You might feel overwhelmed if one of your debts ends up with a debt collector. It can be stressful to have an account sent to collections. But you have options — and rights — when going through the process.
The steps you need to take once you learn you're in collections.
Take a deep breath.
Many debtors panic when they receive a collection letter. You may refuse to answer unknown phone calls out of fear the caller might threaten you. You've stopped checking your credit score, as the thought of seeing how much of a hit the debt is taking on your score makes your stomach turn.
If you cannot resolve the issue immediately, take a deep breath and relax, knowing there is a path forward.
Thanks to the federal Fair Debt Collections Practices Act, debt collectors aren't allowed to engage in abusive, deceptive or unfair debt collection practices. As a result, you cannot be harassed or threatened with jail if you don't pay. Additionally, they can't call you before 8 a.m. or after 9 p.m. unless you give permission.
Don't Ignore the Debt.
It may be tempting to ignore debt collector calls or throw away collection letters when being hounded by debt collectors. But that will not make your debt disappear. Instead, it's best to take control of the situation and face the debt head-on. That way, you can live life with some peace of mind, minimize harm to your credit, and avoid a lawsuit.
When you learn that a debt collector is pursuing you, the clock starts ticking. Recognize the situation and act immediately. Do not ignore your debt. Doing so will avoid trouble down the road. There is a good chance that you can avoid the account impacting your credit by acting promptly. Many collection agencies will not report your debt right away to the credit bureaus, giving you time to address the issue before your credit suffers.
Choose a course of action.
The two most common ways to handle debt in collections are by payoff or disputing the debt because it is incorrect.
If you owe the debt; you may have an opportunity to negotiate a settlement if you cannot afford to pay it in full. The CFPB recommends creating a "reasonable repayment plan" based on how much you can afford in monthly payments after accounting for bills, other debt payments, and emergency costs.
In most cases, professional debt collection agencies will be willing to work out a reasonable payment arrangement with you if you show good attention to resolving the debt. In some cases, a collection agency will even hold off reporting your account to the credit bureaus as long as you adhere to your payment arrangement.
A debt that doesn't belong to you can be disputed: You should dispute a debt if it doesn't belong to you or if you have already paid it off. You have 30 days from the initial communication to ask for the debt to be verified in writing. After that, a debt collection agency must stop collection efforts until they investigate and confirm your debt's accuracy. Suppose the collection agency confirms your debt to be valid. In that case, you can expect to receive some sort of validation of your debt.
If you doubt the legitimacy of your debt, you might want to contact the original creditor to get clarification. In most cases, the original creditor will have more information than the collection agency to verify your account quickly.
Call the debt collections agency.
Upon evaluating the debt and coming up with a plan, contact the collection agency.
Look Into Negotiating the Debt.
The debt may be settled if you ask. In the end, a creditor or collection agency wants to get paid. Thus, a collection agency may be willing to negotiate a lump-sum payment or a plan to pay off the debt over time. The only thing to keep in mind is that a settled debt may appear on your credit report as such and may not be favorable for some.