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….
is student loan debt the same? my wife owes money to ConServe and they said they do not collect debt they manage it.
Student loan debt is a different animal – there is no statute of limitations.
I have a question about the settle for delete. I have a credit card that recently defaulted for $6000 which a debt collector is trying to collect. If I use the pay for delete method and offer to pay 25% ($1500) for a deletion, might it work for me?
This is probably the maximum you should offer; read this article for more information on the pay for delete method:
http://www.creditinfocenter.com/debt/pay-for-delete.shtml
I am living out this exact scenario at this very moment. I was contacted by an “attorney’s office” collecting the debt for the creditor. The attorney’s representative even mentioned the nearest courthouse in my area and said the pending lawsuit was on its way there. In my gut I felt like this was a scare tactic of sort. She also mentioned that if the court ruled for them that they could put a lein on my property (not my house). This is an unsecured loan-debt, can they do this?
I inquired with the BBB as to the validity of this “law firm” and was informed that they are not accredited with them. In addition the “law firm” had a rating of D+ on a scale from A+ to F according to the BBB. The BBB has also tried to contact the attorneys office to get updated information on them and they have not responded. There have been 42 complaints filed against this Collections attorneys office in the past 36 months. My question is can I still mail the documention validation request to this attorneys office as I would for “debt collectors?”
If not, what is the worst that could happen if I just ignore their letters and phone calls and were taken to court?
Out of all debt that I owe, this was the only creditor that refused to work with me and bring my payments down to something more affordable. I would also like to add that I have been sending minimal payments towards this account to show good faith. Will that make a difference to a judge?
I have a credit card that I can’t make payments on any more, I can’t afford it due to loss of work, it hasn’t gone to collections yet. They brought it down to 50% lower than original amount due. I still can’t afford it. They also told me even if I pay that amount I will have to fill out a 1099 C form for taxes, that I would be taxed for the remainder princable amount, and also can’t afford that.
So I’m wondering if its better for me to wait till it goes into collection, or will I be worse off doing that. This is stressing me out and don’t know what to do and never been in this situation before, can any one please help?
If an account has been sold to a collection agency, who do I ask for a 623 dispute–the credit card company or the collection agency that now owns it? Another question: The credit card was originally a Bank One account which was purchased by Chase and I continued to use it. Chase charged it off when I quit paying and sold it to a CA. Who gets the 623 dispute?
I am getting letters from Target National Bank’s collection dept. They are saying to please call to avoid being referred to an attorney. Is the attorney going to take over the collections. At this, point do i send a letter to them.
I sent a pay to delete letter to one of my collection agencies. I received a response back indicating that they would not remove it from my credit. What is my next step with them? I haven’t done a validation letter; I’ve also searched to see if they are licensed in my state (FL) and they weren’t. Does that mean anything?
My spouse has a liver disease and numerous hospitalizations in a three state region have put us into terrible debt. I have 3 cards in just my name that I can’t pay on. I tried to get into a program to reduce the debts on the cards but could not get started because I didn’t have the money to pay them for the program. I have explained our situation to all 3, and that as soon as our home and land sell I will pay them off, but we’re still getting continuous calls which interfere with my spouse’s care, that I am providing because we can’t afford to hire a nurse . Any suggestions? We’re retired and don’t have any savings left.
I would read this article:
http://www.creditinfocenter.com/bankruptcy/dont-qualify-for-bankruptcy.shtml
It might give you some ideas.
Kristy,
Please help!! My husband was out of work then I was put on bed rest til I had my baby last year so we were on one income all year!! All my CC’s got outta hand. I stopped paying them August of last year. I have 3 of them and they were charged off jan of this year. One of them is tryin to sue me now.
I also signed up with Freedom Fedelity Managent(a debit program) they scammed me outta $3,000…yeah big mistake but a year has gone bya nd I’m trying to get my credit cleaned up.
I want to try your disputing methods. When should I strart sending the letters?? DO I need to send one to each of the 3 credit place? Please help me!!! Thanks for your time.
Chass
Chass, you need to read this article to get started:
http://www.creditinfocenter.com/repair/
Hi I had a GE Care Credit Card in 06 and in 08 they raised my intrest rate to 39%.I kept asking for help to get it lowered well they did’nt so I stop paying.So now i’m dealing with this debt collector that’s trying to sue me they sent me 1.Settlement Offer then I sent them a Cease and Desist letter then they sent me a Notice of Commencement of Suit then I sent them a Valdation letterthen they sent me a Affidavit of Corrections and they came to my house twice and gave my husband a Notice of Pending Action Service of Process letter.Now I just got a Default Request,affidavit Entry & Judgement what do I do because I never been served.
Kristy,
My credit card was charged off for $1,oo0 3 years ago and is now with collections. What steps should I take to clearing this debt and possibly lowering the amount and make multiple payments on it. Unfortunately, I do not make much money but i would like to clear this debt off and take it out of my credit report.
I would do a debt validation or settlement. Here is a place to start:
http://www.creditinfocenter.com/repair/five-collection-methods.shtml