Knowledge Center: — FAQ’s —- DEBT/COLLECTION TERMS —- STATUTE OF LIMITATIONS —- MILITARY DEBT —- COLLECTION PROCESS
The Debt Collection Process
How does the process work?
It’s typically a 4 stage process. Understanding this process can be very helpful when you’re behind on your payments. Like any other process there are steps that have been proven to get results. Most creditors and reputable collection agencies follow these 4 stages to slowly escalate the debt and push for payment.
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STAGE 1: 30 Days Past Due
If you’re 30 days behind on your payment. Your lender will probably call, email or send a polite reminder letter informing you that your payment is past due and should be paid as soon as possible. They may reach out to credit reporting bureaus to report your account as delinquent.
What to do: If you’re going to miss a payment, reach out to your lender ahead of time. They may be willing to sort out a payment plan or deferment. If you do miss your payment without notifying your lender, let the lender as soon as you realize you missed it, and work on a repayment plan. Do not ignore calls and letters. At this stage, you can rectify the situation fairly easily.
STAGE 2: 60 Days Past Due
At this point, your debt should still be with your original creditor. They will get more aggressive pursuing payment and they will definitely contact a credit reporting agency about the delinquent account if they haven’t already. You may also be hit with fees and penalties.
What to do: Contact the creditor. It’s not too late to work things out. The lender will probably be open to a payment or hardship plan.
STAGE 3: Charge-Off Status
This is where the debt will be ‘charged-off’ and the original creditor will sell the debt to a collection agencies for a fraction of the debt (typically 30-35% of the original amount). This will definitely be reported to credit bureaus and added to your credit report.
What to do: Immediately contact your original creditor and try to set up a repayment plan directly with them. This may way your account may be returned from collections and save your credit score from a huge negative mark.
- Ask the collection agency to send you written verification of your debt. Do not discuss payment details.
- Contact the original creditor and work with them to set up a payment schedule.
- Ask the original creditor if they can get the account back from the collection agency.
- Follow the agreed upon payment schedule.
STAGE 4: Court
If the payment company is unable to collect, they may pursue a lawsuit. If this is the case, they will send you a court summons and you must attend the hearing. If you don’t appear, the collection agency automatically wins and a judgement will be made against you. This can mean wage garnishments or place a lien against your home or other assets. They may even have a marshal or sheriff seize property.
What to do: SHOW UP FOR COURT and dispute the debt. You can ask the judge to oversee a repayment plan instead of resorting to garnishments, liens, or seizing of property.
ADVICE FOR EVERY STAGE –
BE SURE TO VERIFY – Know who you’re talking to and do not give in to the pressures of a collection call. Always ask for written verification and never give out your bank account info.
KNOW YOUR RIGHTS – Take the time to understand the Fair Debt Collection Practices Act (FDCPA) that protects consumers from predatory collectors. Learn more about the FDCPA...
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