When a debt collection agency suddenly contacts you and tells you that you have a debt, you may think about not responding or even paying them.
Ignoring a debt collection agency may be okay in the short term, but not in the long term because they’ll continuously collect on you. If you ignore them, don’t be surprised if they contact you in various ways, such as by making spam calls or even calling your workplace phone number.
So, what if you still do not want to pay them? Will you be at risk? To help you understand this, let’s figure out what will happen if you do not pay them!
Why is the Debt Collection Agency Contacting You?
The debt collection agency will suddenly contact you when the entry of your debt is on their collection list. When they first contact you, they’ll tell you that you have a past-due debt.
Some collection agencies will usually not immediately collect your debt, but they’ll first send you a debt verification letter before they contact you.
If you don’t do that, you can send them a validation letter to ask them about your debt, and of course, you shouldn’t pay them right away before they send you a verification letter.
How to Deal with a Debt Collection Agency
It’s not okay if you ignore a debt collection agency when they’re contacting you. Instead, it’s best for you to respond to them, even if you’ve yet to ensure that the debt is yours.
Even though you do not want to add to the stress of having unpaid debts, ignoring them will not relieve you of the stress, since they will not stop sending you letters or calling you. Keep in mind that it also doesn’t make your debt go away.
So, what should you do? Well, the best thing to start is to respond to them. Regardless of what happens later, it is such a sign that you have good intentions to deal with them. When you’re responding to them, you can find out more about why they collect on you.
To prove that the debt is yours, the collection agency will send you a validation letter. In the letter, they will mention the details of your debts, including who you owe, how much you owe, and when you started the debt.
Of course, if that’s officially your debt, you must pay it, right? But there are a few options you can take when dealing with the debt collector, including:
- Option 1: Paying your debt off if you can do it.
- Option 2: Negotiate with the debt collector if you cannot yet pay off your debt. In this way, you can submit a payment plan, whether to pay it off at a certain time, pay it in installments, or even if you don’t repay the debt in full since you have made a debt settlement with the previous creditor.
- Option 3: Filing bankruptcy can be the last option for you to get out of debt. If you take this, you may need to pay a fee, which can vary, starting from $1,500 to $6,000.
Well, you can take one of the three steps above to deal with the debt collector.
On the contrary, if the collection agency fails to validate your debt, you’re entitled to dispute the debt, and you shouldn’t pay them.
If they keep contacting you and collecting the debt, you can file a lawsuit against them for violating the Fair Debt Collection Practices Act (FDCPA).
What Happens If You Do Not Pay a Collection Agency?
The debt collector has managed to prove that the debt belongs to you, but if you don’t pay it or don’t try to settle your debt with them, you may face a few consequences, such as:
1. There will be negative marks on your credit report
The immediate consequence is that you’ll have a negative mark on your credit report. Sure, it will have a significant negative impact on your credit score if you don’t pay them.
You need to know that this mark will remain on your credit report for seven years. Sure, it can affect your chances of getting loans, credit cards, and interest rates in the future. Even if you pay it off, it will not improve your credit.
Thus, paying off your debt can help the condition of your credit in some ways, such as:
- Your collections account will appear as “settled.” When potential lenders look at your credit report and see your collections account paid in full, this sends a more positive signal than an outstanding debt.
- Paying off your debt can at least help, so you can improve your credit habits over time.
- Lenders are now starting to use updated scoring models, such as the FICO® Score 10 Suite. If your potential creditor uses this, it may view paid collections accounts differently than a paid collection account, which would not affect your credit.
2. Interest may continue to accrue
The Fair Debt Collection Practices Act (FDCPA) states that debt collectors can charge fees or interest rates in the initial contract of the debt agreement, including loan interest rates.
If your debt enters the collection phase, interest charges can continue to accrue. Even though debt collectors cannot add new fees or increase your interest rate, they can choose to continue to charge a late fee or change interest.
If this is stated in the initial debt agreement, not paying the debt means that the amount of your debt can continue to increase.
3. Debt collectors will continue to contact you
If you ignore the debt collector, it means that you will not pay them, right? If so, be ready to get constant phone calls, letters, faxes, or emails from them—from morning to night. In addition, they may contact your family or friends one by one.
As long as the statute of limitations is between 8 a.m. and 9 p.m. each day and lasts for up to 10 years, the debt collectors can continue to contact you. The limitations vary by state and the type of debt you have. They will stop contacting you when the debt collector account is removed from your credit report.
After that period is over, you ask the debt collector in writing to stop contacting you. If they don’t, you can file a complaint with the Consumer Financial Protection Bureau (CFPB).
Just because the debt collector stops contacting you doesn’t mean your debt is wiped clean. In other words, you still have an outstanding debt.
4. The debt collector can file a lawsuit against you
If you continue to argue not to pay them, debt collectors may take legal action. If they file a lawsuit against you, you may receive a copy and a summons to appear in court.
Keep in mind that the situation puts you at high risk. How could it not? When the court grants their demands, the debt collector will try to get payment for your debt.
No matter how you try to fight them, they may ask the court to place a lien on your assets, garnish your wages, or even freeze some or all of the funds in your bank account. But the practice will depend on state law.
So, if you receive a court summons, it will be better for you to immediately consult an attorney who can help you reach the best possible settlement with the debt collector.
Since you now know the consequences you may face if you don’t pay your debts, it’s important to address this issue proactively.
Can You Get Out of Your Debt Collection Without Paying?
It’s okay if you do not pay your debt, as long as it is not yours or it has passed the specified time limit.
If that’s the situation, you can really get out of debt without paying it. Plus, you can file a debt dispute with the debt collector or credit bureau to have your debt account removed from your credit report.
Conclusion
Even though your unpaid debt will be written off by the creditor after the statute of limitations as a loss, it does not mean that you no longer have the debt or that it is gone. Sure, your creditor may transfer your collection account back to the debt collector to sell at a much lower price, so you will still be chased to pay off your debt.
If you ignore the debt collector and do not pay them, they will continue to contact you in various ways, and worst of all, you will be sued for your unpaid debts.
