An unpaid account that’s been placed with a collections agency doesn’t mean you’re off the hook for your debt. In fact, a bill you may have ignored for a few months or forgot you had may remain a part of your financial life for years to come, once it’s in the hands of a debt collector. It’s important to note that before you run into financial hardship and have trouble paying your bill, you should reach out to your creditor to discuss options, which may help you avoid a more serious situation. Here are seven things you need to know if you have a debt in collections.
1. You’re entitled to information.
Debt collectors have to tell you which creditor turned the account over to collections and the amount owed, either in their initial conversation with you or in writing within five days of contacting you. The Consumer Financial Protection Bureau (CFPB) has useful information for people in collections. If you don’t recognize the creditor, submit a written request to the debt collector within 30 days asking them to provide the name and contact information for the original and current creditor. They have to cease collection efforts until they’ve given you this information.
Debt collectors also have to notify you that, unless you dispute all or part of the debt within 30 days, the debt collector will assume the debt to be valid. If you dispute the debt within those 30 days, the debt collector cannot collect on the debt until it provides verification of the debt to you.
2. You can dispute a debt on a credit report.
The Fair Credit Reporting Act (FCRA) gives you the right to dispute any reported debt, including those in collections. It is best to do so by registered mail (so you have records of the dispute), or by submitting an online dispute with each credit bureau that has reported an account in collections.
Under the FCRA, the bureaus are legally required to investigate disputes. You can also dispute the debt directly with the creditor, which must investigate and respond to your dispute.
3. There are limits to how and when debt collectors make contact.
The Fair Debt Collections Practice Act (FDCPA) says collectors may contact you, but cannot send postcards or publicly announce that you have an account in collections. Collectors may use U.S. mail, phone, text messages or email to contact you. They cannot call you before 8 a.m. or after 9 p.m. in your time zone, or contact you at work if they should know your employer does not allow such calls or if you tell them not to.
4. You can tell a debt collector not to contact you.
You can write a letter to collectors saying they must cease further contact. While they must honor your request once they’ve received your letter, the FDCPA does allow collectors to contact you with specific communication, which may include notification of legal action.
5. You may be able to negotiate.
A collector may agree to accept less than the total amount owed, but the CFPB recommends securing a written agreement of any negotiated amount or repayment plan you make with a collector before you make a payment. If you have multiple accounts in collections, the FDCPA states that you can specify the debt to which the payment you are agreeing to make will apply.
6. Creditors can take legal action.
The FDCPA says collectors cannot make empty threats about seizing property or suing you to get you to pay your debt, but creditors can take legal action in an attempt to collect from you.
7. How long a creditor can sue to collect a debt varies by state.
States have different statutes of limitations for how long collectors can sue in an attempt to collect. Once the statute expires, collectors can’t sue you, but some collectors may still try to contact you.