What To Do If An Account Is Sent To Collections
If you do not pay one of your bills on time, the
creditor has the option of either writing off your account as a
bad debt and sending it to collection. Creditors aren't required
to wait a certain period of time before turning an account over
to collections, but most wait until an account is three to four
months past due and they believe they can't collect it before they
send it to a collection agency.
Once an account is sent for collection, you'll have
to deal with the collection agency - not the original creditor.
While collection agencies may be very persistent in their efforts
to get you to pay the outstanding account, they are required to
follow federal, and sometimes state laws, that prevent them from
harrassing you and engaging in deceptive collection practices.
A collection agency, cannot:
- Call you repeatedly for the purpose of harrassing
you,
- Call before 8 a.m. or after 9 p.m.
- Call you at work if your employer prohibits
it,
- Use abusive or obscene language
- Publish your name in a list of "deadbeats."
- Here are some tips for dealing with a collection
agency:
Pay the outstanding debt soon as possible.
If you are in an extremely poor financial situation, explain your
situation and tell the collector that you simply cannot pay the
bill now. If, however, you can pay some or all of the bill, you
should. An unpaid collection account listed on your credit report
is considered very serious. The sooner you can pay it off, the better,
as far as your credit record is concerned.
Some creditors will negotiate -
offering to take less than the total amount due in exchange for
quick payment. For example, one collector might offer to settle
a $2000 debt for $1500 if you can pay within a week. Understand
that the IRS considers "forgiveness of a debt" a taxable
activity and treats the amount forgiven as income for tax purposes.
Keep good records. Keep copies
of all correspondence, and make copies of any letters you send to
the collection agency. Also keep a written record of whom you spoke
with, when and what was agreed. If there are discrepancies later,
these records may prove to be very helpful.
Don't make promises you can't keep
- and keep the ones you make. Don't allow yourself to feel pressured
into making a payment you can't afford. Neither you or the collection
agency wins if you agree to payments but don't keep up with them.
If you need time to think about an offer from an agency, ask for
it. Once you do agree to a payment schedule, stick to it.
Avoiding collections: Since collection
accounts are considered very negative and will hurt your credit
for years to come, your best strategy is to try to avoid them altogether.
If you find yourself unable to pay a bill, call the creditor immediately
to see if you can negotiate a reduced payment schedule. Another
option is to work with a nonprofit counseling agency which will
negotiate with your creditors for you . Take the initiative to ask
for help, even if you don't feel like dealing with the problem.
If you don't keep the lines of communication open with your creditors,
you may hear from a collection agency instead!
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