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Paying Off a Debt in Collections

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I received the following email the other day and, having no advice to give, I received permission to post this on my blog in hopes that someone who reads will have some sort of advice. Essentially B. had a little credit card debt that she was a little irresponsible about and now she wants to pay that debt off except it’s already gone to a collection company and now jam packed with fees and penalties.

Dear Jim,



I had a credit card about 10 years ago that I had forgotten about. I feel on some very hard times and had quit paying on it. They had turned it over for collections. A $300 credit bill went to over $1000. At that point I just didn’t respond to the collection company. I never heard anything else from them. All these years have gone past and now a different collection company is trying to sue me for it. Can they still sue me for this?



I know you must be thinking I am such a dead beat but I really am not. I would gladly go back and pay the credit card company for the money but I don’t think I should have to pay the amount they are asking. Could you please give me some advice? I really am a good person just trying to make it week to week.



Sincerely,

B.

I just ask that if you do leave a comment, please let it be constructive and helpful, not chastising and rude. I won’t censor anyone but I like to keep things positive and I don’t like mean spiritedness.

{ 29 comments, please add your thoughts now! }

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29 Responses to “Paying Off a Debt in Collections”

  1. buttercrud says:

    Don’t pay it. In fact, don’t even promise to pay it as this would reopen the debt, thus reintroducing the possiblity of being sued. Every state is different, but the window of collection has most likely passed for this debt. For more info, check here:

    http://www.bcsalliance.com/y_debt_sol.html

  2. Dus10 says:

    Wow! Ten years! I am not sure about your particular state, but you may want to look into the statute of limitations for your state and see if your situation applies; you may not owe them anything, and it may be illegal for them to seek collection.

    Double-check your states laws and double-check the last time you sent a payment or implied that you would be sending a payment.

  3. Sarah says:

    I had a situation similar to this. I owed Cingular some money – when I terminated my contract they waived the termination fee but then I misplaced the paperwork in a move. When the bill came it showed that I owed that extra $200 for early termination. Similar to you, I had fallen on hard times, I had moved out of state and moved back shortly after and didn’t have a job at the time.

    However, when trying to clean up my credit a couple of years later, I had found the paperwork and I contacted Cingular directly instead of the collections company listed on my credit report. They reduced the payment according to the paperwork that I had (I had to fax it to them) and I also did not have to pay any of the fees that the collections company had tacked on. It made a HUGE difference, I think I only paid like $240 instead of $500. I got a letter proving that I paid the bill and sent it to the three credit reporting agencies and it has been removed from my credit.

    I would suggest that you contact the credit card company directly and talk to them rationally about it and ask for a settlement amount. Depending on what state you are in, I think all they can do is put it on your credit, and if it’s been 10 years, it should not even show up on your credit at this point! If you don’t want to pay it, you’d have to find out what the exact laws are regarding when it can be removed from your credit report (if you care about your credit report – if not then you can just keep ignoring them!)

    Good Luck!

  4. CK says:

    It depends on the state but it’s most likely outside the statute of limitations to collect. This is a favorite trick of scum bag collections agencies. They know that most people don’t know the law and they berate them into paying. If you feel like you owe the money morally or what not then talk directly to the credit card company. If you do anything get it in writing. Whatever they agree to get it in writing before you do anything. Did I mention get it in writing? And a promise to send you something in writing is worthless, wait until you have in it writing.

    A good resource. (http://www.ftc.gov/bcp/conline/pubs/credit/fdc.htm)

  5. Tinyhands says:

    Note: IANAL–
    I don’t think contacting the credit card company is going to do any good. They have already written off the bad debt, selling it to a collection agency (who appears to have sold it to a second). You want to contact the collection agency.

    In all fairness, you owe somebody $300, and chances are that the collection agencies bought your debt for MUCH less than that. (FYI, that’s how collection agencies stay in business. They buy a $300 debt for $100 and then try to get as much as they can. It’s legal, as are the “collection fees” and interest they tack on, as long as the penalties aren’t usurious.)

    Calm, rational negotiating is your best strategy. You don’t want to threaten NOT to pay it, but you could suggest that it will take them a LOT longer to collect $1000 than it will take them to collect $300. Knowing that they probably bought your debt for less than $300 strengthens your negotiating position. I would also avoid agreeing to a payment plan that has you paying much more than the original $300. They are allowed to sue you for more than the original debt, but they are not allowed to harass you for it. Request everything in writing and send correspondence via certified mail (keeping a copy for yourself, of course).

  6. Wil says:

    I’m pretty sure that the change in collections companies (which I presume happened within 7 or so years from the last collection account) and their interest in persuing this is why it is even an issue for them. In these cases, I’m pretty sure the clock starts ticking all over again. You have a few choices. You could dispute the item, and hope that the expense involved in researching a 10 year old debt is more than the collection agency is willing to deal with for a small account, and the worst that could happen is they respond to your dispute and the item stays on your report. You could pay them in full (really expensive, but maybe worth it, especially if you are planning a big-ticket purchase relatively soon). You could also contact the company and work on a settlement amount. If this is the method you choose, make sure you have them provide you something IN WRITING that states the exact amount they are accepting, and that they will report this within 30 days as being paid in full. Settled accounts may make consumers feel better, but loan officers look at these as giant red flags. Our thought is “If they didn’t pay their bill then, why would they pay it now?”

    I don’t know if they even have standing for the debt in court if it’s been over ten years. That’s more of a legal opinion, and one I wouldn’t venture to give. There is a radio show out here called “Handel on the Law”, that get’s this type of question all the time. Try their web boards http://www.handelonthelaw.com to see what answers are there.

    Good Luck.

  7. The first bit of advice that I would give is that there is a lot of information about there – and some if it is even useful. This is a really good place to start – link There are also discussion boards at creditboards.com, but you need to register before you even are allowed to READ most of their stuff.

    If you read through the link above, you will likely find that their first advice will be for you to write the company billing you a letter asking them to verify the debt. There is very specific wording that you should use – and they have to reply – again, very specifically – something with your signature that says that you agree to pay the amount owed and additional charges. If they do not, then you do not owe them any money. With a debt this old, the likelihood that they will be able to verify this debt is low.

    To be honest, your good intentions in wanting to repay money that you legitimately owe may actually be HARMFUL to your credit score. Even if you pay back the debt, without following the procedures listed in the above link, you may find yourself with a black mark against your credit.

    There is obviously a ton more information on this subject – and I would encourage the reader to follow up with some of the discussion boards that deal exclusively with debt and credit repair, as this is a topic that they handle frequently. Good luck.

  8. moneymonk says:

    10 years ago !!!!!!!!! Check out the statues of limitations. Most debt expires after 7 years.

  9. missiondebtfreedom says:

    If you feel you are morally obligated to pay the debt, then scrape together $300 and offer it to them as “settlement in full.” DO NOT send money until you have that agreement in writing, and do not give them electronic access to your checking account.

  10. Matt says:

    Do not give them ANY access to your checking account. If you’re going to pay the debt, pay it to the original creditor. If the original creditor won’t accept it and you feel morally obligated to pay somebody, go down to the post office and get a money order.

    DO NOT UNDER ANY CIRCUMSTANCES SEND ANY MONEY TO A COLLECTION AGENCY BY CHECK. The routing and account numbers on the bottom of your check are sufficient for them to steal the entire balance of your checking account…and likely significantly more than that. If you have $2000 in your checking account, for example, they can issue a bank draft for, say, $15000, and your bank will honor it and then come after you for the money. It will then be up to you to prove that you didn’t authorize the transaction, not to mention possibly defend yourself against criminal charges for having (unknowingly) spent a month writing bad checks. If you can do this (fat chance), you may get out of repaying the $13000, but you’re still out the $2000, plus whatever you’ve been charged by all the people you wrote checks to that didn’t clear because of the $2000 not being there. Either way, your bank will close your account, and it will be at least 7 years before you’ll be able to get another checking account somewhere else. This sort of thing can cause a cascading nightmare through your credit history that takes many years to fix.

    I made that mistake ONCE. I’m still trying to put my credit rating back together more than ten years later. I have $167,000 in cash and $140,000 in home equity, but I can’t get a credit card or a checking account, because of the consequences of paying a collection agency by check. Don’t do it. Learn from the horrible mistakes of others.

    Is this illegal? Of course it is. But collection agencies do it every day. Breaking the law is their reason for existence.

    Chances are you can walk away from this debt legally in the clear. If you feel a moral duty to pay it, then pay it to the original creditor. THEY should be safe to pay by check.

  11. Lisa H says:

    Since the statute of limitations has almost certainly passed I would say it won’t be affecting your credit. If you start paying the debt now it will restart the statute of limitations all over again. I would be weary of paying this debt-Definitely do not make a payment arrangement. If you feel you must pay this debt I would make the payment in one lump sum. Making a payment arrangement now can actually hurt your credit score.

  12. Vic says:

    The statute of limitations has expired, but it will remain on you’re credit file for about 7.5 years. Don’t offer anyone anything this will start things over again, and there are agencies that try to collect on old balances that have expired!

  13. Yves says:

    The statute of limitations has expired. You do not owe anything.
    I advise you: not to speak with the collection agency nor the credit card company, if you do they will destroy you credit.
    If they bother you, just send them a registered mail asking them to prove and source the amount they try to collect from you. They will not be capable to prove it or it will be over the statute of limitations and will be a proof that the debt is extinct.
    After that, if the still bother you, tell them that you will go to the court and file a small claim (you do not need any lawyer for that.) If they continue then file the small claim and ask for a few thousands for damage (stay below the small claim maximum).
    If you have a record in your credit file, dispute it as erroneous with the 3 credit bureaus.
    If you feel guilty not paying the $300 and / or suing: once everything is cleared, you can give that money to a good charity, the money will be then better used than in the hands of the collection agency.

  14. Kevin says:

    The statute of limitations is probably up (however I think this is an affirmative defense, meaning you have to actually go to court if they sue). Either way, I second Rob. Don’t listen to anyone here. Doing the wrong thing could start the statute of limitations clock ticking again. Go to http://creditboards.com/forums/ and get advice. They know what they are doing when it comes to credit repair.

  15. Tim says:

    there is more to learn from the note on exactly what happened in the intervening period. However, a useful link about Statute of limitations on debt is here

    http://www.fair-debt-collection.com/statue-limitations-explained.html

  16. Ralph says:

    I wanted to ask for help. In 2001 I openend an account with Sprint PCS. I then had to cancel it because I had lost my job. The bill ended up at $758.08. Since I was young and dumb and could not pay the bill I ignored and it disappeared. This month I decide to look at my credit report and notice a judgement (thru Asset Acceptance) which I did not know about. I called them (played dumb just in case) let them know that I was not sure this was my account. The rep was extrememly rude. I told him I wanted proof he then kept harrassing and hung up on me. I then called Sprint and asked them if I pay the balance with Sprint will the bill collection company stop collecting the balance after constant holds she said that they shouldn’t since the balance would be at zero. Does anyone know if this is true? Will the collection company still try to collect the collection, court fees and interest fees?

  17. Mark says:

    Yuck. I too had a difficult situation involving a past business. Anyways, the SOL issue is a interesting one. However, there are several anomalies in your situation, which might be cleared up by a posting on one of the more technical legal websites. First, even though the SOL may have passed (depends on the state, and the type of debt), the creditor (which in this case is the collection agency) can still ask for money. He just cannot sue you. There are many reasons why a debtor might pay a debt that is out of the SOL. For example, an expired debt can still be reported to a consumer reporting agency (Transunion, Equifax). So if you wanted to buy a home or a car with credit, clearing up the credit issue would be to your advantage; that is why they may try to discuss a “stale” debt with you. Second, a judgment resulting from a lawsuit can be extended if it is expiring, so it may not be subject to SOL if it is a judgment. Also, the date of the SOL may run from a particular moment in time that is different than what you think: the date it is written off, or the date it went into collections, as opposed to the date of your first delinquent payment. Third, some private collection agencies are more…careful, tenacious, aggressive, whatever. Even though Asset Acceptance is talking to you, the other ones may not be.

    Finally, private collection agencies sometimes buy the debt for themselves, and sometimes they collect it on behalf of another financial institution. Just because they are calling or writing you does not mean that the others will also. Just because they have contacted you does not mean it is the harbinger of a new round of super-aggressive efforts to collect the old debts.

    PCAs pay pennies on the dollar for old debts. In fact, in times past, I spoke to a guy in Ohio who used to buy old bad judgments from the Resolution Trust Corporation (failed S&Ls). He paid one dollar per thousand of the debt’s face value and was pleasued to collect anything. Consumer debt is less costly, and it depends on the age of the debt. A 10 yo debt will not have cost them much, so they may well be pleased with anything you offer; but if you make an offer, it will increase their interest in you. If you can’t tell, I have a background in the industry, and was later on the other side of the table when my own business experienced problems.

    Anyways, several things to remember at this stage —
    1. Don’t get yourself down. You remember the dark days when your business failed, and the creditors seemed the least of your problems. Others have been there, too, and the worst thing to do is to pretend your problems don’t exist. Face them and you will feel so much better — at least that worked for me.
    2. You should probably just explain to them that you are 58 years old and nearing retirement. You cannot afford to pay them the full amount. Use the other debtors as leverage. Perhaps they will accept a nominal payment to settle the account. If not, I doubt you need to do anything. Yes, you will have to put up with phone calls or letters, but they cannot do too much to you. And let me tell you: if they ever sue you, imagine going in front of a judge and asking him to seize $40k from some 60 year old’s retirement accounts and garnishing his Social Security. Believe me, not many collectors would go this far. More liekly, they will call and write to you, expecting a brushoff on such an old debt. So give them a brushoff.
    3. The collectors are people too, who understand what you have gone through. Be honest with them and you may be pleasantly surprised.

  18. larry ghent says:

    I was told by a collection department for a credit card I have that they cannot sue me because they are going to write off my credit card debt as a bad debt. She acted like she had just made a slip up and would not repeat the info. She said that because I live in South Carolina, they could not sue me. Then I found out that SC will not let anyone garnish my wages. Right now I have no job and no money. In the future, I will be imployed and will want to pay off my credit cards. Could some one help me with this info ?

  19. cornell says:

    A bill collector has agreed to erase my debt if i agree to a settlement offer that was half the orginial bill. If i agree to the settlement when it gets listed on my credit report. Is it considered a negitive and does it hurt my credit score?

  20. Erik says:

    I am a lawyer, and have dealt with consumer debt issues. I can’t give specific legal advice, but want to explain two points:

    1. If the statute of limitations has passed, there is NOTHING they can do to collect the debt. No lawsuit, no garnishment, nothing. They’re screwed, period. The statute of limitations varies by what state you live in; a few quick searches should turn it up. There is one catch here. That is, if you pay on the debt after the statute has run, the debt becomes valid again. Some collections agencies will try to get you to send just $1 on the debt. That’s because they know it will start the clock again.

    Also, don’t confuse this with actual judgments. Those are different and I can’t sum them up in a few lines. Simply put, each state has different periods judgments are good for and how to renew them. Also, if you’re trying to enforce a judgment from one state in another, there are many different rules. For stuff like this, it really helps to ask a lawyer. It really is complicated.

    2. After 7 years, bad debt drops off your credit record. Earlier credit histories can be accessed for security clearances, certain background requests, etc., but not if you’re trying to get a car loan or a credit card.

    So, if it’s past the statute of limitations and off your credit record, well, why would you pay them? Politely saying, “no, I am not going to pay it” and repeating that (always politely) will usually make them go away. They know they won’t get anything.

  21. asw says:

    DO NOT PAY THESE THUGS… I was in exact same situation as u are, and i did the mistake of being nice, and paid them off (way more than my original amount) and guess what happened?… My score went down drastically but like 60 points. It opened a new debt and that decreased my score. DO NOT PAY THEM, and dont even think of them. Just move ahead with ur current credit and keep paying active ones off. dont even touch these old ones.

  22. golfgirl says:

    Similar situation – however, I was not aware until they sued……Now the lawyer wants me to prove SOL have expired. How do you prove a negative – I can provide bank statements; however, they could come back and say I used another way to pay…. I do have a credit report that shows the last payment was May 2000

  23. Dolly says:

    I recently found a misreported collections account that shows closed by creditor and paid in 2002. Should I ask the creditor to delete this deragatory or will the request hurt my score?

    It is actually a credit card account that, both I and the creditor concurred, was never opened by me, nor did I receive a card or invoice by mail. I only discovered this account by looking at my credit report in 2002 and was surprised to see such an account # and a delinquent amount (the annual card membership fee plus late fees. In 2002, this account and the unpaid fees were eventually written off by the creditor and closed.

  24. Sheldon says:

    Read the Fair Debt Collection Practices Act. Second party debt collectors have to sue you in your venue (state of residence). This costs them money that they CANNOT get reimbursed for. In addition, they cannot charge interest or other fees. It is possible that a second tier collector bought this debt for pennies on the dollar. They will stop at nothing to harrass you into paying. Legally they cannot do so.

    Check your state law for statute of limitations. In all likelyhood, it has run out and they are out of luck in trying to collect. Consider it a gift. Most states SOL run 4-7 years. Typically second tier collectors buy the old debts after first tier collectors have stopped trying to collect a debt.

    Finally, see Eric the Lawyers reply.


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