You wish the debt collector would stop bugging you, so your strategy is to ignore them. But brushing aside a debt collector can cause more trouble than your debt is already causing. And ignoring them won’t make the debt go away. Even worse, the debt collector might sue you if the debt remains unpaid.
Read along to learn the consequences when you ignore debt collectors.
When Does a Debt Go To Collections?
Once a debt has gone unpaid for 120 to 180 days, a creditor or lender typically will turn it over to a person or agency specializing in debt collection. At that point, the creditor or lender (such as a credit card issuer, mortgage lender or auto lender) will wipe the debt off its books, a process known as a charge-off.[JE1]
A debt that’s gone to collections can lead to a severe hit to your credit score. This applies to both the FICO and VantageScore credit-scoring systems. Payment history, including debt that goes to collections, accounts for 35% of a FICO score and 40% of a VantageScore.
If a debt that’s in collections pops up on your credit score, it could trigger a drop of up to 110 points. FICO scores and VantageScores range from 300 to 850 points. Generally, if you have a high credit score, debt in collections will put a bigger dent in your score than if you already have a low score.
How Long Can You Ignore Debt Collections?
While it’s not wise to ignore a debt collector, you might be able to put them off long enough so that you don’t end up in court.
A debt collector has a certain period of time (typically three to six years) to file a lawsuit against you to collect the money you owe. This period normally begins at the point you missed the first payment on a credit account, such as a credit card or personal loan. When that window of time closes, the past-due debt becomes “time-barred.”
Once a debt is time-barred, a debt collector can’t take you to court to collect the money that you owe. Actually, a debt collector is breaking the law if they file a lawsuit over time-barred debt.
Although you might escape being sued, a debt that’s gone to collections generally stays on your credit report for up to seven years. The seven-year clock starts ticking on the date of your first missed payment.
What Happens if You Refuse to Pay a Collection Agency?
If you refuse to pay a debt collection agency, you could be hit with a lawsuit aimed at recovering the money you owe. But the harm to you and your credit goes well beyond that:
- Communication from a debt collection agency (calls, letters and messages) generally won’t stop unless you request in writing that the agency quits contacting you.
- Interest charges may continue to pile up on unpaid debt.
- Late fees might be tacked onto unpaid debt.
- Unpaid debt typically stays on your credit report for up to seven years.
- The presence of unpaid debt on your credit report could damage your credit score for years to come.
Can You Just Not Pay Debt Collectors?
Technically, you can decide not to pay a debt collector. But doing so may prompt them to sue you. Or, at the very least, they might continue harassing you (unless you ask in writing that they stop reaching out to you).
Furthermore, failing to pay debt that’s being handled by a collection agency will almost certainly leave a negative mark on your credit report. This may make it harder to qualify for credit, rent an apartment, get a job, obtain an insurance policy or sign up for utility services. If you do get approved for a loan, it will probably be at a higher interest rate.
Consider seeking legal advice if you’re unsure how to handle a debt-collection situation.
Can Debt Collectors Sue You?
Yes, debt collectors can sue you to get the money you owe, as long as your debt isn’t time-barred.
If you don’t show up in court after being ordered to do so, a judge might let the collection agency:
- Garnish your wages. This means your employer will hand over some of your pay to the collection agency before you receive your paycheck.
- Freeze money in your bank accounts
- Put a lien on your property. A lien is a legal claim that shows the debt collector is legally entitled to use your property as collateral for repayment of the money you owe. If there’s a hold on your property, it’s attached to the property title and appears in public records. You can’t sell a property until the lien is discharged. So, one way or another, you will need to settle your debt.
What to Do if a Debt Collector Sues You
Even if you believe you don’t owe the debt, you should always respond to a lawsuit filed by a debt collector. This means sending a response, written by you or your attorney, to the lawsuit and appearing in court as instructed.
After you receive the lawsuit, look through the paperwork to make sure:
- You (and not someone else) owe the debt.
- The amount of the past-due debt is correct.
- The clock hasn’t run out on the debt collector filing a lawsuit against you. In many cases, a debt collector has three to six years after your first payment was late to sue you.
If you lose the lawsuit, you could be ordered to pay various costs and fees. In addition as stated above, your wages might be garnished, your bank accounts might be frozen and a lien could be placed on your property, such as your home. Furthermore, the court judgment likely will wind up on your credit report, making it more difficult to qualify for credit in the future.
Can you Settle a Debt Collector’s Lawsuit?
If you’ve been sued by a debt collector, the lawsuit will likely be dropped if you agree to pay all or part of the debt. However, if you ignore the lawsuit, the debt collector probably won’t be open to settling the case. Working out a payment plan will save you the hassle of dealing with legal matters.
“Some collectors will accept less than what you owe to settle a debt,” according to the Federal Trade Commission. “Before you make any payment to settle a debt, get a signed letter from the collector that says the amount you’re paying settles the entire debt — and you no longer owe anything for that debt. Keep the letter and a record of any payments you make to pay off the debt.”
Do Debts Go Away After Seven Years?
Debts don’t really go away after seven years.
In most states, past-due debt does not disappear until you pay it, according to the Consumer Financial Protection Bureau. However, under the Fair Credit Reporting Act, unpaid debts generally drop off your credit report after seven years.
Can You Get Collections Removed From Your Credit Report?
You may be able to get collections activity removed from your credit report.
Three major credit bureaus — Equifax, Experian and TransUnion — produce credit reports for consumers. Not all debt that’s gone to collections is reported to all three credit bureaus, though.
To see whether debt in collections appears on any of your credit reports, order a copy of your report from each of the three bureaus. Once you’ve figured out which credit reports show the collection activity, you can take one of these three steps to try to get it removed your credit reports:
- Send a letter (known as a “pay to delete” letter) to the collection agency explaining that you’ll pay some or all of the money you owe in exchange for the collection information being deleted from your credit reports.
- Send a “goodwill” letter to the original creditor or lender asking that the collection activity be removed from your credit reports. Essentially, you’re requesting that the negative information be taken off your credit reports as a goodwill gesture. However, this tactic won’t work unless you’ve otherwise had a good history with the creditor.
- Dispute the collection information. If you see incorrect, unfair or questionable items on your credit reports that are related to collection activity, you can file a dispute with the credit bureaus, collection agency and original creditor. By law, the credit bureaus must investigate your dispute.
FAQs About Debt Collection
What Kinds of Debts Can Be Collected?
Under the Fair Debt Collection Practices Act, the kinds of debt that can be collected include:
- Credit card debt
- Auto loans
- Student loans
- Personal loans
- Medical bills
- Utility bills
How Can a Debt Collector Contact You?
A debt collector can contact you by:
- Text message
- Social media message
When Can a Debt Collector Contact You?
A debt collector can’t contact you before 8 a.m. or after 9 p.m. unless you provide permission for them to do so. Also, they can’t reach out to you at your workplace if you tell them you’re not supposed to accept phone calls there.
What Is a Debt Collector Prohibited From Doing?
Among other things, federal law prevents a debt collector from:
- Threatening to harm you.
- Using obscene or profane language when communicating with you.
- Repeatedly harassing or annoying you over the phone.
- Lying to you. This includes falsely telling you that they’re an attorney or a government representative.
- Threatening to have you arrested.
- Collecting interest, fees or other charges in addition to the amount owed unless a law or your contract with the original creditor allows it.
- Discussing your debt with anyone but you, your spouse and your attorney.
How Can You Report a Debt Collector?
If you suspect a debt collector is violating your rights, consider contacting:
- The Federal Trade Commission
- The Consumer Financial Protection Bureau
- Your state attorney general’s office
No one wants to deal with debt collectors. But not dealing with them can lead to consequences that are far more damaging than the debt itself.