How to Deal With Debt Collections Issues
Things to Know When Dealing with Debt Collection Issues
- General Debt Collection Information
- Debt Collection Rules and Laws
- Debt Collection Timeframes
- Debt Collection and Credit
- Specific Debt Collection Scenarios
The idea of debt collection is terrifying to most people. However, even if you always pay your bills on time, you can still find yourself facing debt collection attempts. That’s because mistakes happen. Your creditor might report debts as unpaid even if you’ve been paying them.
No matter why you’re dealing with a debt collection agency, there are important things you should know. This article will cover all the basic facts you need to deal with debt collections issues. We’ll go over the basics about debt collection and cover the Fair Debt Collection Practices Act. We’ll also help you understand how debt collections can affect your credit. Finally, we’ve included an FAQ that will answer all the questions you have about debt collections.
Use this information to help yourself deal with debt collection issues that you or someone you care about might be having. Don’t let yourself be bullied by debt collection attempts, and always make sure that any debt someone tries to collect is money you actually owe.
The Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act regulates legal debt collection tactics. The law is designed to protect consumers from abusive debt collection attempts.
The Fair Debt Collection Practices Act covers the following types of debt:
- Credit card debt
- Auto loan debt
- Medical debt
- Student loan debt
- Mortgage debt
- Household debt
The act does not cover business debts. Those are regulated by a different set of laws.
The law also gives you the right to demand a detailed accounting of the debt that a collector says you owe. You can request validation of the debt. They’ll have to provide a record of your payments and lack of payments on the debt they’re attempting to collect. They’ll also have to show that they are legally allowed to attempt to collect the debt.
Statute of Limitations on Debt Collection
Many people think that there is a federal law that regulates how long debt collection agencies can attempt to collect debts. However, that’s not the case. Each state has a different set of rules and regulations that govern how long a debt can be collected. Moreover, different states will have different limits for different kinds of debts. Therefore, it’s important to make sure you understand the statute of limitations on debts in your state before you make any payments to a collection agency.
Illegal Debt Collection Tactics
There are lots of limitations on what debt collection companies can do when attempting to collect a debt. These limitations are designed to protect consumers from aggressive and abusive debt collection practices.
Debt collectors cannot:
- Contact you at inconvenient times or places
- Contact you before 8 AM without permission from you
- Contact you after 9 PM without permission from you
- Contact you at work if you’re not allowed to get calls there
- Contact you for most circumstances once you’ve asked them in writing to stop
- Talk to people other than your spouse or lawyer about your debt
- Threaten you with violence
- Use profane language
- Repeatedly call you
- Lie about how much you owe
- Lie about being a lawyer or government representative
- Claim you’ll be arrested for face illegal action if it’s not true
- Collect interest or other fees in addition to what you owe unless the original contract allows it
There is some ambiguity when it comes to what constitutes abusive debt collection actions. If you think you’re being harassed by a debt collector or that a debt collector is engaging in illegal tactics, then you should contact a lawyer. A qualified attorney can help you understand your options for dealing with a debt collector.
Debt Collections and Credit Reports
A debt collection can have negative impacts on your credit report. However, the extent that it affects your credit can be different. For example, the FICO 8 scoring system doesn’t take collections for less than $100 into account when determining your credit score.
The impact that a collection effort will have on your report depends on several different factors. The initial charge-off report is going to have a serious negative impact on your score. The greater your credit score is, the more points you’ll lose from a charge off.
The charge off will stay on your credit report for 7 years. However, it has less of an impact over time. That means paying the rest of your bills on time will allow you to rebuild your credit score even if the charge off is still on your report.
Understanding Debt Collections
Debt collection usually refers to companies that specialize in collecting bad debt. They buy debt from an original creditor after the original creditor has decided to stop attempting to collect on the debt. This is called a charge off. We’ll take a closer look at charge offs and debt collection companies next.
A charge off occurs when a company decides to stop attempting to collect a past-due debt. There’s no rules or regulations that govern how long a company has to wait before they charge off bad debt. However, most companies will wait at least 180 days from the first missed payment.
Companies wait to charge off debt because they’d rather have the money. They hope that the person will resume payments and attempt to get their account current. A company loses money when they charge off your debt.
One of the most common things for a company to do with a debt that’s been charged off is sell it to a debt collection agency. The collection agency pays a fraction of what the debt is worth. That allows the original creditor to get some money for the bad debt. The debt collection company then owns that debt. They have the right to attempt to get you to pay the debt.
Debt Collection Companies
A debt collection company is a business that specializes in buying bad debt from lenders and creditors. Then they attempt to get the borrower to pay back the debt they owe. The company makes a profit because they pay much less than the face value of the debt.
These companies are very common. They’re governed by a strict set of rules and regulations. These laws dictate what debt collection companies can and cannot do when they attempt to collect a debt. The most important law that regulates debt collection companies is the Fair Debt Collection Practices Act.
General Debt Collection Questions
This section covers all of the basic questions you might have about debt collection and debt collection companies.
How do I Pay Off Debt in Collections?
Every debt collection company has their own methods of accepting payment. You’ll need to talk to the company that owns your debt to get more specific information about how you can pay the debt off.
How do I Know if I Owe Money to a Collection Agency?
Usually a collection agency will contact you to let you know they own a debt you owe. However, you should make sure to ask for verification that the debt is legitimate if it’s not something you recognize. You should also ask them to validate that they have the right to collect on the debt.
What does a Debt Collection Agency do?
A debt collection agency purchases bad debt from creditors and then attempts to collect on that debt. They will find people who owe money and attempt to make them pay the debt that the collection agency now owns.
How Much do Collection Agencies Pay for Debt?
Every creditor and collection agency transaction is different. It depends on how much the collection agency is willing to pay and how much the creditor is willing to sell the debt for. There’s no single answer here.
Can I Pay Original Creditor Instead of Collection Agency?
No, once the debt has been sold to a collection agency the original creditor no longer has the legal rights to the debt. The collection agency is the only legal holder of the debt at that point.
What is Skip Tracing in Debt Collection?
Skip tracing is a series of practices that attempt to find someone who owes a debt. It includes finding people that have moved and people that are intentionally changing their information in order to avoid debt collection efforts.
Should I Ignore a Debt Collection Letter?
No, you should not ignore a debt collection letter. If you don’t think you owe the debt the company claims then you should request validation. If you have more questions then you should contact an attorney.
What Happens When Credit Card Debt is Not Paid?
If credit card debt is not paid for a long time the credit card company will usually sell it to a debt collection agency. That agency will attempt to get you to pay the debt. Read more: How to pay off credit card debt.
What is a Court Summons for Debt Collections?
A court summons for debt collection means that you’re being sued by a debt collector. The collector will attempt to prove in court that you owe the debt and that they have the legal right to collect on it. You need to contact an attorney immediately.
What is a Debt Collection Lawsuit?
A debt collection lawsuit is when a debt collection agency attempts to seek court permission to recoup your debt through various means. These could include garnishing your paycheck or federal tax return. You should contact an attorney right away if you’re facing a debt collection lawsuit.
Can I Negotiate with a Debt Collection Agency?
Yes. Not only can you negotiate with a debt collection agency, but you should. The collection agency paid much less than the face value of your debt for the right to collect on it. That means they’re likely to take a settlement for less than the debt is worth because they can still profit.
Debt Collection Rules and Laws
This section goes over the different rules and laws that regulate the practice of debt collection. It will help you understand your rights when dealing with a debt collection agency.
What is the Fair Debt Collection Practices Act?
The Fair Debt Collection Practices Act is a federal law that regulates what debt collectors can and cannot do when they are attempting to collect on a debt. It is the foundation for debt collection regulations.
What is the Purpose of the Fair Debt Collection Act?
The purpose of the Fair Debt Collection Act is to prevent consumers from being abused or harassed by debt collectors. It provides them certain rights and protections to prevent abusive debt collection practices.
Does a Collection Agency have to Validate a Debt?
Yes, a debt collection agency must validate a debt. The Fair Debt Collection Practices Act lays out the rules for this. Otherwise any company could say you owe them money and wouldn’t have to prove it.
Can a Debt Collector Show Up at Your Job?
No, a debt collector cannot come to your workplace to collect a debt. That is considered an intimidating and abusive debt collection practice and is outlawed by the Fair Debt Collection Practices Act.
Can You go to Jail for Unpaid Credit Card Debt?
No, you cannot be sent to jail for unpaid civil debts. These include things like credit card debts, hospital bills and loans. You can be sent to jail for failing to pay taxes and some states allow you to be sent to jail for failing to pay child support.
Can a Debt Collection Agency Sue Me?
Yes, a debt collection agency can sue you to force you to repay the debt. This is also known as seeking a judgement against you. If the debt collection company wins, then the court will give them permission to use certain means to collect a debt.
What Happens After a Judgement is Entered Against You?
Several things happen after there’s a judgement against you. First, it will go on your credit report and stay there for 7 years. Second, the debt collection agency will have access to enhanced collection means. You’ll need to talk to your lawyer about your specific judgement for more information.
Debt Collection Timeframes
Many people have questions about a collection agency’s ability to collect on old debts. This section goes over the different timelines and answers questions that relate to how long a collection agency can legally collect on a debt.
Can a Collection Agency Re-age Debt?
Yes, a debt collection agency can contact people about time-barred debt. If you make a payment or even say that you intend to make a payment, then the company will argue that the statute of limitations on collecting the debt has been re-aged.
What is the Statute of Limitations to Collect a Debt?
Every state has different limitations on when a debt becomes time-barred. Moreover, different states have different limitations on different kinds of debt. You should look up the regulations for your state and the type of debt you’re concerned with.
Can a Debt be too Old to Collect?
Yes, this is called time-barred debt. It means a collection company cannot sue to force you to repay the debt. However, they can still contact you about the debt unless you explicitly tell them not to.
Is a Debt Written Off After 6 Years?
There is no one rule about when debt is written off. Every company will charge off debt according to their own policies. Also, every state has a different system of rules about how long it takes before a debt becomes time-barred.
When is a Debt No Longer Collectible?
That depends on several factors. Certain medical situations can mean a debt can no longer be collected. Also, every state has its own set of limitations on how long a company can pursue a debt. Each state can also set different limitations for different types of debt.
How Long Can a Debt Collector Pursue an Old Debt?
There’s no limit on how long a debt collector can pursue an old debt. However, there are state limits on how long they can successfully sue to force you to repay the debt. You’ll need more information about the debt and your state to get an answer on how long that is for you.
How Long Can a Collection Agency Attempt to Collect a Debt?
A collection agency doesn’t have any limits on how long they can attempt to collect a debt. Instead, there are limits on how long an agency can successfully sue you in court to force you to pay the debt. If the debt is time-barred, then you need to tell the collection agency in writing to stop contacting you.
How Long Can a Medical Debt be Collected?
That depends on lots of different factors. You’ll need to look up the time-barred limitations on medical debt for the state that the debt originates in or is currently held in.
How Long Before a Debt is Statute Barred?
That depends on what type of debt it is and what state’s laws govern that debt. Each state has different rules about different types of debts. You may need to contact an attorney for a detailed answer.
How Long Can a Debt Collector Legally Pursue Old Debt in California?
California has one of the most consumer-friendly debt collection laws in the country. You cannot attempt to collect a debt after four years. If the debt was the result of an oral contract then you cannot attempt to collect it after two years.
How Long Can a Debt Collector Legally Pursue Old Debt in Florida?
Debt collectors can successfully sue to have a debt paid in Florida for 5 years for written agreements. For oral agreements the limitation is 4 years.
How Long Can You Legally be Chased for a Debt?
A collection agency can try to get you to pay a debt until the end of time. They cannot win a lawsuit to force you to pay after the debt is time barred. That happens at different points for different types of debts in different states.
How Long Can You be Chased for a Debt?
A collection company can try to get you to pay a debt until you ask them to stop talking to you. They cannot sue and win after a debt has been time-barred. That point in time depends on what the debt is and the state that has jurisdiction over it.
Can a Debt Collector Sue me After 7 years?
It depends. You should contact a lawyer for more information about your specific situation. The state that has jurisdiction and the type of debt all influence how long a collector can sue you and win for.
Is Credit Card Debt Forgiven After 7 years?
The debt itself will not be forgiven. Instead, it will become time-barred in most states. That means a company cannot sue and win to force you to pay the debt. You’ll need to check on the regulations in your state to see what the time limitation on credit card debt is.
Can a Debt Collector Collect After 10 years?
The debt collector can attempt to collect forever. However, they can’t win in court after the debt is time barred. You’ll need to find out what state has jurisdiction over the debt and what their statute of limitations is on the type of debt the agency is attempting to collect.
How Long does IRS have to Collect Tax Debt?
The IRS has 10 years to attempt to collect your taxes from the date those taxes were assessed. There are some exceptions to this rule however. Moreover, tax debt is a matter of federal law. Therefore, you may want to contact an attorney to get more information about your particular situation. Check out the tax debt help article for my information.
Debt Collection and Credit
Debt collection efforts can have large credit score implications. This section will answer your questions about how different collection scenarios will affect your credit score.
Can Paying Off Collections Raise Your Credit Score?
Paying off your collection won’t raise your credit score. However, it could help convince a lender that you are more trustworthy than your credit score would indicate. The good news is that once you pay the collections off, the collection account won’t stay on your credit report.
How Long Does a Paid Collection Stay on Your Credit Report?
A paid collection account doesn’t stay on your credit report. However, the charge-off that lead to collections efforts will stay on your report for 7 years. It will have less impact on your score the farther you get from the date of the first delinquency.
How Long Does It Take for Debt to Fall Off Your Credit Report?
7 years. The Fair Credit Reporting Act says that almost any negative information on your credit report must be removed 7 years from the first date of delinquency.
Can Old Debt Reappear on Credit Report?
It does happen, but it isn’t supposed to be there. If old debt reappears on your credit report then you’ll want to open a dispute with the credit reporting agency that has the debt on their report.
How do I get a Charge Off Removed from My Credit Report?
There’s no surefire way to get a charge off removed from your credit report unless you wait 7 years from the date of the first delinquency. However, credit repair companies might be able to help you. You’ll need to talk to those experts to find out what your options are.
Is it True that After 7 years Your Credit is Clear?
Your credit may or may not be clear in 7 years. However, the Fair Credit Reporting Act says that almost every kind of negative item on your credit report must be removed after 7 years starting from the date of the first missed payment.
Does a Charge Off Go Away After 7 Years?
Yes, a charge off will fall off your credit report 7 years from the date of the first missed payment. That may be different from when the company actually charged off the debt.
Does Paying Debt Collections Affect Credit Score?
Paying a debt collection doesn’t really affect your actual credit score. However, it can influence whether or not a lender will approve you, as they’ll see the account was paid in full.
How Long does a CCJ Last if Not Paid?
A CCJ will remain on record for six years. If you pay it, then it will be removed from your report within a month.
Specific Debt Collection Questions
There are also some specific scenarios regarding debt collection that people find themselves in. These scenarios don’t fit neatly into our other categories, so we’ve listed them here.
How Long before a Debt is Written Off?
Every company has a different policy on how long they’ll wait before they write off an unpaid debt as bad debt. It depends on lots of complex accounting factors within the company itself.
Can a Disputed Debt be Sent to Collections?
A company can send a disputed debt to collections. However, the debt collection company will not be able to legally collect on it until they can validate the debt. If you win your dispute, then the company cannot validate the debt.
Can You Join the Army with Debt in Collections?
It depends on several factors. However, the army can deny your enlistment if you have outstanding debts in collections. You’ll need to talk to your recruitment office for more information.
Can a Charged Off Debt Still be Collected?
Yes. A charge off just means the original creditor has given up collecting the debt. They can still sell the debt to a collection agency and that agency can attempt to collect on the debt.
What Happens when Your Debt goes to Collections?
When your debt goes to collections a collections agency will contact you and attempt to get you to pay the debt. They’ll need to validate the debt and prove that they have the right to collect it.
Can a Collection Agency Charge Interest on a Debt?
Not in most cases. However, if your original contract contained certain provisions then your collections debt may still accrue interest. You’ll need to talk to a lawyer to find out more information about your specific debt.
Elizabeth is an expert on Debt Consolidation as she provides helpful advice to people who are dealing with debt problems. She graduated college with a BS in Finance. After college, she took a job working at a non-profit debt counseling program. It was at this position where Elizabeth honed her expertise for helping people understand how different financial products work and finding ways to help people pay off their debts.