If Your Debt Goes Into Collections, Here Is How You Should Handle It
Here at Galler Law, we work with a lot of people whose debt has gone to collections. One question that we are often asked in these difficult situations is, “What do I do know?” We thought we would, therefore, take this opportunity to walk our readers through the debt collections process. If you find yourself in the unfortunate situation of getting constant calls from debt collectors, here is what you should do.
How Debt Collection Agencies Work
Before we dig deeper into what you should do when your debt goes into collections, let’s take a quick look at how debt collection agencies work in the U.S. There are currently over 7,000 debt collection agencies operating in this country–debt collection is big business! These companies make money by buying your debt from your original lender- often at pennies on the dollar – then attempting to collect the full amount from you. Debt collections companies make huge profits this way. Most debt collection companies purchase credit card debt and medical debt, but other forms of debt can be sent to collections as well.
Stages Of Debt Collection
In most cases, your debt will go into your lender’s internal collections department after you have gone 30 days or more without making the minimum payment. This is known as “delinquency.” If you go several months without making the minimum payment, your lender will likely hand collection duties off to a 3rd party agency. It is important to note that this agency is contracted through your original lender, and makes a commission if they are successful in getting you to pay off your debt (plus interest and late fees). If this does not work, your creditor will sell the debt to a different collections company–one that buys the debt for a fraction of the outstanding balance. This debt collections company will attempt to recoup as much of your debt as it can so that it makes a profit. To summarize, here are the 3 stages of debt collection:
- Contracted 3rd party agency attempts to collect the debt
- Debt is sold to collections agency at pennies on the dollar
If your account moves into delinquent status, that should be your first warning sign. Fortunately, you usually have a couple of months to get back on track. You may even be able to stop your debt from going into collections. This is especially true now that we are in the throes of the coronavirus pandemic. In response to the current economic crisis, many credit card companies have initiated financial assistance programs for those who are struggling to make payments. Since time is of the essence in these cases, we recommend contacting your lender as soon as you think you will miss your next payment. Your lender may be willing to work with you, especially during these difficult times.
The Debt Collections Process Does Not Follow A Set Schedule
Unfortunately, the time table mentioned above is only a rough guideline: there is no set rule for when your debt can move to the next step of the collections process. There are also no guidelines concerning how many times your creditor must contact you before your debt is turned over to a collections agency. Many of our clients tell us that they were shocked to find out that their debt has been in collections for weeks, or even months. That is why, here at Galler Law, we recommend that people check their credit scores as often as possible, ideally once a week. Many agencies offer free weekly credit reports. Until April 20201, you can view these agencies on www.annualcreditreport.com.
How To Get Out Of Collections
Let’s say that worst has come to worst and your debt was sent to collections: there are still ways to dig yourself out of debt, though it won’t be easy. You may be able to work out a repayment plan with the debt collection agency. This allows the delinquent marks associated with your debt to come off your credit report as soon as possible. Keep in mind that it can take up to 7 years for your past-due history to completely disappear from your report. That’s the bad news. The good news is that each debt you pay off will increase your credit score.
Debt Collectors’ Tools
Before we get into what debt collectors can do to recoup their investment, we would like to highlight some things that they legally cannot do. Debt collectors cannot threaten you, lie to you, or use obscene/harassing language. In most states, they are not allowed to use predatory practices like adding fees and interest to what you already owe. All that being said, debt collectors do have many effective tools for collecting debt, including freezing your assets and suing you.
Contact Galler Law If You Are Deep In Debt
If you are so deep in debt that collections agencies are constantly calling you, contact Galler Law. Our bankruptcy attornies may be able to help you in several ways:
- We can help you file for bankruptcy, potentially eliminating debt
- We can stop debt collectors from contacting you
- We can represent you in a lawsuit
- We can countersue
When you successfully file for Chapter 7 bankruptcy in Georgia, several types of debt will be discharged, including medical and credit card debt (exceptions include alimony/child support and student loans). Also, when you hire a bankruptcy attorney at Galler Law, debt collectors must direct all correspondence to us. Our clients in Georgia find this to be a huge relief. Earlier in the article, we mentioned things that debt collectors can’t do, such as lie to you. Debt collectors frequently break these rules, If they do, we may be able to file suit on your behalf. We can also represent you if you are being sued. When a collections agency takes you to civil court, they are counting on the likelihood that you will not have legal representation (as over 90% of defendants don’t). By calling us, you can turn the tables in your favor. If you need help with bankruptcy or debt settlement, call Galler Law today.