When a debt goes into collections, it has most likely already negatively impacted your credit score. When you refuse to work with a collector, it can cause further damage. If you are contacted by a collector, just cooperate and pay or explain your situation.

It’s a collector’s job to resolve the debt, so they are most likely willing to work with you and figure out some options for how you can pay the debt.

Bad debt is debt that doesn’t increase your net worth, has no future value and that you don’t have money to back for. Some examples of bad debt are auto loans and credit cards.

Good debt is considered an investment that generates long-term income or value.

While any amount of debt is too much, there is an easy way to find out if your amount of debt is too high.

A good metric to use is your debt-to-income ratio.

To find this, add up all your monthly debt payments and divide that by your monthly gross income. Anything over a 43% debt-to-income ratio is a red flag to potential lenders.

Secured debt is when the borrower uses some type of property as collateral for the loan.

Debt consolidation is taking out a loan in order to pay off other loans. Basically, instead of having multiple loans spread out, you would just have one big loan.

This may provide you with a lower interest rate, but you will still be responsible for the entire amount of debt owed.

Debt collection agencies collect delinquent debts of all types: credit card debt, medical debt, automobile loan debt, personal loan debt, commercial debt, student loan debt and more.

Most collect agencies specialize in types of debt, like commercial or consumer debt and within those types, they will specialize in specific vertical markets to create a more seamless process when working a customer’s placements.

Often times, companies will hire debt collection agencies to collect the debt for them. A detailed onboarding process should include mutually agreed-to terms that are documented in a Standard of Operation (SOP), Work Standards or Service Level Agreement (SLA).

These agencies usually act as negotiators in collecting and resolving past due amounts. Debt collectors are skilled in quickly assessing the reasons for non-payment and will work with the debtor to collect the past-due balance, remedy disputes and negotiate the most favorable outcome for their client.

Agencies will also buy debt off of companies to collect – once this is done, the company can no longer attempt to collect a debt, as the agency now owns it.

Debt collectors’ jobs are to resolve the debt, not just collect it.

They will work with you on payment plans and recommend programs to assist you in paying off your debt.

So, if you’re contacted by a debt collector, see what your options are and what they can do to help.

It’s best to cooperate with collectors and try to explain your situation.

Collectors ask questions to ensure that they are speaking with the correct person, and for privacy and security reasons.

They may ask for information like your full name, address, date of birth or other information to verify your identity.

If the amount of the debt seems higher than it should be, it’s most likely because many contracts have provisions for additional fees or charges when an account goes into debt collections or charges off.

Pay the undisputed portion of the debt first.

Then, if you believe there has been a mistake, speak to the collector and provide any documentation you may have to prove the correct amount.

This can happen when the company you owe the debt to changes its name or is acquired by another company.

However, you are still responsible for the debt.

If you still believe there has been a mistake, you can speak to the collector and send any documentation you may have to prove the debt is not yours.

There are several options for repaying debt.

If you can’t pay all the debt upfront, the collection agency may accept a payment plan.

Otherwise, most agencies have an online payment portal and accept credit cards, cash wire transfer or check.

Generally, calls from debt collectors are excused from the restrictions of the National Do Not Call list.

For more information, visit the Federal Trade Commission website.

Other companies hire debt collection agencies to collect for them, called third-party agencies. Or, they sell their debt to a collection agency, meaning the original creditor no longer owns the debt.

Either way, the collection agency is contacting you for a reason and you cannot bypass them.

The good news is, however, that most collection agencies make it as easy as possible to pay back a debt. Most offer several payment options, like an online payment portal or a payment plan.

According to Investopedia, the Fair Debt Collection Practices Act (FDCPA) is “a federal law that limits the behavior and actions of third-party consumer debt collectors who are attempting to collect debts on behalf of another person or entity.”

In short, the FPCPA protects debtors from abusive, unfair or deceptive debt collectors.

The FDCPA only protects consumer debtors, not commercial debtors.

Although there are currently no federal laws controlling commercial debt collection, most states have statutes which govern commercial debt collection.

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