If you have ever had a debt sent to collections, it can be a frightening and disorienting experience. While it is never a good thing to have a collections agency calling, we have some suggestions to help.
Here's the thing: It is important to take collections agencies seriously. Why? If you do not pay a collections agency, they may take legal action against you. This could include filing a lawsuit, garnishing your wages, or putting a lien on your property. If you are unable to pay the debt, the collection agency may also report the debt to the credit bureaus, which could damage your credit.
Here’s what you need to know if you have a debt that has been turned over to collections in a helpful question and answer format.
Can a Collection Agency Take You to Court?
Yes, a collection agency can take you to court if you do not pay your debt. The collection agency can file a lawsuit against you, and if they win, the court may order you to pay the debt plus interest, fees, and court costs. The collection agency may also ask the court to garnish your wages or put a lien on your property or tax returns. Your bank accounts may also be frozen.
Your Rights and Debt Collection Agencies
If you are contacted by a collections agency, it is important to understand your rights. The Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from using abusive, unfair, or deceptive practices when collecting a debt. You have the right to request the collections agency stop contacting you, and they must comply with your request. However, this does not mean that you do not owe the debt; it just means the collections agency cannot contact you about it.
The Consumer Financial Protection Bureau (CFPB) is the government agency that protects consumers from unfair, deceptive, or abusive practices. If you are having problems with a collections agency, you can file a complaint with the CFPB.
What if You Cannot Pay Your Debt?
If you are unable to pay the debt, don’t despair. While your unpaid debt will be reported to credit bureaus and your credit score will be negatively affected, there are still several options available to you.
- You can try to negotiate a payment plan with the collections agency.
- You can request the debt be validated. If the debt is validated, you will be able to see how much you owe and to whom. This might reveal the debt you are on the hook for is inaccurate. If this is the case, you can dispute the debt.
- If you have multiple debts, find out if debt consolidation—along with an affordable monthly payment—is an option for you.
- Check and see if your debt is beyond the statute of limitations. It does not mean the debt is forgiven, but it will provide some relief from collections.
- You can file for bankruptcy. Debt collection agencies are not allowed to try and collect on debts in bankruptcy court.
How to Avoid Debt Collection
There are several things you can do to avoid having a debt sent to a debt collection agency. First, make sure you only borrow what you can afford to repay. Second, keep track of your payments and make them on time. Third, be proactive with debt. If you have a debt or debts you are struggling to pay, look into debt consolidation services. Fourth, know your rights and understand the debt collection process.
Debt Management Programs and Debt Settlement Companies
If you are struggling to pay your debts, a debt management program (DMP), or debt settlement company might be able to help. A debt management program is usually run by a non-profit company. The program will negotiate with your creditors on your behalf and provide credit counseling. Debt settlement companies are for-profit companies that provide services for a fee.
Here are some tips about using a debt management program or debt relief company:
- Research the company thoroughly and read reviews
- Make sure the company is accredited by the Better Business Bureau
- Understand any fees charged and be certain you can afford them
If you're considering a debt settlement company, make sure to do your research. There are many scams and unscrupulous companies out there. Make certain you choose a reputable company to help you get out of debt.
Having a debt sent to collections is never fun, but if you know your rights and understand your options, you can survive it, repair your credit, and get back to living a life free of debt collection agencies. If you have more questions, visit TDECU's website for more information.