No one wants to receive the dreaded call from a debt collector. But if you’ve fallen behind on paying your credit cards, loans or bills, your account may be sent to collections.
Dealing with these debt collection companies can be stressful and embarrassing, but it’s more common than you think. In the fourth quarter of 2024, the U.S. hit $18.04 trillion in household debt, and the average delinquency rates went up 0.1 percentage point from the previous quarter to 3.6 percent.
Paying off your outstanding debts is important, but you want to do it the right way. A misstep here and there can result in you paying more debt than you owe, reopening zombie debt or exposing yourself to a scam. Here’s how to pay off collections strategically and confidently in nine steps.
Important tip
As you move through this process, document everything. Keep copies of letters, emails, payment receipts and any agreements you make with the collector. Also note the dates of phone calls and what was said in the call. If you live in a one-party state, you could consider recording your phone conversations.
1. Confirm the debt is yours
Before taking any action to pay off a debt in collections, verify the debt belongs to you. Gather all relevant information about the debt, including the amount owed, the original creditor and any other account facts.
If, after reviewing this information, you find that the debt is not yours, take steps to protect your credit and finances in case your identity has been stolen. You can dispute errors directly with the credit bureaus. If the debt doesn’t appear on your credit reports, you might have been targeted by a debt collection scam.
2. Know your debt collection rights
Educate yourself about your rights under the Fair Debt Collection Practices Act (FDCPA). This federal law regulates how creditors and debt collectors can interact with you regarding debt collection.
For example, a collector is not allowed to:
- Call you between 9 p.m. and 8 a.m.
- Contact you at your workplace if you’ve requested they refrain from doing so.
- Contact you via email, text message or social media if you’ve requested they stop.
- Call you more than seven times in a single week.
- Call you within seven days of last speaking to you about the debt.
- Disclose your debt to anyone else, such as a coworker.
Debt collectors are also strictly prohibited from harassing, threatening or verbally abusing you.
If a debt collector breaches these regulations, you can contact your state’s attorney general’s office to find out your rights under state law. They can help you identify if you are protected under state-level collection regulations and laws like the California Consumer Financial Protection Law (CCFPL) and the Debt Collection Licensing Act (DCLA).
3. Check the statute of limitations
Each state has a statute of limitations determining the legal time limit within which creditors or debt collectors can sue you for an unpaid debt. Statutes for different types of debt range from as little as two years up to 10 years or more. Once the statute is up, you can’t be sued for the unpaid debt.
However, it’s important to know that you can reset the statute clock on old debt if you:
- Agree to pay
- Get a bankruptcy discharge revoked
- Make a new charge on the account
- Make a payment
Understanding how these statutes work is essential as it impacts your legal obligations and rights regarding the debt. Research the statute of limitations in your state to know your rights.
4. Determine collectability
Not all debts are collectible. For instance, unpaid medical debt has to be more than six months old before it can be sent to collections, and it can’t appear on your credit reports if it’s under $500 or under a year old. Soon, medical debt will be completely barred from appearing on credit reports.
Zombie debt is another issue. This debt is often past the statutes of limitations and may be too old to legally appear on your credit reports. You need to be especially careful to avoid resetting the clock on zombie debts.
In addition to verifying the debt is collectible, you should contact the collection company and request a debt validation letter to ensure it has a legal right to collect on your debt.
5. Determine how much you can pay
You may have more debt than you can pay off in a reasonable time frame. In that case, you may be able to negotiate with your creditors on how much and when you pay. But first, you have to calculate how much money you can afford to commit to paying down your debts.
Start by reviewing your budget and seeing how much cash you can free up. Determine how much money you could contribute to a lump sum payment or monthly installment. Be realistic and don’t put yourself in a position where you need to take on more debt to pay off your existing debt.
6. Negotiate a settlement with the collector
Once you’re informed and have an idea of how much you can realistically pay, it’s time to contact the collector. Be prepared to discuss your financial situation honestly and weigh different repayment plans. Effective negotiation can often lead to a reduced amount or favorable payment terms, especially if you pay a lump sum up front.
If it’s a medical debt, you may be able to negotiate interest-free payments with the provider directly. Contact the billing office and ask if there are any programs you qualify for to eliminate or reduce the balance. Inquire about your repayment options. If you’re not getting anywhere, ask to speak to a manager.
Pay-for-delete agreements
As a part of negotiating a payment plan, during your repayment period or after the collection has been settled, you may be able to request pay-for-delete agreement. This means the collection agency will remove the collection account from your credit report once repayment is complete.
Get any pay-for-delete agreements in writing, and follow up with the creditor or collector to ensure the deletion request is processed. Be aware that changes to your credit reports can take 30 days or more to appear.
Very few creditors will not do a pay-for-delete agreement, but you can still ask.
7. Set up a repayment plan
Once you’ve successfully negotiated, formalize the agreement by establishing a written payment plan with the collector. Be sure to outline the payment schedule, the amount due and any other important details. A clear plan reduces misunderstandings and ensures both parties follow the agreement accurately.
8. Make your payment(s) as agreed
Once you’ve agreed on a payment plan with the debt collector, send your payment(s) promptly. This shows your commitment to resolving the debt and helps avoid further collection actions.
For payment security, consider mailing a check via USPS with a paper return receipt for $4.10 or an email receipt for $2.62. A return receipt provides proof of delivery with the recipient’s signature — essential if there’s a dispute over receipt of payment. Alternatively, you can request a “Certificate of Mailing” to show the date you mailed your payment.
How to pay off a debt in collections online
When you want to make online payments to resolve a collection account, the first step is to contact the credit collection service or agency handling your debt. They will give you specific instructions on how to proceed with an online payment.
Most legitimate collection agencies have websites or secure portals where you can log in to make payments electronically. You may need to create an online account on the agency’s website or use a designated payment link.
Always verify the legitimacy of the website or portal before entering sensitive financial information. And keep records of all payment receipts or confirmations.
The bottom line
Debt that winds up in collections can cause you stress and financial strain and even lead to legal action. Making a strategic plan for tackling this debt can help you avoid unnecessary pitfalls and costly mistakes.
From verifying the debt and checking your state laws to negotiating a payment plan and sticking to it, you can ensure your debt in collections gets paid off — and your future finances and credit remain safeguarded.
Frequently asked questions
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Debt in collections has a huge impact on your credit score, especially if the debt also had late payments or a charge-off associated with it. It can take up to seven years for your credit to fully recover from one collection account. However, as time goes on if you use good credit building habits, negative marks will have less impact over time as newer things on your credit score have the most influence.
If you need help fighting a collection account error or fraud, you can contact a reputable credit repair company.
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The safest way to pay a debt collector is with a method that provides proof of payment, such as mailing a check with a return receipt or using a secure online payment portal provided by the collector.
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No. Typically, paid collections will remain on your credit reports for up to seven years from the date of the original delinquency. However, lenders view paid collections more favorably than unpaid ones.
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If you ignore or refuse to pay collections, the debt collector may escalate efforts to recover the debt. This could include legal actions such as lawsuits or wage garnishment. Unpaid collections that pass the statute of limitations can still severely impact your credit score and make it harder to secure loans or credit in the future.
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