to Collections

For one reason or another, things happen. And when circumstances affecting one’s financial situation arise, consumers may find it difficult to keep up on things like credit card bills, phone bills and more. If there’s an issue making ends meet, a consumer may stop paying a certain bill. While this is never advised, like we said, things happen. After the creditor realizes payments are not being made, they’ll contact the consumer to let them know, but eventually, after three to six months of inactivity, the debt may be turned over to a collection agency. At this point, the credit bureaus will also be notified and you’ll likely see your credit score take a hit.

But you’re not done once the debt goes to collections. No, it’s only just begun – and things can get messy and confusing. With that said, this post will cover what to expect when a debt goes to collections:

What to Expect When a Debt Goes to Collections

• Assigned vs. sold debts: Your debt is either assigned or purchased. When it’s assigned, the debt is simply turned over to collections with a contract to collect. When it’s purchased, the creditor has sold the debt outright to a collection company. No matter the situation, the collection company has motivation to collect, as they’re paid for results. For instance, agencies with assigned debts can keep up to 60 percent of what they collect. And there’s certainly motivation for an agency to collect if they’ve purchased the debt.
• They work fast: As soon as a debt is passed on to a collections agency, you can expect to be hearing from them. Generally speaking, the earlier contact can be made, the better the likelihood of settling or collecting.
• Collection agents can be ruthless: There’s a lot at stake when it comes to collecting debt, so an agent may revert to extensive – and possibly illegal – tactics as a way of collecting it. Make sure you know your rights when it comes to this, as you do have rights as a consumer. If collection agencies are breaking the law, they may be punished.
• Assigned debts can be tricky: In the case of assigned debts, the collection agency is still taking barking orders from the creditor. So as they work to recoup what is owed, agencies can’t do anything without first checking with the creditor – they’re essentially just the middle man in things. For instance, an agency can’t sue you without the creditor’s authorization. Similarly, if you settle with an agency for less than what is really owed, nothing can be set in stone until the creditor agrees to the terms.
• Negotiating: In most cases, you may be able to settle with an agency to repay less than the amount that is actually owed.