Be Sure You Know Whom To Pay
Once you’ve arranged to pay off the debt, who should receive your debt payments?
If the original creditor, such as a credit card issuer or mortgage lender, is handling the debt collection, then your payments will go to the creditor. But if the original creditor hires a debt collector or sells your debt to a debt collector, you’ll send payments to the debt collector.
Dealing With Identity Theft
Keep in mind that collections agencies arent perfect. Sometimes, they will just look for people who have the same name as what is listed on the debt, and begin calling all of them to find the person that owes the debt. They are not always careful about making sure they have the right person. This is why you need proof that the debt is yours before you begin making payments on that debt.
The debt can even be attributed to your name and Social Security number but not be yours. In this case, it’s usually because of identity theft. If you suspect this has happened to you, you need to file a police report and mail a copy of the report to the collections agency. This should stop the debt collection agency from harassing you until the issue is resolved.
And never give the debt collections agency your full Social Security number. Rather, let them give you the last four digits of the number attached to the account and see if it matches up.
What To Know About Old Debts
What if my debt is old?
Debt doesnt usually go away, but debt collectors do have a limited amount of time to sue you to collect on a debt. This time period is called the statute of limitations, and it usually starts when you miss a payment on a debt. After the statute of limitations runs out, your unpaid debt is considered to be time-barred.
If a debt is time-barred, a debt collector can no longer sue you to collect it. In fact, its against the law for a debt collector to sue you for not paying a debt thats time-barred. If you do get sued for a time-barred debt, tell the judge that the statute of limitations has run out.
How long the statute of limitations lasts depends on what kind of debt it is and the law in your state or the state specified in your credit contract or agreement creating the debt.
Also, under the laws of some states, if you make a payment or even acknowledge in writing that you owe the debt, the clock resets and a new statute of limitations period begins. In that case, your debt isnt time-barred anymore.
Can a debt collector contact me about a time-barred debt?
Sometimes. It depends on which state you live in. Some state laws say its illegal for a debt collector to contact you about a time-barred debt. But even if you live in a state where a collector may still contact you, they cannot sue or threaten to sue you over a time-barred debt.
What if Im not sure if my debt is time-barred?
Does a time-barred debt stay on my credit report?
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Collection Agencies That Purchase Debt Might Not Have Good Information
Buying debts has become a massive business for collection agencies. Especially if your debt is old, you’re likely to find yourself dealing with someone who has bought a bundle of debts for pennies on the dollar. Because the collector might not have any of the original credit documents and only a screenshot with information about the debt, the information it has might very well be incorrect. The collector might even have bought the debt from another collector, not the original creditor, which increases the likelihood that the collector doesn’t have accurate information about the debt.
What Is A Collection
The original lenderssuch as the credit card company, mortgage lender, or doctors officeturn to collection agencies when they no longer expect to receive your payment. Collection agencies either act as a middleman to retrieve the debt or purchase the debt from the lender for a fraction of the original amount. The lender then writes the amount off as a loss to their business and passes responsibility off to the agency.
Collection agencies purchase your debt for a smaller percentage of the original amount since they take on the risk that the money will not be repaid. This percentage varies based on a series of details, including the age and type of debt. Often, the higher the risk the debt will not be repaid, the less the agency pays.
When does a bill go to collections? A lender will typically sell the debt between 30 and60 days of delinquency, though they may not tell you that this occurred until after the transfer. Medical bills will not be transferred until they reach 180 days of delinquency due to the National Consumer Assistance Plan.
Debt Collector Contacting Your Employer Or Other People
Debt collectors may contact your employer but only:
- To verify your employment
- To get your location information
- To garnish your wages , but only after it sued you and a court entered a judgment against you
- If the debt is a medical debt, to find out whether you have medical insurance or
- You or your attorney agreed in writing that the debt collector may contact your employer.
A debt collector may call your employer once to verify your employment. Healthcare providers and their agents may also call your employer to find out if you have medical insurance. Otherwise, the debt collector must contact your employer in writing. If the collector receives no response to its written contact within 15 days, it may then call or otherwise contact your employer.
Generally, a debt collector cannot contact your family, neighbors, or other people about your debt unless:
- The debt collector is doing so to get your location information
- A court has given the debt collector permission to do so
- If, after the debt collector sued you and a court entered judgment against you, it is reasonably necessary to contact other people to effectuate the judgment or
- You or your attorney agreed in writing that the debt collector may contact other people.
How Can A Bill In Collections Affect My Credit
Payment history is one of the top contributing factors to your credit report, accounting for over a third of your credit score. Lenders want to be able to see that youve managed your finances in the past. Missed and lapsed payments that have gone to collections could be seen as a sign of financial instability. The effect on your credit score comes down to how late the payment is, the amount due and the type of debt.
When unpaid bills are sold to collection agencies, the negative mark can stay on your credit score for up to seven years. The starting date is determined by the last time the bill was brought current. For example, notes on defaulted bills can remain on your credit for seven years after the last time you made a payment on the loan in question.
It is important to look at your credit report on occasion to ensure these negative marks do not appear by accident. If the collections agency or lender made a mistake in reporting the information, you can dispute the debt to have your report updated or the note removed.
As we mentioned earlier, the National Consumer Assistance Plan keeps medical debt from appearing on your credit report before 180 days of delinquency. This allows patients to negotiate with their doctors and insurance companies, many of which will offer payment plans when the bill is too high to pay in full.
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What Does Sent To Collections Mean
If you feel that collection agencies have violated your rights as a result of harassing and abusive phone calls, the Fair Debt Collection Practices Act could help you to collect compensation, also called damages. The FDCPA was founded in a 1977. Today, the FDCPA gives protection to consumers against mistreatment and abuse from collection companies.
There are strict guidelines as to what collection companies can and cannot do in regard to consumers. Collection agencies are not allowed to be profane or threatening, contact other parties about your debt, or contact you outside of certain times.
Accounts that are being paid on time and have no issues will always be handled by the original creditor or lender that issued the debt. If one of your debts has been sent to collections, it usually means:
- The account is past due by a certain amount of time
- There have been notices sent to collect the payment that have not been successful.
- A company or department that specializes in collecting payment for delinquent accounts will now contact you about the loan and collect the payment. Usually, they receive a percentage based on the size of the loan.
If a debt of yours has been sent to collections:
- All contact should be through the collection agency and not the original lender.
- Work out a payment plan that you can use to pay off the debt.
- See if you can get negative or false information removed from credit reports
- The state attorney general
Collection Agencies Are Choosy
Before an agency tries to collect, it evaluates its likelihood of success. It might carry thousandsor even tens of thousandsof delinquent accounts and must prioritize which ones to go after. If success looks likely, the agency will move full speed ahead. If the chances of finding you are low, the odds of collecting money are slim. If your credit file shows that you’ve defaulted on 20 other accounts, the agency might give your debt low priority.
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How Debts End Up In Collections
The road to debt collections is long. It starts when a debt goes unpaid for a period of time, usually starting 30 days after the due date. The overdue payment may be reported as delinquent. Youll get notices and possibly calls seeking payment. At some point, usually after 180 days, the creditor such as a credit card company, bank or medical provider gives up on trying to collect.
The original creditor may then sell the debt to a collections agency to recoup losses. It may get only pennies on the dollar, but thats seen as better than having an old debt on the books and getting nothing.
If your debt is sold, youll start getting debt collection notices from a different company. Its the same debt, and you still owe payment its just that a third party has bought the right to collect.
How To Manage Debt In Collections
As a general rule, dont ignore debt collectors. While its OK to take a few days to gather your thoughts and documentation before talking to them, ignoring them entirely only makes your debt problem worse. Working with debt collectors is a process, and youll want to take the time to formulate a plan.
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What To Do If A Bill Is Sent To A Collection Agency
Money, Home and Living Reporter, HuffPost
We all know were supposed to pay our bills on time. But even the most responsible folks can somehow miss a payment. Addresses change, memories lapse and sometimes hard times hit.
No matter why a bill has gone to a collection agency, its important that you deal with the situation before it gets out of hand. Heres what to do when debt collectors start calling.
Who The Legislation Does Not Apply To
The legislation does not apply to businesses or people collecting debts for which they are the original creditor or owner of the debt, a lawyer who is collecting a debt for a client, a civil enforcement bailiff or agency while seizing security or people working in the regular course of their employment while licensed under the Insurance Act.
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Ask The Collector Who Theyre Calling On Behalf Of
This can help you determine which account it is. Get information about the amount owing, the total time it has been delinquent and the agency name and contact information. Be confident that you do have rights in this situation.
For example, they may not contact you during holidays, or during certain hours on Sundays. In addition, unreasonable, undue, or excessive pressure or harassment techniques arent allowed.
If you have concerns about how the agency is treating you, here are some tips for how to officially report the situation.
Determine how youd like the relationship to take shape moving forward. For example, you can legally request for a collection agency to contact you in writing only. The Government of Canada website offers some additional advice on this point: Ask your legal advisor to send a written request to your creditor by registered mail, including an address and phone number at which you may be contacted.
Bill Collecting Is A Lucrative Business
Collection agents get paid for results. Some earn high salaries. Other companies pay their collectors meager wages plus commissions, which means you might have to deal with a nasty collector who isn’t worried about complying with the law.
Debt Collections During the Coronavirus National Emergency
Some states have temporarily prohibited creditors and debt collectors from taking specific debt collection actions, like filing a collection lawsuit, garnishing wages, seizing property, repossessing a vehicle, or freezing a bank account, due to the coronavirus crisis.
To find out if your state has any restrictions on debt collection practices during this national emergency, check your state’s official website and look for orders related to the pandemic. The National Consumer Law Center website is also a good source of information on consumer matters, including debt collection limitations during the coronavirus outbreak.
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How Debt Collection Agencies Work
Collection agencies tend to specialize in the types of debt they collect. For example, an agency might collect only delinquent debts of at least $200 and less than two years old. A reputable agency will also limit its work to collecting debts within the statute of limitations, which varies by state. Being within the statute of limitations means that the debt is not too old, and the creditor can still pursue it legally.
The pays the collector a percentage, typically between 25% to 50% of the amount collected. Debt collection agencies collect various delinquent debtscredit cards, medical, automobile loans, personal loans, business, student loans, and even unpaid utility and cell phone bills.
For difficult-to-collect debts, some collection agencies also negotiate settlements with consumers for less than the amount owed. Debt collectors may also refer cases to lawyers who file lawsuits against customers who have refused to pay the collection agency.
What Rights Do Debt Collectors Have
Debt collectors have the right to contact you, but you have debtor’s rights, too. Debt collectors aren’t allowed to call you nonstop, insult you or make you feel lousy for not paying. They also aren’t allowed to call you before 8 a.m. or after 9 p.m. unless you somehow agree to it.If you’re being harassed by a debt collector, you can send a complaint to the Consumer Financial Protection Bureau or your state’s attorney general.
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What Happens To Your Credit Score
Once your creditor transfers your debt to a collection agency, your credit score will go down.
A low credit score means:
- lenders may refuse you credit or charge you a higher interest rate
- insurance companies may charge you more for insurance
- landlords may refuse to rent to you or charge you more for rent
- employers may not hire you
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Medical Bills With Health Insurance
Carefully read and re-read your policy its not easy for any of us, but the more you delve into it the more youll understand. If you think charges that arent covered should be, contact your insurance agent. If you are certain you should be reimbursed, or that your doctor or hospital should be paid by your healthcare provider, file an appeal in a timely manner, as most insurers limit the time you have to question a benefit. It often is just 30 or 60 days.
Be prepared for denials and delays and be careful to keep records of all phone calls and correspondence. That way, if you eventually must file a formal complaint with your states insurance commission or contact a consumer law attorney, you have accurate records.
Be aware: In the end, you may still have to pay the bill.