Understanding What Happens if a Bill Goes to Collections: Your Guide to Debt Relief

Here’s how to prevent your bills from going to collections and what actions to take if they do…

In the United States, there are over 7,000 collection agencies ready to take action if your credit card debt debts, personal loans, and medical bills (along with any other type of bills you have) remain unpaid. 

It’s important to be aware of the consequences and understand your debt relief options if your debt is sent to collections. 

KEY TAKEAWAYS:

• Collection agencies are hired by lenders, creditors, medical providers, and even federal and local governments to collect outstanding debts. And if they are unsuccessful, they will often sell the debts to a debt buyer for pennies on the dollar. 
• If you find yourself in a difficult financial situation due to job loss or unexpected expenses like medical bills, there are resources available to help you manage your debt and avoid collections.
• If your debt is already in collections, it’s crucial to take swift action to address the situation by seeking professional assistance from a reputable debt relief company like Americor. 

Below, we will explore what happens if a bill goes to collections, your rights in the process, and how to seek debt relief when you need it most.

What is a Collections Agency?

When you are unable to make at least the minimum payment on your credit card for 30 days or more, a collections representative from your credit card issuer may contact you. However, if you allow your debt to remain unpaid for several months, your issuer has the option to transfer it to a third-party collections agency. 

These agencies are hired by lenders, creditors, medical providers, and even federal and local governments to collect outstanding debts.

Credit card balances and medical bills are the most common types of debt that end up in collections. However, other forms of debt, such as rent, student loans, and tax debts, can also be passed on to collections agencies. 

It’s essential to understand the debt collection process, your rights, and the available avenues for assistance.

The Phases of Debt Collection

Debt collection typically involves three phases. 

When you first become past-due or delinquent on your bills, your credit card issuer’s collections representative will contact you to request payment. If you fail to pay within approximately six months, depending on the lender, they may give up on collecting the debt.

Next, your creditor may transfer your debt to a third-party agency contracted by them. This agency will attempt to collect the debt, including interest and late fees, in exchange for a commission on successful collection.

If the third-party agency is unable to recover the debt, your creditor may sell it to a collections agency, also known as a debt buyer, for a fraction of the original amount. It’s not uncommon for debts to be sold for as little as 5% of the total debt. 

At this point, your creditor is cutting their losses and is no longer involved. The collections agency will then make efforts to collect as much of the original debt as possible to generate a profit.

Depending on how much debt you owe and where you’re at in the debt collection process, you may want to consider seeking debt relief. Americor has provided over $2 billion in debt relief to over 200,000 clients, and could help provide you with the debt relief you need. 

Timing of Debt Collections

While six months (or 180 days) is a general guideline, there is no specific rule on how long it takes for your debt to go to collections. Some companies engage collection agencies from the beginning of the debt collection process, while others may take longer. 

To minimize surprise calls from collections, it’s recommended to check your credit report at least once a year. This will help you stay informed about any outstanding debts you may have overlooked.

The three major credit bureaus, Experian, Equifax, and TransUnion, are currently offering free weekly credit reports through AnnualCreditReport. Take advantage of this opportunity to stay on top of your credit and address any potential collection issues promptly.

Avoiding Debt Collections

If you find yourself in a difficult financial situation due to job loss or unexpected expenses like medical bills, there are resources available to help you manage your debt and avoid collections. 

The best course of action is to contact your creditor as soon as possible to discuss setting up a payment plan or negotiating a reduction in the amount owed.

By proactively reaching out to your creditor and explaining your financial hardships, such as a recent layoff, furlough, or reduced working hours, you may be eligible for accommodations. 

These accommodations can include lower APR, temporary forbearance or deferment of payments, waived late fees, or other forms of financial relief tailored to your situation. 

Navigating Collections

If your debt is already in collections, it’s crucial to take swift action to address the situation. Seeking professional assistance from a reputable debt relief company like Americor can greatly help in the process. 

With Americor’s help, they can reach out to the collections agency and negotiate a debt settlement to ensure that delinquent marks are removed from your credit report as soon as possible.

While it can take years for “past-due” bill history to completely disappear from your credit report, making progress towards settling outstanding debts will gradually improve your credit score over time. 

It’s important to note that debt collectors must adhere to specific rules and regulations. They are prohibited from lying to you, using obscene language, threatening you, or harassing you by phone.

Seeking Debt Relief

Navigating debt collections can be overwhelming, but remember that you are not alone. There are resources available to help you understand your rights and explore debt relief options. 

By proactively addressing your financial situation, working with debt specialists, and seeking legal advice when needed, you can regain control over your finances.

If you are struggling with debt or facing collections, we encourage you to seek guidance from certified Debt Specialists, such as those at Americor, who can provide personalized advice tailored to your specific needs.

By taking proactive steps, you can navigate the complexities of debt collections and work towards a brighter financial future. Remember, there is always hope for debt relief, and our team of experienced professionals are ready to guide you on your journey to regaining control of your finances.

For more information on Americor’s debt relief services, contact us today to see how we can help you pay off bills that go to collections and get on the fast-track to becoming completely debt-free!