They come for all kinds of reasons—and a lot of people get them. More than 35 percent of Americans have collections on their credit report, and more than 70 percent of the professional athletes I work with in my practice have them.
When you go to the hospital, the x-ray, the doctor, the cast and the pain medication are all separately billed to the insurance company. Maybe it goes to an old address or to a work address on file for your insurance. The result? You read that right. The fact that you got a letter does damage. And the damage is painful. You may or may not get a statement to that effect. Moving is another way to mess up the system. If you cancel your cable because of a move and you have a balance, that remainder will probably get sent as a last bill—to your old address.
The vast majority of collection letters come from companies who buy uncollected debts for pennies on the dollar. If you challenge the debt within 30 days of first contact, the collector cannot ask for payment until the dispute is settled. After 30 days you can still challenge the debt, but the collector can seek payment while the dispute is being investigated. Your state may offer additional consumer protections. Check with legal aid in your area or your state attorney general's office.
Understand your federal and state protections in the debt collection process. Your state's attorney general and the Federal Trade Commission are good resources. Watch your debts dwindle. Sign up for an account to link your cards, loans and accounts to manage them all in one place. Let's do this. Don't give in to pressure to pay on first contact.
Can you go to jail for not paying back a payday loan? What happens if you ignore a debt collector? How do I dispute a debt?
Gather the facts. Track your debt the easy way. Sign up with NerdWallet to see your debt breakdown and upcoming payments all in one place. Sign up, it's free. But it can really be annoying if they're contacting you in error. If that occurs, mail a letter to the debt collector stating the amount they're saying you owe is incorrect. You should also ask for proof of the debt collector's claim that you owe money, such as a copy of a credit card bill.
Be sure to keep a copy of the letter. The federal Consumer Financial Protection Bureau offers a sample dispute letter on its website. What happens if you and the debt collector can't settle the dispute? It might be time to bring in a third-party arbitrator.
The arbitrator will weigh the evidence, such as proof that you paid all or some of the debt, and listen to both sides of the story before issuing a ruling. If the situation with a debt collector gets messy—particularly if the debt collector is suing you—then you might want to hire an attorney to represent you.
Once you hand the matter over to an attorney, all communication must be between the debt collector and the attorney. Another option: Ask for help from a nonprofit credit counseling service. A credit counselor can work with you on a debt payment plan and a household budget.
Don't delay in seeking help, though, as waiting too long could land you in court. In some cases, a debt collector might take you to court and request that a judge order you to pay the debt. You can represent yourself in court or hire an attorney. As part of the legal case, the debt collector must show that the debt is valid and that you're the one who owes it. Based on that and other evidence, a judge will rule whether you do or do not owe the debt.
While it's scary to go to court, it's not wise to ignore the lawsuit. In fact, ignoring a suit against you often worsens your situation. Typically, a judge will rule against you if you don't respond to the legal action. That could let a debt collector:. To stay out of legal hot water, face the consequences rather than hoping the lawsuit will simply go away. On a positive note, a debt collector might not be able to take you to court over old debts.
Debt collectors have a certain window of time to sue you. In most states, that window is three to six years. Once your overdue debt is handed over to an internal or external debt collector, this action probably will pop up on your credit reports. A collection account on your credit can lead to a significant drop in your credit scores. It'll take seven years for accounts that have gone to collections to fall off your credit reports. How to Get Through the Collections Process When one of your debts winds up with a debt collector, you might feel helpless.
There are plenty of reasons to be hopeful, though. The way you react to this can empower you to come through this with your head held high:. The purpose of this question submission tool is to provide general education on credit reporting. The Ask Experian team cannot respond to each question individually. However, if your question is of interest to a wide audience of consumers, the Experian team may include it in a future post and may also share responses in its social media outreach.
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