George Simons | October 19, 2022 Show
Summary: When a collector contacts you, respond with a Debt Validation Letter. You may not want to pay a collector if you will never have any income or assets, if you don't owe the debt, if you want to settle for less, if the statute of limitations has expired, or if the collector doesn't own the debt. You've heard that you should never pay a debt collection agency, and now you want the truth. What happens if you never pay collections? Should you pay the debt collector or the original creditor? Debt collection agencies can employ a variety of shifty tactics. They may start with harassing phone calls and escalate from there. But depending on your situation, you may never need to pay a debt collector. Not sure where to begin? SoloSuit can help. Respond to debt collection lawsuits fast with SoloSuit. Debt collection agencies buy your debt from lendersDebt seems like a fact of life for many Americans. Four out of five Americans (80 percent) owe some debt. Collectively, Americans owe $1.4 trillion to banks, credit card companies, and other lenders. There are usually two parties in debt collection cases. First, there's the party who allegedly owes money, called the “debtor.” Then, there's the party to whom the money is allegedly owed, called the “creditor.” Often, a creditor finds they can't collect a debt from a debtor. Interest keeps piling up on the debtor’s loan, and there's no money coming in to pay it. A creditor now has two options:
A debt collection agency is a company that buys unpaid debt from a creditor. On average, debt collection agencies buy these debts for just 4% of the original debt amount . Then, they attempt to track down a debtor and force them to pay it all back. Let’s consider an example. Example: Bobby owes a credit card debt of $1,000. After months of missed payments, the credit card company (aka the creditor) charges off the debt and sells it to a debt collection agency for $100. Debt collectors start calling, sending letters, and writing emails asking Bobby to pay the $1,000 he owes. They threaten to take legal action if he doesn’t. If Bobby pays off the full debt, the collectors will make a gigantic profit. Because these companies specialize in tracking down alleged debtors, they're better suited to collecting unpaid debt than the original creditors themselves. They employ a small army of sleuths equipped with the world's best search tool: the internet. Against these odds, an alleged debtor is hopeless. Debt collection agents can track their prey using anything from bank records to voting data—even internet providers! Luckily, you can fight debt collectors and beat them in and out of court. Old debts can cause problems whether you pay or notAt first glance, it might make sense to just pay off a debt collection agency. After all, that's the easiest way to make them leave you alone, right? Not exactly. Sure, paying a debt collection agency may get them off your back. But that's all it'll do. Evidence of the unpaid debt will remain on your credit report for another seven years. The actual amount of the debt doesn't matter. Collections raise the same red flag on your credit report, regardless of whether the debt is for $100 or $100,000. This can affect your ability to secure loans in the future. What's worse, intent doesn't matter in debt collection cases. Many debtors aren't trying to dodge their creditors. They just don't know they owe money. This happens all the time. A creditor may send an unpaid debt notice to a borrower's old address. The borrower never receives it and goes on with their lives, unaware of the debt following them. This lingering debt can have some surprising effects, namely a damaged credit score. It'll make getting new loans more difficult. Securing financing for a car, mortgage, student loans, or home improvement is significantly more difficult with bad credit. But that's not all. Bad credit can also make it difficult to rent a home or even open an online streaming account. On the other hand, paying an outstanding loan to a debt collection agency can hurt your credit score. Yup, you heard that right. Any action on your credit report can negatively impact your credit score, even paying back loans. If you have an outstanding loan that's a year or two old, it's better for your credit report to avoid paying it. Protect your credit score by filing a response with SoloSuit. How to decide if you should pay a debt collection agencyThere's no “silver bullet” in a debt collection case. While ignoring a debt collector may be an option in some cases, it's not available to some debtors. Here are some general considerations. If you refuse to pay a debt collection agency, they may file a lawsuit against you. Debt collection lawsuits are no joke. You can't just ignore them in the hopes that they'll go away. If you receive a Complaint from a debt collector, you must respond within a time frame determined by your jurisdiction. For most areas in the US, that time frame is 14-30 days. If a debt collection agency wins their lawsuit, they have several options available. For example, debt collectors may garnish earnings to collect a debt. A garnishment is a court order that takes money directly from a debtor's earnings. This money goes towards repaying the debt they owe. Consider this possible outcome before ignoring a debt collector's payment demands. Here's one more thing to keep in mind. Interest on your unpaid debt will continue to pile up as time passes. If you don't pay a debt collection company, the amount of money you allegedly owe will keep increasing. Sometimes, paying a debt collection agency makes sense. Remember, these agencies buy debt for pennies on the dollar. As a result, you may be able to negotiate paying off your debt for a much lower amount than you owe. Debt collectors may also send you a letter stating that your debt is paid. You can use this letter to remove evidence of the debt collection from your credit report. A piece of advice: pay the right person. If you receive a letter from a debt collector demanding money, do your research. Often, debt collection agencies sell debt to one another. Don't just assume you're paying the right debt collector. Make sure your debt hasn't changed hands. Should you pay collections? Consider these factors and situations firstHere are some more specific factors to consider if you find yourself asking, “Should I pay a debt collector?” It may be a good idea to avoid paying a collection agency if:
You may want to pay a collection agency if:
If a debt is sold to another company, do I have to pay?The argument goes like this. You owed $1000 to the original creditor. The creditor sold your debt for $100 to a debt collector. If you pay $1000 to the debt collector, that doesn’t restore the creditor. Besides, the creditor already got their remedy for the debt in the $100 from the collector. Also, you don’t owe the collector $1000, because they only paid $100 for your debt. That said and the ethical argument aside, if a collector legitimately bought the debt from your creditor, you do have a legal obligation to pay, if the debt was legally assigned to the collector. You can reach a settlement instead of paying the debt in fullFor most people, it makes sense to angle for a settlement. If a collector is hounding you for a debt they are probably adding on hundreds or thousands of dollars in fees to the debt, including court fees and attorney costs. They also probably bought the debt for a small percentage of the face-value of the debt. These factors suggest that if you paid the full amount they are asking for, you would be overpaying. On the other hand, if you don’t pay off the debt at some point, they may keep hounding you forever. Even if the statute of limitations has expired and they don’t get a judgment against you, they can still keep asking you for payment or selling your debt to the next guy till the end of time—or it ends up on the spreadsheet of some street-thug collector who threatens your life. You can start the settlement process using SoloSuit and filing an Answer to your debt collection lawsuit. Once you pay the settlement, you’ll have documents showing the case is dismissed with prejudice and there was a full and final settlement. At that point, the debt is resolved. Learn more about the debt settlement process here:
Use SoloSuit to respond to a debt collection lawsuitIf you’re being sued for a debt, whether you owe it or not, you must respond to the lawsuit or you will lose by default. When you ignore a debt collection lawsuit, the debt collector can request a default judgment to be entered into the case. If granted, the default judgment gives the debt collectors the right to garnish your wages and seize your property. The first step to beating debt collectors in court is to respond to the lawsuit with a written Answer. Follow these six tips to draft an Answer to a debt lawsuit:
In many cases, filing an Answer will stop the lawsuit from proceeding further. Sometimes, the collection agency may drop it altogether, especially if they don't have the evidence they need to prove in court that you owe the debt. Increase your chances of winning a debt collection lawsuit by 7x with SoloSuit. What is SoloSuit?SoloSuit makes it easy to fight debt collectors. You can use SoloSuit to respond to a debt lawsuit, to send letters to collectors, and even to settle a debt. SoloSuit's Answer service is a step-by-step web-app that asks you all the necessary questions to complete your Answer. Upon completion, we'll have an attorney review your document and we'll file it for you. Respond with SoloSuit"First time getting sued by a debt collector and I was searching all over YouTube and ran across SoloSuit, so I decided to buy their services with their attorney reviewed documentation which cost extra but it was well worth it! SoloSuit sent the documentation to the parties and to the court which saved me time from having to go to court and in a few weeks the case got dismissed!" – James Get Started We have answers. |
If i settle with a collection agency will it hurt my credit
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