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You should never pay a collection agency, even if they demand payment immediately and directly. This repayment will remain as a transaction on your credit report for several years. This type of debt repayment could negatively affect your credit score, leaving you with limited options for obtaining loans and harming your financial life in other ways.
A bankruptcy lawyer can help determine the best steps to take regarding the unpaid debt you owe. Having an attorney on your side can help you deal with the debt collector in a legally favorable manner that helps you now and well into the future.
What Could Happen to Your Credit Report If You Pay a Collection Agency Directly
Having a debt with a collection agency account will harm your credit score and can remain on your credit report for years, even if you pay it. By paying the collection agency directly, the notification of the debt could stay on your credit report longer than if you attempt to use another option, like filing for bankruptcy.
When institutions check your credit report and see this information on it, it may harm your ability to obtain loans. By going with a different means of paying back the debt, such as setting up a settlement plan, you could potentially have the negative entry leave your credit report sooner.
Don’t Just Ignore the Debt Collector’s Phone Calls Either
Even though immediately paying the debt collector may not be a good option, it’s worse to ignore the collection call altogether. Problems can arise when you ignore a debt collection call, including:
- Interest: You’ll accumulate interest and perhaps even collection fees on the money you owe during the time you are ignoring the collection agent.
- Negative Effects: Not taking care of the debt will continue to negatively affect your credit score until you explore your options and take steps to remedy the situation.
- Lawsuit: The collection agency could bring a debt collection lawsuit against you, potentially leading to a wage garnishment and a freezing of your bank accounts and assets.
Instead, you should tell the debt collector to stop calling you. Then reach out to a bankruptcy attorney to figure out the best way to handle your situation.
Never Pay a Collection Agency Without Weighing All Your Options
Although it can feel like you are backed into a corner when you receive a call from a debt collection agency, do not panic.
Depending on your situation, you may have multiple options. Don’t let the debt collector bully you into making a direct, immediate payment. Instead, explore whether another action may fit your situation better:
Filing for Bankruptcy
Although some people have a negative feeling about filing for bankruptcy, it may be your best option in a case like this.
By filing for bankruptcy, you can receive some legal protections that aren’t available in other situations. It gives you time to come up with a plan for repaying the debt as it stops all collection proceedings immediately. You may even be able to receive forgiveness for some types of debt, like credit card debt or medical debt.
A bankruptcy law firm can explain more about the process of filing bankruptcy and determine whether it fits your situation.
Creating a Debt Repayment Plan
If you believe you’ll be able to repay the debt eventually but need to spread it out over a longer period of time, developing and agreeing to a payment plan may be a good option for you.
This can be a better option than bankruptcy for some. A personal finance attorney can help you decide. However, if you go with this option, you won’t receive the same types of legal protections you receive when filing for bankruptcy.
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Never Pay a Collection Agency Directly Without Determining the Legitimacy of the Debt
Sometimes, a debt collection company may reach out to you mistakenly or illegally. A debt collection call also could be a scam. Never pay the money without first investigating the legitimacy and legality of the call.
The Collector Must Give You Proper Notice
Debt collectors cannot just report your debt to credit bureaus unless they follow certain steps, as specified by the Consumer Financial Protection Bureau, including:
- Speaking with you about the debt
- Sending you a letter about the debt
- Giving you a reasonable amount of time to respond to the letter
If the collection agency reports the debt to the credit bureaus without following proper procedure, you may be able to bring legal action.
The Debt Should Be on Your Credit Report
To be sure whether the debt in question is legitimate, check your credit report. All your debts should have a listing on the report.
If you don’t believe you owe this money, don’t recognize the company that you supposedly owe, and the debt isn’t listed on your credit report, the debt collection call may be a scam.
You May Have Already Paid the Debt
It’s possible you paid the debt, but the company made a mistake and sent it to a collection agency anyway. If so, explain the situation to the collector and don’t send the collection agency any money. If you can’t seem to untangle this type of situation on your own, a personal finance lawyer can help.
Seek Help from Our Bankruptcy Lawyers When Dealing With a Collection Agency
At Farmer & Morris Law, PLLC, we have decades of collective experience helping people deal with debt collectors. We know the importance of never paying a collection agency without checking out your various legal options first.
For a free consultation, contact our legal team today. We can discuss the advantages of filing for bankruptcy and explore other options that may fit your specific situation.
