What to do if Your Account has Been Sent to Debt Collectors

Being notified that your account is in collection can be a stomach-churning moment. There’s not only the worry over how you’re going to pay the money back but also how it could affect your credit score long into the future.

To help you to understand the best steps to take in such a scenario, we’ve created a list of four points that should help you to get your house in order. While these won’t solve your debt problem, they should at least give you the confidence to tackle the problem head on.

Request a Statement

If you’re not 100% sure of the total that you owe, get in touch with the debt collector to request a statement. This document will outline your original debt and make clear any additional fees that have been added on as a charge for delayed payment.

Check They Have the Right Person

Debt collectors will search through directories to find a contact number or the address of the person that owes the debt. The problem is that they often don’t have any way of differentiating between people with the same name.

When you receive your debt statement through the post, check to make sure that your social security number is attached. If you still don’t recognize any of the charges listed, it could be a case of identity fraud. If you do find yourself in this scenario, file a police report as soon as possible. A copy of the report should then be sent to the collection agency to prevent them from hassling you any further.

Try to Negotiate a Payment Plan

Once you have received your statement and checked that the amount listed is correct, you need to decide upon how you’re going to settle the remaining balance. If you’re lucky enough to have the money lying around, we’d recommend paying it in full as soon as possible. Doing this will raise your credit score and will be listed on your report as a debt that has been paid in full. This change in your spending habits is likely to be seen in a positive light by lenders.

Many aren’t in a financial position where they can pay off any debt in one go, so a debt settlement plan may have to be reached. If you offer a large enough lump sum payment, the debt collector may be willing to reach a reduced settlement. While this will clear all of your debt, it will show on your credit report as a debt settlement rather than the debt being paid in full.

Know Your Rights

There are laws in place to stop collection agencies from being overly aggressive in their pursuit of collecting any money that is owed. They’re under no circumstances allowed to share details of your debt with any other parties or to threaten to seize your property/wages without an approved court order.

It’s also illegal for them to contact you in your workplace if you’ve specifically asked them, either verbally or in writing, not to.

Of course, if you do owe money and don’t make any effort to settle your debt, they’re well within their rights to issue you with a subpoena that will mean you will have to attend a court date.

Improve Your Credit Rating

After you’ve settled any outstanding debt, it’s important that you come up with a long-term plan to improve your credit rating.

There are a number of online services that provide practical advice, as well as blogs and websites that are aimed at educating its readership on such topics.