When you owe money, whether in the form of a mortgage, auto loan, or medical bill, you're required to pay your bill. If you don't, the entity you owe money to might put your debt into collections. And from there, a series of negative financial consequences could ensue.
How the collections process works
A lender or entity you owe money to might turn over your unpaid debt to an outside collection agency so that they can recoup that sum. Once that happens, you can expect your credit score to take a significant hit. And the lower your credit score, the harder it becomes to borrow money -- or borrow affordably -- when you need to. You may, for example, be denied a personal loan if you apply after your credit score has plunged.
Once your debt goes into collections, the collection agency has the right to contact you frequently and urge you to repay the sum you owe. However, there are rules that the agency needs to follow -- more on that in a bit.
If you're unable to pay your debt in full, you can try negotiating with the collection agency. It may agree to settle your debt for a reduced amount so it can get paid something. But that's not guaranteed to happen.
If you don't pay your debt, your collection agency may, at some point, take the case to court. If a judgment is entered against you requiring you to pay your debt, and you don't do it, you could face consequences such as wage garnishment or having your bank accounts frozen so you can't access your funds.
What happens when a collection agency harasses you?
Debt collectors are allowed to contact you many times over in an effort to get you to repay your debt. But there are still rules these agencies need to follow, and it's important to know your rights.
The Fair Debt Collections Practices Act dictates that collection agencies cannot threaten you or use abusive language when they make contact. They cannot, for example, claim to have the right to throw you in jail for failing to repay your debt.
Debt collectors also have to contact you at reasonable hours. They aren't allowed to call you prior to 8 a.m. or after 9 p.m.
Furthermore, if a debt collector is made aware that you're not allowed to receive calls at your place of work, then it can't continue to call you there. And, collection agencies cannot use social media to shame you or post about any sum you owe.
You may decide to hire a debt settlement attorney to help you deal with your debt. If that's the case, the collection agency assigned to you must stop contacting you directly and instead direct future communication to the lawyer you've hired.
If a collection agency violates any of these rules, you can report it by submitting a complaint to the Consumer Financial Protection Bureau. Keep a record of all communications so you're able to provide as much detail as possible.
All told, it's really not a great thing to let your debt get to the point where it's gone into collections. If you're able to reach out to your original creditor and work out a payment plan first, you'll generally be in a better position. But if that doesn't work, it's important to know your rights once you have a debt collector assigned to recoup the money you owe.
FAQs
If you don't pay your debt, your collection agency may, at some point, take the case to court. If a judgment is entered against you requiring you to pay your debt, and you don't do it, you could face consequences such as wage garnishment or having your bank accounts frozen so you can't access your funds.
What happens if you let debt go to collections? ›
Having debts in collections can impact you financially. They can: Hurt your credit score: Your payment history makes up 35% of your score, so having an account in collections can have a big impact and for a long time, too. Collections can remain on your credit report for up to seven years, FICO notes.
What is the 11 word phrase to stop debt collectors? ›
If you are struggling with debt and debt collectors, Farmer & Morris Law, PLLC can help. As soon as you use the 11-word phrase “please cease and desist all calls and contact with me immediately” to stop the harassment, call us for a free consultation about what you can do to resolve your debt problems for good.
What happens if I never pay collections? ›
Persistent attempts to collect the debt may result in increased pressure from the collector, including frequent phone calls, letters, or even legal actions such as lawsuits. Ignoring these efforts could lead to further financial strain, potential wage garnishment, or the seizure of assets through a court judgment.
How bad is letting something go to collections? ›
A debt in collections creates a negative entry on your credit report, which in turn hurts your credit score. Which bills are at risk? Debts that can go to collections include credit card and loan debt, medical bills, utility bills, government debt and rent that hasn't been paid for months.
Is it better to pay off collections or let them go? ›
Is it good to pay off collections? Yes, it is generally beneficial to pay off collections. Settling collection accounts can improve your credit score over time and prevent further negative consequences like legal actions or added fees.
What is the loophole of debt collection? ›
The legal loophole is the debtor has no right in law to know or enquire who ownes the debt which then makes the contractural relationship no longer transparent.
How do I get rid of debt collectors without paying? ›
Once you notify the debt collector in writing that you dispute the debt, as long as it is within 30 days of receiving a validation notice, the debt collector must stop trying to collect the debt until they've provided you with verification in response to your dispute.
What's the worst a debt collector can do? ›
Debt collectors are limited on when they can call you — typically, between 8 a.m. and 9 p.m. They are not allowed to call you at work. They can't lie or harass you. Debt collectors can't make you pay more than you owe or threaten you with arrest, jail time, property liens or wage garnishment if you don't pay.
Will debt collectors give up? ›
They can keep trying to collect your debt until the sun explodes. But once the statute of limitations has expired, you're not legally obligated to make a payment. This is most important to keep in mind in the event that the creditor tries to sue you for the debt.
Debt collectors don't want you to know that you can make them stop calling, they can't do most of what they tell you, payment deadlines are phony, threats are inflated, and they can't find out how much you have in the bank. Furthermore, if you're out of state, they may have no legal recourse to collect.
Is it OK to hang up on a debt collector? ›
When you answer the phone, as soon as you know it's a creditor or debt collector, HANG UP THE PHONE. If they call again, HANG UP THE PHONE. Do this as often as you need to until they stop calling. Tell your friends and family to do the same thing if they are called about your bill, debt or judgment.
Can I get a debt removed from collections? ›
Even after you pay a collection account, it stays on your credit report for seven years. However, you can dispute collection accounts that are inaccurate. You may even be able to persuade a collection agency to remove the account once you've paid it.
Can a debt sent to collections be reversed? ›
Your original creditor may be most willing to take your debt back if you have already worked out a plan with your debt collector and begun repaying what you owe. However, there's no guarantee that the creditor will reaccept the original debt.
Will collections eventually go away? ›
In the United States, according to the Fair Credit Reporting Act (FCRA), a collection account can remain on your credit report for up to 7 years from the date of the first delinquency. That's the date when you first missed a payment and didn't catch up on it.
How to get out of collections without paying? ›
Ask for a goodwill deletion
You may be able to ask the collection agency, the original creditor or both to request the credit bureaus delete the delinquency from your credit reports as a courtesy. Of course, even a goodwill deletion will only remove the collection account from your credit report.
