My Account has Been Sent to Debt Collections. What Do I Do?

It can be discouraging to have an account in collections. Most companies will allow your account to be delinquent for a few months before they turn it over to a debt collections company. The debt collections company is their last resort to get money from you. If you are working on paying off old debt, or if you did not realize you were missing payments on a bill, like a medical bill, you will need to deal directly with the debt collections company to clear up your old debt. When you are ready to begin clearing up your old debts you will need to work with the debt collections company.

Ask for a Statement

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You will need to ask for a statement from the debt collections company that outlines the original amount of the debt, as well as any fees that have been added to your account. You may be surprised at how many fees you have accumulated with the debt. If a collections company contacts you and tries to collect a debt on account you do not remember, you need to request account information. By law they need to give it to you. They have to show you proof that the debt is yours.

Negotiate Payment Terms

If you have enough money to pay the debt off entirely, you may want to go ahead and do that. This will show on your credit report as debt paid in full. It will help to raise your credit score by showing that you are cleaning up old debt and changing past habits. If you do not have all the money, but a large lump sum, you can negotiate a debt settlement. You offer the amount that you have as a single lump payment as settlement in full. This means that the amount you paid will clear the debt. Before you send in the payment, you need to receive a letter in writing stating that the amount will be considered settlement in full. Your credit report will state that the debt was settled. While this is not as good as paid in full, it is better than having outstanding debts on your credit report. You can also negotiate a payment plan with consistent payments over a few months. Do not pay them electronically. You need to send in a check or money order each month.

Dealing with Identity Theft

Collection companies will often 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 paying. If the debt is attached to you, with your social security number, and you are sure you did not borrow the money, then you need to treat it as identity theft. You will file a police report, and mail a copy of the report to the collections agency. This should stop the debt collection agency from hassling you. Never give a debt collector your entire social security number, they may go in and change the number on the account. Instead have them give you the last four digits of the number attached to the account.

Dealing with the Collections Agency

There are laws established to keep the collections agency from hassling you. Once you have talked to them and explained your circumstances, you do not need to take their calls every day. They are not allowed to tell other people about the debt, though they may call looking for your contact information. If you have established the debt is not yours, they should stop contacting you completely. If they will not work out terms you can manage, then you can ask to speak to a supervisor. If you do owe the debt and do not make payments on it, they can take you to court and have a judgment taken out against you. This means they can garnish your wages until the debt is paid off. It is best to set up a monthly payment you can afford if you are not in a position to offer a lump sum payment to the agency.

Work to Prevent Future Accounts from Going to Collections

Once you have dealt with an account in collections, it is important that you take steps to prevent this from happening again. Start with a budget and work to pay down all of your debts as quickly as possible. If you stop using credit cards and stay current on your utilities and rent, you will likely never have to worry about this again. It is important that you take control of your finances so you do not need to worry about debt collectors again.