How To Pay Off A Debt Collector

How To Pay Off A Debt Collector – If you’ve fallen on hard financial times and are struggling to pay your bills, it’s possible that one or more of your bills may end up in the hands of a debt collector. As of 2019, according to the Urban Institute, 68 million American adults had debt collections. In the third quarter of 2020, delinquent consumer debt in the US totaled $485 billion, according to Federal Reserve data.

Fortunately, if you’re dealing with a debt collector, you’re not helpless. As soon as your debt comes due, it is important that you do not ignore it. After all, you are still legally responsible for the debt. You can work to pay it off, either with one lump sum or by trying to negotiate a payment plan.

How To Pay Off A Debt Collector

But what if you don’t manage to reach an agreement with the amount of debts? You can seek help from a non-profit credit counseling service or, if legal action is necessary, from an attorney.

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No matter how you decide to attack debt collection, keep in mind that you can straighten out your finances. Eventually, you’ll see the collection account fall off your credit report and restore your credit scores. Here’s what you need to know to start the recovery process.

Once you know your debt is in your eyebrows, take a deep breath before doing anything else. There is no need to panic or make hasty decisions – many remedies are at your disposal. It’s time to take matters into your own hands.

You may be inclined to ignore the seemingly incessant calls and letters from debt collectors. However, ignoring the debt won’t erase it—it can actually make it worse. Therefore, your best bet is to recognize and deal with the debt. Doing so can put your mind at ease and help reduce the damage to your credit.

If your debt has been past due for only a few months, debt collection will most likely be handled by the creditor – for example, your credit card issuer or the bank where you got your car loan. You will want to deal with the creditor before transferring your debt to another company. If the creditor cannot collect money from you, they may sell your debt to a debt collection agency or other company. Once the creditor has transferred the debt, it can be sold repeatedly and transferred from one debt collection company to another.

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Consider asking the debt collector to stop contacting you. This can prevent the anxiety that comes with answering phone calls from debt collectors or opening the mailbox to find a threatening letter. In most situations, a debt collector must stop contacting you if you make this request in writing, except to acknowledge that they will stop contacting you or notify you that you are being taken to court.

But stopping collection-related calls and letters won’t make your debt go away. You can still report your debt in collections to the credit bureaus, and the debt collector can still file a lawsuit against you to collect his money.

When the debt is in collections, the main goal of the creditor or the debt collector is to receive all or part of the money owed to him. Therefore, you may try to negotiate a way to wipe out the debt, such as by making a one-time payment or committing to a long-term payment plan.

Be sure to find out how much you can afford to pay, either all at once or over time, before making a settlement offer. Then approach the debt collector with your idea. For example, you could offer to pay off two-thirds of the $4,000 you still owe on a credit card or pay off the remaining $2,000 with a personal loan over 24 months.

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Before you hand over a single penny, make sure you know who to pay. If the original creditor still owns the debt, you will send your money to them. If the original creditor transferred your debt to an outside company, you will pay that company.

If the debt collector has threatened to sue you, it may make sense to have an attorney handle your case if it goes to court. After you have hired a lawyer to represent you, you will not be contacted by the debt collector. Instead, all communication will be between your attorney and the debt collector.

So, let’s say debt collection didn’t sue you. In this case, you may want to seek help from a non-profit credit counseling service. The service can assign you a qualified credit counselor who will come up with a repayment plan along with a household budget to put you on a better financial path.

Being harassed by debt collectors can be annoying and scary, but there are steps you can take to gain control of the process. A federal law known as the Fair Debt Collection Practices Act governs how debt collectors treat you.

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Besides your ability to ask a debt collector to stop calling or emailing you, here are some of your other rights:

When we moved, the best ways to eliminate debt that has gone to collections is to negotiate a lump sum payment or set up a payment plan. Starting the debt settlement process is a big step towards parting with the debt collectors and ultimately the debt.

When considering a lump sum or payment plan, consider all of your debts. Make a list of what you owe on all your loans and credit cards, and note the interest rates and monthly payments for each debt. Then add up how much you owe each month on all these debts. By checking your credit report, you can see your debt balances in one place.

Once you’ve completed this list of debts, figure out all of your other expenses. This includes rent, groceries, utilities and gas. Some of these expenses vary from month to month, so you’ll want to come up with a monthly average for debt-free expenses based on that expense over the past few months.

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Then subtract your after-tax income from the combination of your monthly debt and non-debt expenses. If your total income is higher than your total expenses, you can put the difference to pay off the debt that is in collections. If the remaining amount is not less than what you owe, look for ways to cut expenses, earn extra income, or both.

Prioritizing debts that are in collections can help prevent further damage to your credit and can get rid of your debt collection headaches.

After you have paid or settled a debt that was in collection, you do not need to notify the three national credit bureaus – TransUnion and Equifax. The reason for this is that the debt collector is supposed to report the canceled debt to the bureaus, which will record it as “paid” or “settled”.

What if the debt collector doesn’t tell the credit bureaus that your debt has been paid or settled? File a dispute with the bureaus so your credit report can be updated.

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Collection accounts can lower your credit scores, but paying off or settling a debt in collections won’t necessarily improve your credit scores. Newer credit scoring models ignore collection accounts with a zero balance, but older credit scoring models take these accounts into account. This means that a debt that has been paid or settled may raise your credit scores under newer scoring models, but debts that have been paid or settled may not move your credit scores under older models.

Since you likely won’t know what credit scoring model or models your future lenders will use, it’s impossible to say for sure whether paying off a collection account will help you secure better credit terms.

A collection account remains on your credit report for seven years from the date the debt originally became delinquent. After the seven-year window closes, the collection account will automatically be removed from your credit report. Unfortunately, you will not be able to remove a paid or settled collection account from your credit report before the seven-year period ends.

If one of your debts ends up in the hands of debt collectors, don’t neglect it. Ignoring calls and letters about overdue debts only prolongs the issue. Debt will not simply disappear over time. However, you can take a simple approach to clearing the blame by first being honest about the situation and taking action. This action may include making a one-time payment or drawing up a payment plan to deal with the debt. By solving the problem, you’re taking care of yourself—and you’re taking care of your financial future.

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