When you’re unable to work out an agreement to settle your loan obligation with your creditor, collection agencies will step in to act as collection representatives. They will be ones who will exhaust all efforts to collect from you.

Some types of loans that are sent to collection agencies are credit cards, utilities, cars, government, and medical loans.

Here’s what to expect when your debts are sent to collection agencies:

  •  Your delinquency is reported to credit bureaus following the turnover of your account to a collection agency;
  • The  negative impact on your credit record will typically show up 3 to 6 months after your default;
  • Collection agencies will start to track you down even if you have changed contact information or address;
  • They will begin to regularly send you billing statements or call you in your home or place of work;
  • They will offer you repayment plans with an outstanding balance that is significantly less than your defaulted balance.

Should You Ignore Your Debts Sent to Collection Agencies?

Probably the only reason why you should halt reacting to a collection agency’s notice and not pay right away is for you to make sure you actually owe the debt being collected from you. In some cases, you incur debts that you may not be aware of such as, separately-billed medical expenses or unsettled utility bills when you transferred home. If you acknowledge the debt and the amount, then you should not ignore the efforts of your collection agency.

Once your credit has been sent to the collectors, your credit score may drop by at least 70 to 100 points in a short period. If you begin to make progress with repaying your debt, your score may start to pick up again.

If your credit score takes a hit it can take some time for your score to rise back up again.

However, ignoring paying off the collection debt that is over 1 or 2 years will add more damage to your score. Although ignoring the collection will hurt your score less and less over the years, it will take no minimum of 7 years before that bad information is taken out of your report.

The collection agency may also sue if you deliberately avoid them.

the fair debt collection practices act

What Are Your Rights As a Debtor?

It is not surprising to think that apart from struggling to repay your debt, you could also be developing severe anxiety with the way the collectors deal with you. Yes, you may owe money, but you also have your civil rights against unlawful credit collection practices.

Here are the significant governing laws that protect you as a borrower:

The Fair Debt Collection Practices Act

The FDCPA is a federal law that was enacted in 1977 to limit abusive third-party collection practices such as harassments, threats, unwanted calls, and disclosing of debt information to friends and neighbors.

The Telephone Consumer Protection Act

Unless you have provided consent, no agency or business can make unsolicited calls to you, send fax ads, and contact you with the use of autodialer equipment. 

The Fair Credit Reporting Act

This law states that credit reporting companies, including data furnishers, must abide by the strict set of guidelines in processing credit reports, as well as correcting them when errors are present.

The law mandates that you can sue a collection agency if:

  • They can’t prove you owe the debt. The FDCPA requires that debt collectors must provide you with debt information that must include the name of the original creditor, the amount you owe, and verification of the debt.
  • You’re being harassed. The FDCPA forbids collectors from harassing you in any way such as using foul language, repetitive calls, calls made during ungodly hours, and mention of threats of harm.
  • The debt collector states untruth. Collectors violate the law when they commit any form of lie or deceit in order to put pressure on collecting money from you. Such lies include: claiming to be an attorney when they are not, or threatening to sue even when they have no legal right to do so.

how to deal with debt collectors

How to Negotiate For Repayment Terms With Collection Agencies  

Collection agencies earn income through commissions from the loan payments they collect. Their commission income ranges from 30% to 50% of the amount collected. Actively negotiating for loan repayment with your collection agency is good news for them.

Here’s a list on how to negotiate for loan repayment with collection agencies:

  •  Verify that you owe the debt;
  • Determine your true financial status;
  •  Express good faith in repaying your debt;
  •  Remind your collector of your rights and inform how you wish to be notified;
  •  Consider hardship programs;
  •  Offer a lump sum payments;
  •  Mention bankruptcy;
  •  Negotiate how the debt will be reported to credit bureaus;
  •  Get the settlement agreement in writing.


The consequences that come with avoiding paying a debt you owe will only create a huge negative impact on your credit record. The damage may drag you for years, even after you have paid off your loans. You can avoid all that by simply becoming honest about your financial situation with your collector and negotiate a fair deal.

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