Everybody knows how hard it is to catch up on old bills. Even when the bills are relatively new and low in both initial amount and interest, they can be hard to pay off. What is even worse than dealing with an overdue payment that you know you have is suddenly realizing that you have an overdue bill payment that you didn’t know you had.
This happens all the time when people check their credit reports before making big purchases, taking out loans, or refinancing their mortgages. They pull up their credit report and – wow! – smack dab in the middle of the report is a new collection item. While a collection item won’t always rule out your chances of getting a new loan, it can definitely put a damper on things.
Collection items, as you can imagine, are just plain bad for your financial health. At a minimum, they generally give you a much lower credit score. This low credit score can make it nearly impossible to get new credit. Without first paying it off, it can even make it hard to improve the credit that you already have.
Worse yet, is when a collection item takes an even bigger toll on your financial health. You will generally soon know this is the case because your creditors will be after you. Collection calls, angry letters, threats of lawsuits, and sometimes harassing phone calls are only a few of the things you have to deal with from collection agencies.
Finally, collection items can be that much harder to pay off quickly because you are already dealing with and keeping up with your standard monthly bills and expenses. Most people who are in debt don’t have enough money to pay off debt while in collections.
Still though, there are a number of ways that you can do this, that you can pay off debt while in collections. It is tough, yes, but possible. The steps and tips discussed below show you how.
Understand Your Rights
When attempting to pay off debt while in collections with a debt settlement or debt consolidation it is very important to understand you rights and protect them. Simply put, owing money is not a crime, and though you might feel the heat from collections agencies, you only have to pay back the said money according to the terms of the agreement that you made with your creditor.
However, if you cannot pay or simply do not pay, then the creditor and collections agency has the right to collect that debt, even if it comes to suing you. Though creditors, lenders, and collection agencies all have the right to ensure that they collect their debts, there are some behaviors that are just not allowed. Sadly though, these behaviors are all too often seen in the sometimes sleazy debt collection industry.
A few of the laws that govern the behavior of debt collectors, according to a Federal Trade Commission fact sheet, include:
- They are not allowed to harass or otherwise abuse you.
- They are not allowed to threaten you with arrest.
- They are not allowed to lie or make false statements.
- They are not allowed to give anyone, specifically credit agencies, false information about your credit.
Understanding your rights also means sticking up for them if you feel you are being mistreated by a collection agency. The link to the fact sheet shared above includes information on how to file complaints.
Figure Out Whether You Really Need to Pay the Debt
This step is especially important if you just stumbled upon a collection item on your credit report that you didn’t know you owed. Sometimes a creditor might sell a bill to a collection agency right at the same time that you pay it off and it can show up twice. When this happens, it can be hard to recognize the collection item for the bill it once was.
In this situation, you should:
- Take a look at your credit report.
- Make sure the debt is one that you actually owe (there are always scammers out there looking to try and get you to pay off debts that you don’t owe. Check out this Bills.com article on debt validation for more information.
- Check the Statue of Limitations (sometimes a debt past its deadline can be thrown out in court).
Pay Off Your Debt in Collections
When it comes right down to it, you are probably going to have to just buckle up and pay off your debt in collections. There are a few different ways to do this. The three most common include negotiating a settlement yourself, enrolling in a debt settlement program, and declaring bankruptcy. All of these methods allow you to lower the amount of debt that you need to pay. You can learn more about each by following the corresponding link.
Though it may sometimes seem impossible, you really can pay off debt while in collections. It can be difficult and nerve-wracking but the three steps/tips discussed above show you how. Follow them to a T and you should be able to take control of your debt in no time.