Anyone faced with collection debt faces the dilemma of trying to negotiate for a settlement or at least an affordable installment plan and then having the funds to be able to repay the debt comfortably. A priority is trying to have the marks removed or stamped as paid on the credit report to avoid adverse effects.
Typically, collections stay on a credit profile for seven years from when the debt went into default. After those seven years end, the collection is cleared from history. Until then, most collectors won’t remove the mark, whether settled or paid in full.
Before moving forward with the payoff or suggesting that the balances belong to you, it’s essential to research the accounts to confirm the debt is yours and that the time frame falls within the state statute of limitations. You could inadvertently reactivate the statute by reaching out to collectors, depending on the state.
Once the statute is up, the collectors won’t be able to sue you, but they can contact you about the accounts until they’re paid.
The high road will be to take financial responsibility if you determine these are your accounts by finding a way to return payment. That speaks of integrity. Let’s look at the steps involved in repaying debt collectors.
Can You Refinance After the Debt Collection Has Been Satisfied
Some repayment methods debt collectors will accept from borrowers include the following:
- PayPal
- Personal check or postdated check
- Money order
- Debit or credit card
- Money transfer
- Prepaid card
- Law office check
While many people don’t have the funds to pay cash or offer a check for a lump sum repayment, most try to negotiate for a settlement with a much lower balance or an installment plan over a term of an agreed-upon period.
In order to pay the settlement in full, borrowers will often use credit cards to meet the balance as quickly as possible. This leaves them still in debt but with high interest.
Fortunately, at this point, the collection debt can be refinanced into a personal or consumer loan.
You can find information on refinancing debt collections at https://www.refinansiere.net/refinansiering-av-inkasso/. With a personal loan, borrowers benefit from a lower fixed interest rate, fixed installments, and a set term.
The debt can be satisfied with collectors, marked as paid on the credit profile and repaid with the personal loan comfortably in set monthly installments.
Why Borrowers Should Satisfy Debt Collections
Primarily, a reason to satisfy the debt you have in collections is because of the damage it does to your credit history and score. Additionally, within the statute of limitations, the debt collectors have the authority to sue you, which can result in “bank account levies or wage garnishments.”
While you may not be trying to buy a home or car or take out a loan currently, at some point within that seven-year time frame, the collection will have an impact. You could be looking at a new career opportunity, interested in an apartment, or need car insurance.
These professionals will look at your credit standing and could find you unresponsible and not a good risk.
What To Do If the Collection Is an Error
Errors do occur. It could very well be that the debt was paid with the original creditor, but it’s now showing as a collection. The collection could also be well beyond the seven-year statute of limitations. A first step is to request a free annual credit report to see if the collection is incorrectly showing on your profile.
If, for any reason, you don’t believe the debt is due, you have 30 days to dispute the first collection notice. The letters will ask that the negative marks be deleted from your history. Once these are removed, your credit score should be boosted.
What Protocol Should You Use When the Debt is Confirmed
When faced with a collection notice, you have a period of roughly 30 days to submit a dispute if you believe it to be a mistake. In that time, it’s critical to research to verify that. What’s the protocol you should follow? Consider these suggestions.
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Confirm the debt
Before responding to the notice or paying on the account, you must confirm that the debt belongs to you and that the statute of limitations is still in effect. For most states, acknowledging a collection or paying on that debt reactivates the statute.
After the statute is exhausted, the collectors will no longer be able to actively pursue legal action. The debt will still be due, and the collection agents can still try to collect. A few steps to consider as the borrower includes the following:
- Ask for a “validation notice” from the collecting agency
- Reach out to the Better Business Bureau or the attorney general for your state to confirm the legitimacy of the collecting agency
- Contact the Federal Trade Commission if it’s found that the collector is a scam
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Learning rights
Consumers are protected by the FDCPA- Fair Debt Collection Practices Act, along with many laws in the individual states and federal protections.
When a debt goes into collections, there are many resources for you to reach out to in order to learn your rights as a consumer with a debt handled by collectors. The collecting agencies have guidelines they must follow when trying to collect on a bill.
These agencies can pursue legal action within a set statute of limitations. Seven years is common but can vary. It’s crucial to find out the time frame for your state and the specific protections afforded under the laws. Click to learn when to bypass the collecting agency and return to the original creditor.
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Develop a budget
Develop a budget to learn what you can afford to pay in an installment plan or with a settlement. Comparing your income with monthly obligations can help you decide on a realistic and comfortable amount to use when negotiating. Negotiations are necessary when the debt balance is too large to be paid in full.
You shouldn’t feel intimidated or hesitant to negotiate with debt collectors. These agents aim to achieve a settlement with you or a payment plan. If you successfully reach an agreement, all details should be received in writing before a payment is made.
Suppose you find the collectors are staunch, refusing to negotiate the debt, instead expecting payment in full or a payment plan they determine above what you can afford. In that case, it’s legal to reject what they’re suggesting.
These agents are not allowed to use high pressure or bullying to get a borrower to pay above what they can afford and possibly cause the borrower to let other monthly expenses go.
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Making the payment
When you receive the collecting agency’s written agreement, read it thoroughly to ensure it’s correct. When paying a collecting agency, it’s wise to refrain from supplying your debit and bank account details. If you prefer to use a check, opt for a certified check or buy a money order instead.
The payment should be sent via certified mail, so you have documentation of the amount paid, and ensure that it requires a signature on the return receipt.
Some payment forms will also expect fees, like wire transfers, but you can ask that these be waived. After making the payment, confirm it was received and accurately posted. Payments are often inadvertently entered into the wrong account or with an incorrect amount, causing the collection to remain open.
Verify that everything is handled properly, noted in the account as paid and that the agreement stands. You’ll also need to verify with the credit bureaus that the collection no longer shows as an outstanding debt.
A documentation file should be held onto indefinitely since collections have a way of cropping up even years down the road.
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Credit cards for payment
Financial experts and debt counselors suggest paying a collecting agency with a credit card doesn’t eliminate the debt. In fact, the obligation exists along with finance charges. The suggestion is to refrain from using this method if at all possible. Still, the objective is to satisfy collection debt.
If a credit card is the only way to do that, it’s wise to clear the debt. You can try for a no-interest credit card with zero interest for an introductory period of roughly 18 months. That will allow any money paid to apply to the balance during that promotion.
If it’s difficult to repay within that time period, you can then use a personal loan to refinance the credit card to a lower interest fixed rate with set monthly installments for a designated term.
Before making a debt to pay a debt, reaching out to a financial counselor would be a wise decision to gain insight on the best way to proceed with your finances and setting up a realistic budget.
Final Thought
Once collections are repaid, rebuilding your credit profile and score is essential. That will involve making prompt and consistent debt payments, paying your credit cards in full, and checking the profile for errors regularly. The more diligent you are, the greater the improvement you’ll see over time.
