Many people are really worried when an account goes in to collections, meaning a credit card company has decided to charge off your debt due to non-payment. Sure, now you have two big negative marks on your credit report, but I’m going to make a statement now that may seem counter-intuitive: once something gets to collections, you are pretty much home free!
Much of my reason for making this crazy statement comes from the fact that your protections under the law are dramatically increased when an account goes into collections. Let’s see how.
- It’s pretty hard for the collection agency to build up a good case against you in court if they decide to sue. Read more.
- If they are reporting on your credit report, it’s generally easy to get this off using the debt validation or so-called “623″ method of requesting an investigation from the information furnisher. These two methods are effective because collection agencies do not have documentation adequate enough to support them if you challenged them in court. When a credit card company sells off bad debts, they place them in million dollar packages of debt to be sold on the market to junk debt buyers. No documentation regarding the original debt goes along with this debt when a junk debt buyer purchases the paper.
- It’s very easy to get them to settle for 10-25% on the dollar and also remove the item from your credit report. Our readers do this all the time, it’s called pay for delete in the credit world.
- It’s easy to tell them to just “go away” via your rights in the Fair Debt Collection Practices Act (FDCPA). Under the FDCPA, you can send them a written note telling them you wish no further contact with them and they MUST comply or they are violating the law. This way you call essentially call off the dogs forever.
So while being in collections is not necessarily a good thing, there really is no need to panic. Remain calm and read the information on this site and you will be ok. As a parting tip: here’s another good article on ways of dealing with collection agencies.
Does anyone have any other good tips? Leave a comment!
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Stepha, thanks for the kind words. Unfortunately, the only remedy is to take them to court.
Credit card companies don”t “decide” to charge off the debt because of non-payment.
They have too charge it off, due to federal laws that are in place to protect consumers.
When is the best time to request a documentation & validation of a credit card debt? Is it by phone with the collection agency or better to get a letter from them first? Thank you.
Hello all, A year ago I was flying high, my investments were paying the rent, and I used my 6 credit cards until the rates doubled, then I lost my nest egg (Lehman Bros. + other unlucky stocks) Now I’ve got $50K in credit card debt and am starting to get the calls threatening to go to collections. I work for my Father’s small business, and have to move into that shop now to live since I have run out of cash. My income there barely pays my portion of the rent. I have no real assets other than a rusty Fiat and a camera. Should I file Bankruptcy or just let it go to collections/judgement? I cannot make the minimum payments anymore. Feeling very worried and stupid right now. Thanks to anyone that can offer advice….