All content is written objectively and meant to provide a neutral opinion. If you cannot pay a lump sum, it may be harder to negotiate settlement for less than the amount owed. In fact, you should try to avoid having your debts sold to a collection agency at all costs. Find out why it’s better to settle your debt before it’s sent to a debt collector and how to negotiate with the original creditor instead. We are able to present this information to you free of charge because some of the companies featured on our site compensate us. If you are a debtor whose loan or credit card account goes into default, be prepared to face serious repercussions. The answer is based on an important but a fine and nuanced distinction. Collection agencies are often more aggressive in their collection attempts and may take extreme measures. When a debt exists there are two parties involved â the creditor, who is the source of the loan, and the debtor, who is the receiver of the loan. However, it can report a charge off, which remains on your credit report for seven years, even if you pay off the debt—with the original creditor or via a collections agency. You will know your account is still with the original creditor if all of the following are true: You are not more than 150 days late on your payments. Federal law prohibits debt collectors from threatening you, but this doesn’t mean they won’t try to use fear to motivate you to pay off the full amount. But one factor that is a major influencer is time. In most cases, debt buyers pay pennies on the dollar for the debt. Exactly what percentage of your debt is a creditor willing to settle for? Having an account sent to collections is stressful. How to pay off debt in collections Before paying off debt in collections, follow these steps to make sure you cover all the necessary bases. What does this mean for you? The creditor may insist you pay100% of the debt if you pay … For example, debt collectors may offer a better deal during the spring when debtors are receiving income tax returns and may have some extra cash. Before choosing any financial product, read all information, including terms and conditions from the financial service provider. One option is to pay for a deletion. Negotiate a Settlement or Create a Debt Payment Plan. One option is to pay … The general consensus? The Fair Debt Collection Practices Act covers third-party debt collectors — those who buy a delinquent debt from an original creditor, like a credit card company. In your process of dealing with debt collectors, it’s also very important to keep a note of what you should not share with them. What Are Collection Accounts? You'll likely be barraged with letters and phone calls – if you haven't been already – as the debt collector tries to get you to pay up. Debt collectors usually try to collect as much as possible and theoretically, could demand that the debtor pay 80 or 90 percent of the balance – or even all of it. Lauren is a Crediful writer whose aim is to give readers the financial tools they need to reach their own goals in life. Ask the debt collector if they own the debt. A company bought your debt from the creditor and is trying to collect the money you owe. 5 Things You Should NEVER Say To A Debt Collector. Eventually, you could also be subject to wage garnishment to have the judgment repaid. However, our web content may be different than the information you receive from a financial institution or service provider. A debt collector has a variety of tools in its arsenal to convince you to pay, such as credit damage, the threat of a lawsuit and incessant phone calls. Keep in mind that paying the debt won't remove it from your credit report (unless you negotiate a pay for delete), but it does look better than the alternative. Plus, having either a collection or judgment (or worse, both) listed on your credit part can do lasting damage to your credit score. The answer really depends on each individual creditor. If they have already written off the debt, they may accept a lower total payment. But hear us: We don’t agree with the tactics they use to try to get you to pay.. Judgments give debt collectors much stronger tools to collect the debt from you. It’s better to deal directly with the original creditor than to have your debt sold to a collection agency. If a debt is older, such as 9 months old, the creditor will most likely accept a lower amount to settle the matter and get it off their books. If they find that it is difficult for you to pay, they may work out an installment plan or end up taking a loss on your debt. If your creditor has sold your account to 3rd party collection agencies, you'll have to deal directly with them. Still, it’s important to protect yourself. Not so fast. These companies can be worse than bullies on the school playground. The post Should I Pay the Debt Collector or Original Creditor? They can't threaten to take action that's illegal or that they don't intend to follow through with. A debt collector can contact you by phone, email, mail or text message when it's trying to collect payment for your overdue bills. Collectors must provide a written notice explaining the debt—including the amount, the name of the original creditor, and your right to dispute the debt—within five days of contacting you the first time. Our reviews are based on independent research. How Much Should Your 401(k) Contribution Be? Also, check out our in-depth article on how to settle your debts with a debt collector. If you are a debtor whose…. To avoid this scenario, use your credit report listing as part of the negotiation process, especially if you’re offering a large one-time payment. 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