When you owe money, whether in the form of a mortgage, car loan, or medical bill, you are required to pay your bill. If you don’t, the entity you owe money to may put your debts into groups. And from there, a cascade of negative financial consequences can follow.
How does the collection process work?
The lender or entity you owe money to may turn your unpaid debt over to an outside collection agency so that they can recover that amount. Once this happens, you can expect your credit score to take a huge hit. And the lower your credit score, the harder it becomes to borrow money — or borrow at a reasonable cost — when you need to. You may, for example, be denied a personal loan if you apply after your credit score is low.
Once your debts are in collections, the collection agency has the right to contact you repeatedly and urge you to pay the amount you owe. However, there are rules that the agency must follow – more on that in a bit.
If you can’t pay your debts in full, you can try negotiating with a collection agency. You may agree to settle your debts at a reduced amount so that you can get something. But this is not guaranteed.
If you don’t pay your debts, your collection agency may, at some point, take the case to court. If a judgment is made against you requiring you to pay off your debts, and you don’t, you could face consequences such as wages withheld or your bank accounts frozen so you can’t access your money.
What happens when a collection agency harasses you?
Debt collectors are allowed to contact you multiple times in an effort to get you to pay off your debts. But there are still rules these agencies have to follow, and it’s important to know your rights.
The Fair Debt Collection Practices Act states that collection agencies cannot threaten you or use abusive language when making contact. They cannot, for example, claim that they have the right to throw you in jail for failing to pay your debts.
Debt collectors must also contact you at reasonable hours. They are not allowed to contact you before 8 am or after 9 pm
Furthermore, if a debt collector knows that you are not allowed to take calls at your place of business, they cannot continue to call you there. Collection agencies cannot use social media to embarrass you or publicize any amount you owe.
You may decide to hire a debt settlement attorney to help you deal with your debts. If this is the case, your designated collection agency should stop contacting you directly and instead continue future communication with your appointed attorney.
If a collection agency violates any of these rules, you can report it by filing a complaint with the Consumer Financial Protection Bureau. Keep a record of all communications so that you can provide as much detail as possible.
Finally, it’s not really a good idea to let your debts get to the point where they’ve been collected. If you are able to communicate with the original creditor and put together a payment plan first, you will generally be in a better position. But if that doesn’t work, it’s important to know your rights once you’ve hired a debt collector to recover the money you owe.
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