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.
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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? ›
Beyond contacting you directly, they can take you to court and sue for what you owe them. If they win—or you don't show up in court—they may be able to take money from your bank account, garnish your wages or place a lien on your property. After a certain period, debt collectors lose the right to sue you in court.
What happens if you never answer debt collector? ›
Ignoring Debt Collectors Can Lead to a Debt Collection Lawsuit. Worst-case scenario: They can file a lawsuit against you. Debt buyers may also sue you. Once a creditor or debt collection agency files a lawsuit, it's even riskier to continue ignoring it.
How bad is letting something go to collections? ›
Collection accounts are considered negative entries on your credit report, and since information from your credit reports is used to calculate your credit scores, any collection accounts that appear can have a negative impact on your credit scores.
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.
Is it better to pay off collections or let them go? ›
Summary: Ultimately, it's better to pay off a debt in full than settle. This will look better on your credit report and help you avoid a lawsuit. If you can't afford to pay off your debt fully, debt settlement is still a good option.
Do debt collectors give up? ›
If the debt is not collected, then the debt collector does not make money. In many cases, although you would think that debt collectors would eventually give up, they are known to be relentless. Debt collectors will push you until they get paid, and use sneaky tactics as well.
Is it true you don't have to pay a collection agency? ›
If you refuse to pay a debt collection agency, they may file a lawsuit against you. Debt collection lawsuits are no joke. You can't just ignore them in the hopes that they'll go away. If you receive a Complaint from a debt collector, you must respond within a time frame determined by your jurisdiction.
What's the worst collections can do? ›
Debt collectors cannot harass or abuse you. They cannot swear, threaten to illegally harm you or your property, threaten you with illegal actions, or falsely threaten you with actions they do not intend to take.
How to get rid of debt collectors without paying? ›
You can sue the debt collector for violating the FDCPA. If you sue under the FDCPA and win, the debt collector must generally pay your attorney's fees and might also have to pay you damages. If you're having trouble with debt collection, you can submit a complaint with the CFPB.
Debt collectors lose the right in many states to sue consumers after three or more years. But there's a loophole: If the consumer makes a payment, even against his or her own will, that can be used to try to revive the life of the debt.
How to outsmart a debt collector? ›
You can outsmart debt collectors by following these tips:
- Keep a record of all communication with debt collectors.
- Send a Debt Validation Letter and force them to verify your debt.
- Write a cease and desist letter.
- Explain the debt is not legitimate.
- Review your credit reports.
- Explain that you cannot afford to pay.
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.
What happens if you refuse to pay collections? ›
If you don't pay, the collection agency can sue you to try to collect the debt. If successful, the court may grant them the authority to garnish your wages or bank account or place a lien on your property. You can defend yourself in a debt collection lawsuit or file bankruptcy to stop collection actions.
Does your credit go up when collections are removed? ›
Paying off collection accounts could improve your credit scores, but there's no guarantee since you can't know which credit scoring model a lender will use to process your credit application.
How do I get rid of debt that went to collections? ›
How to pay off a debt in collections
- Confirm that the debt is yours.
- Check your state's statute of limitations.
- Know your debt collection rights.
- Figure out how much you can afford to pay.
- Ask to have your account deleted.
- Set up a payment plan.
- Make your payment.
- Document everything.
