How to Deal With Debt Collection

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How to Deal with Debt Collection
Collections of debt can be overwhelming. This is why they happen and how it impacts your credit, and the best way to take care of it.
by Sean Pyles Senior Writer | Personal financial, debt Sean Pyles leads podcasting at NerdWallet as the producer and host of NerdWallet's "Smart Money" podcast. The show "Smart Money," Sean talks with Nerds from the NerdWallet Content team to answer the questions of listeners about their personal finances. With a focus on thoughtful and practical money tips, Sean provides real-world guidance to help people improve the financial situation of their lives. Beyond answering listeners' money questions on "Smart Money" Sean also interviews guests who are not part of NerdWallet and produces special segments on topics like the racial inequality gap, how to start investing, and the history for student loans.
Before Sean took over podcasting at NerdWallet, he covered topics that dealt with consumer debt. His writing has been featured throughout the media including USA Today, The New York Times and other publications. When Sean isn't writing about personal finance, Sean can be found working in his garden, going for walks, or taking his dog for long walks. Sean is located within Ocean Shores, Washington.




And Tiffany Curtis Lead Writer | Health and wellness Tiffany Lashai Curtis is a head writer for the core personal finance team at NerdWallet. The writer was previously the health editor for Livestrong.com as well as a freelance journalist for magazines like Refinery29, Business Insider and MTV News, where she focused on the issues that affect communities with marginalized populations. Being a facilitator of wellness, she's led health-related discussions for groups like Planned Parenthood and Harvard University. She is based in Philadelphia.





Nov 22, 2022


Editor: Kathy Hinson Lead Assigning Editor Personal financial, credit scoring, managing money and debt Kathy Hinson leads the core personal finance team at NerdWallet. Previously, she spent 18 years at The Oregonian in Portland in capacities such as chief of the copy desk and team editor and designer. Prior experience includes copy and news editing for a variety of Southern California newspapers, including the Los Angeles Times. She graduated with a bachelor's in mass communications and journalism at Iowa's University of Iowa.







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Nerdy takeaways
Collectors of debt can contact you via phone, mail, email or via text. You have a right to ask for debt verification and validation letters. The Fair Debt Collection Practices Act outlines what debt collectors can and should not do. You can set up an installment plan, pay your debt, or pay it completely. Low-cost or free legal aid may be able to help you in the event of an order from the court.




If you're facing phone calls from debt collection agencies , make sure you are aware of how debt collection works and what the best way to deal with your account, and the implications for your credit before you make any payments.
It is crucial to take care of the collection of debt. If you don't do it, you could end being in the court.
If you're battling the IRS concerning a, you should be sure to take the necessary steps to not let it become an .
What is debt collection?
The process of debt collection occurs when a is not paid for a certain period of time. The late payment could start 30 days following the date of due. You'll be receiving notices or calls from the creditor requesting payment.
In the end, typically after 120 to 180 days of not paying the creditor for example, a bank, credit card company or medical provider -- gives up on trying to collect. The creditor who originally owed the debt may sell the debt to a collection agency to recover the losses.
After that, you'll begin receiving notices of debt collection from a different company. Collection agents may call or send mail notifications, emails or text messages. The same debt is still owed, and you're still owed payment but the third party has purchased the right to take the money.
Are you ready to get rid of your debt?
Track your balances and spending all in one place to track the way to get out of the debt.






How do you deal with debt collection
Avoid making any unwise decisions when confronted with a problem; you could end up making the problem worse. Follow these steps:
Get the facts
You are entitled to be notified; make use of it. You'll get a validation notice from the collector in five business days after first contact. Examine it for specifics about the age, amount and the history of the debt as well as information on who's trying to collect. Review your own documents -- including your -- to verify the details of the account. If you require additional details, you can request a debt verification letter.
Know your rights
Learn about your rights as a consumer in order to know what collection agencies aren't allowed do, like calling you at unreasonable times, threatening you with arrest or using obscenities. Some states have even more protections for consumers. Find your state's laws online , or contact your attorney general's office to find out more.
Make sure you know your choices
The two most popular ways to handle a debt in collections are choosing a payoff method or disputing the debt as it is not correct:
There are several options for a accounts for collections. Whichever one you select, don't grant the collector access to your bank account through providing your debit card's numbers or setting up automatic debits. If you make an agreement for a payment plan or to settle the debt for less than owed, get the agreement in writing so you can hold the collector accountable.
You may if it's not yours or you've already paid off the debt. The company must cease collection efforts and conduct an investigation. At this point it cannot record the debt on your credit report. If it is able to determine that the debt is valid, the creditor will mail you documents verifying the bill. If not, the collector will stop attempting to collect the debt.

How debt collection affects your credit
In general, debt collection will remain on your from when the account initially became indebted. There are some exceptions, such as medical bills that go into collections and are later paid by insurance companies; those drop off your credit reports once paid.
Some of the newer scoring models, such as VantageScore 3.0 and -- do not consider collections that have been paid. But FICO 8 credit scores, the ones most widely used in lending decisions, will consider even if the original debt was greater than $100.
Like other marks of negative impact such as collections appearing on your credit report will hurt your credit, but the impact will diminish over time. There are a few methods to attempt to get the debt removed from your credit report, including:
Rejecting the account if an error has been made.
Requesting a payment debt if you've already settled the amount.

How do you handle a court order for debt collection
They are a popular and effective method used by collection agencies to obtain payment. Here's how to handle a court summons for debt collection:
Never ignore a court order about outstanding debt
These lawsuits can lead to the bank levy, a lien on your property.
Look for errors
Be sure you are able to prove that your debt collector has evidence that the debt is actually owed to you and that the amount is correct and that the debt isn't due to expire. Each state has a period after which you may not legally sue for payment, but you can still be reached.
Get legal help
Employ an attorney who is specialized in debt collection defense. If you can't afford legal fees, search for free or low-cost legal aid programs near you via the or .



The authors' bios: Sean Pyles is the executive producer and host of NerdWallet's Smart Money podcast. His writing has been featured on The New York Times, USA Today and elsewhere.


Tiffany Lashai Curtis is a senior writer for the team for personal finance. She has over 5 years of experience in reporting on issues that affect marginalized communities.







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