What to Consider Before Speaking with Debt Collectors

Look at the Whole Puzzle First

Talking to collectors can absolutely help — if you have a plan. Many people and small businesses we work with have several delinquent accounts. It is important to look at your situation holistically and not just one account at a time when you are behind. Each delinquent account is a separate piece of your financial puzzle. If you are behind on 10 different accounts, it is important to form a plan that addresses all 10 of those problems before you take any action.

A collector’s job is to get as much of the balance for the account they are collecting as fast as possible. They are generally not trying to leave you enough to financially address the other accounts. Most of them only care about the account they are collecting.

If our site can make just one impression on you, this is the main point we want you to walk away with: If you have more than one collection or charge-off, it is mission critical to decide whether you can settle or make payment arrangements on all of the accounts before you start to address them. Otherwise you can spend the money that would have solved the whole problem on just some of them, when you may have had the ability to address them all.

Decide the Path Before You Negotiate Any Accounts

Monthly payments on charge-offs generally do not put you on the path to credit recovery until they are all paid in full or fully settled. If Chapter 7 or 13 bankruptcy is not an option, settling the accounts is the option that leads to the fastest recovery since you will need less money to resolve them. Debt settlement is not right for everyone. Debt settlement is only a viable option if you can settle quickly.

If you can generate enough to settle the delinquent accounts at once, and if using that resource leaves you in a stable place, simultaneous settlement — the Strauss Method — is the conversation to have.

If you cannot settle now and the accounts are charged off, your goal is to regain control before the accounts are placed with an attorney. Debt collection has become much more legally aggressive in recent years. Accounts placed with an attorney are almost always less negotiable, both for settlements and payment plans. Attorney placement can start as early as 4 to 6 months after you fall behind. It is important to look at your accounts similarly to how you would a cavity. If you let the cavity linger too long, you may need a root canal instead of a simple filling.

If you cannot settle quickly, another way to reduce this risk is to set up payment plans on the accounts before they are placed with an attorney, then settle later when you are in a better financial position to do so. We offer a Payment Plan service for charged-off accounts with this goal in mind. If you want expert help see our payment plan service details.

If the Accounts Are Not Charged Off and the Setback Is Temporary

You do not need expert help. Just call your creditors and ask about a hardship and re-age. These programs are generally limited to credit cards and lines of credit. They often become an option when you are 1–90 days past due, and generally remain an option until the account charges off.

Most credit cards charge off around 180 days.

A hardship plan usually lowers the payment and interest rate and often closes the account. Ask how it reports to your credit, whether it shows as current (R1), how long any “special payment plan” remark lasts, and what happens when the plan expires. Get every creditor’s terms before you commit to one, so you can make sure the combined payment total on all of the accounts is affordable.

A re-age usually does not close the account or add a special remark. It also does not lower the interest or payment. Three consecutive on-time minimums often bring the account current without paying the whole past-due amount. That fits someone who hit a short bump, or someone who settled enough of their other accounts that the remaining accounts now fit the budget.

Helpful Tips

There are many myths about debt and credit on the Internet. Paying or settling does not restart the 7-year credit-reporting period on collections or charge-offs. The FTC addressed this directly in its advisory opinion to Amason. Making a payment often does restart the statute of limitations — that part varies by state.

If your accounts have been charged off or in collections for years and will fall off the credit report in two years or less, paying or settling them may not help recovery much unless a mortgage lender requires it to close a loan. Unless those balances are small, waiting for them to fall off automatically can make more sense.

Do not be lured by long-term debt settlement programs just because they sound appealing. Only 22% of people who enroll in a long-term debt settlement program settle all of their debts, and that data point is from a 2020 study commissioned by the debt-settlement industry.

Common Questions