For many of us, 'debt collection' is a scary word.
Those who have experienced it know that the process is not for the faint of heart. Despite your efforts to catch up on the bills, they don't seem to go away until you have paid all the debt.
Several factors make dealing with the original creditor challenging, including the amount and type of debt and the length of time it has yet to be paid. While dealing with the original creditor may be the ideal choice, avoiding a collection agency is only sometimes possible.
Why does debt go to a collection?
A debt collector reaches out to you when you fail to pay your bill for some time, typically three months. The debt can be a hospital bill, cell phone bill, car loan, mortgage, or any money you owe. When you have shown signs of not paying the creditor's debt, they will send your account to collection, meaning the collection agency will be responsible for getting your money.Two scenarios can occur.
The original creditor, such as a mortgage lender or a credit card issuer, thinks you aren't going to pay the debt. The creditor uses its own collectors or hires a collection agency to contact you.A collection agency buys your debt from the original creditor and collects the money you owe.
When a debt goes to collection, they will inform you by phone, email, or mail about the payment of the overdue bills. When they first contact you, ask about the amount of debt and the creditor's name & number to ensure that the collection agency is the authorized entity to receive the payment.How do creditors work with collection agencies?
Creditors often work with debt collectors in one of the following two ways.
The creditor pays a fixed fee to an agency and asks it to collect the debt on its behalf. They most often contact a local collection agency and ask them to collect the money on the creditor's behalf. For instance, if the creditor is in Dallas, contacting a Dallas collection agency only makes sense to avoid long travel and communication gaps.Also read: Does debt go away after 7 years?
The second way is to sell debt. Creditors often make calls and send warning letters before they finally give up. They may sell the debt to an agency that now owns it. The collection agency receives every penny that it can convince you to pay and keeps it.
The second way is to sell debt. Creditors often make calls and send warning letters before they finally give up. They may sell the debt to an agency that now owns it. The collection agency receives every penny that it can convince you to pay and keeps it.
Can you still pay the original creditor instead of a collection agency?
If your creditor has sold the debt to a collection agency, the agency now owns the debt. The creditor no longer has skin in the game; you only have to pay the agency. However, many creditors have their own collection divisions. You can still strike a deal and convince the creditor to remove your account from the collection status and return to a normal state of payments.Also, read Does Debt Consolidation Hurt Your Credit?
If you can pay the creditor all you owe, you can make an arrangement quickly. You can negotiate a partial payment or settle an installment plan. It is advised not to promise more than you can pay because it will only worsen matters.
On the contrary, if your creditor has sold the debt to a third-party collection agent, you may need help to continue making the regular monthly payments to the original creditor. The collection agent now owns the debt; you would be responsible for paying them instead of the original creditor.
If you can pay the creditor all you owe, you can make an arrangement quickly. You can negotiate a partial payment or settle an installment plan. It is advised not to promise more than you can pay because it will only worsen matters.
On the contrary, if your creditor has sold the debt to a third-party collection agent, you may need help to continue making the regular monthly payments to the original creditor. The collection agent now owns the debt; you would be responsible for paying them instead of the original creditor.
How to deal with creditors?
Once a debt goes to collection, your best option is to strike a deal with the collection agent as soon as they contact you. They will tell you how much you owe, and if you pay them right away, they will leave and stop contacting you again. This, however, is not possible for every debtor.If you don't pay and try to wait it out to avoid the payment, the collection agency will try to convince you to pay the debt. However, the Fair Debt Collection Practices Act has set some rules to ensure that the collection agencies play fair.
They can contact you by call, text, mail, email, or any other mean anywhere between the hours of 8:00 am and 9:00 pm. You can make them stop contacting you by asking in writing.
- They cannot harass or threaten you with violence.
- They cannot publicize your unpaid debts or talk to anyone else about your debt (more than once)
- They cannot make harassing calls
- You are advised to know your rights and only repay the amount that you owe.
