Paying Debts in Collections

Jun 1, 2020 by

Past due noticeThrough the sometimes frightening wonders of Google Analytics, I know that someone navigated his or her way to this site a few days ago by searching:

“how to pay off credit card debt in collections”

The searcher spent nearly seventeen minutes on Money Counselor and looked at ten pages—an eternity, measured in Internet-time. Google hasn’t (yet) progressed to the point where it can tell me whether searchers found what they were looking for on this site (or their age, gender, weight, height, bank account balance, astrological sign, and attire at the time—but I feel sure that’s just around the corner). I’ve taken this particular visitor’s rather lengthy search to mean that, while he or she found something of interest, the individual didn’t find an on-target answer. This post is to make amends.

How Do Credit Card Debts Go to “Collections”?

If you run up a respectable credit card balance and then ignore for three or four months the statements, letters, and phone calls you’ll surely receive, your credit card provider may close your account and either transfer it to an internal collections department or sell the rights to a collection agency for a fraction of the balance, writing off the unpaid remainder. Collection agencies make a living by collecting from debtors more than they pay for written-off debts. (How they do that is a topic suitable for three or four posts, but to get a flavor, see Nasty Debt Collector. )

Your Debt is in Collections, But Now You Can Pay

Maybe a wage earner in your household lost a job, and while your household’s income was slammed, you had to triage your expenses and so elected not to make payments on a credit card account. The account went to collections. Now your family’s income is sufficiently restored, and you’d like to start paying off this debt. How do you do it?

I’m Not an Attorney, and I Don’t Even Play One on TV

With the serious disclaimer in the heading above, here’s my suggestion:

  • Ideally, you have a household budget so you can settle on how much you can afford to pay on this debt each month. If you don’t have a budget, you’ll have to guess the slack in your household’s micro-economy. I suggest though that you cut expenses as much as possible and aim to make the largest monthly payment you can on this overdue debt.
  • You’ll have received correspondence, and probably phone calls, from the collection agency now holding your debt. Except to determine the address to which you should send payments, ignore this communication, and don’t take phone calls from a debt collector if they annoy you. Bear in mind: The debt collector’s mission is to get you to send some money, today, period. You’re under no legal obligation to talk to a debt collector on the phone, and the debt collector could not care less about your best interests.
  • Begin making monthly payments on the debt in the amount you’ve determined you can afford, again after keeping a very, very tight rein on your household expenses.
  • Send every payment by certified mail with delivery receipt requested, and keep the associated documentation.
  • You’ll probably get a call from a debt collector telling you the payments you’re sending are not enough. Have one, short conversation with any collection agency representative who calls to tell you that what you’ve been paying monthly to the agency is not enough. Your message: “That’s all I can afford to pay, and I will keep sending it every month.” End of phone call. Unless the agency literally returns your checks (which is extremely unlikely), you are making progress on the debt.
  • If the agency threatens a lawsuit if you don’t pay more, ignore the threat and continue to send money according to your debt pay-off plan.
  • Read up on your rights under the Fair Debt Collection Practices Act. If a debt collector is violating the law, file a complaint with the FTC and talk to an attorney. You may be able to sue and collect damages, paying your attorney through a contingency fee.

“What If I Really Am Sued?!?”

When you’re seriously behind on a debt, you’re in jeopardy of being sued. It could happen, and you may have to go to court. If you’re sued, you need to consult an attorney. If you can’t afford one, try Legal Services.

Again, I am not an attorney, but here are my suggestions should you have to go to court:

Prepare by gathering your records: bank statements, cancelled debt payment checks, creditor statements, and your budget. Sincerely tell the judge the truth, something along these lines:

I acknowledge this debt, and I am doing my best to repay it. Here are my cancelled checks. I’ve been making payments every month for X months, and I have a plan to repay all of this debt within Y months. I’ve put together a very tight budget—here it is—and I’m working a second, part-time job [if you are—don’t lie] and I’ve determined the most I can spend monthly on debt payment is $Y. I’ve been making that payment faithfully for X months, and I will continue until this debts is paid off. I have a plan, and I’m doing the best I can. Yes, I could pay this creditor more, but I’d get behind on other bills, and I’d probably be right back here in court with another creditor sometime down the road. If that’s the future I face, I may have to file bankruptcy and get this over with.

If the court is unsympathetic and does nothing to discourage the creditor from pursuing garnishment or other intolerable collection activity, then you may indeed have to file bankruptcy after consulting with an attorney. But you’ll know you’ve tried your best to pay what you owe.

Do You Have Other Options for Repaying a Past Due Debt?

Yes, you do have options. A Debt Management Plan may work well if you have several debts you’d like to attack at once and pay off. Debt settlement can work for a single debt if you have a chunk of cash saved. (Don’t use your emergency fund!) See DIY Debt Settlement to learn more about the pros and cons of debt settlement and how to settle debts yourself. (Please don’t pay any company to settle debts for you—generally, they’re rip-offs.)

Your Experience?

Have you managed to pay off debts that had gone to collections? How did you do it? Any lessons learned?


  1. I’ve settled some debts in my past and used a debt consolidation service. Getting behind on a bill isn’t that uncommon…people just need to get over the initial fear of dealing with collectors and the repercussions of being past due.

  2. I also used a consolidation service in the past. They were what I needed to have a workable plan in place to get rid of the debt. I have since stayed far away from ever even being close to debt, thank goodness. 

  3. this topic makes me so nervous. I never want to get to the point where it makes sense to sue me.

  4. Although I’ve never been into serious debt situation before, I agree with Jason that instead of harboring fear, you can work with the collector to find a reasonable ground to resolve the debt problem. 

  5. I was lucky and had my mom co-sign on a loan once, so when I defaulted, they started bugging her. And she ponied up.  Now that I”m all grown up and responsible, I just feel terrible for having done that to her.  I”m glad to not be in debt like this anymore!

  6. Seems many of the bloggers in the personal finance world have overcome, or are working to overcome, debt challenges. Sharing the experience with others in similar predicaments has got to be a good thing.

    TB – Thank goodness for Moms! Is it too late to repay her? Mother’s Day is coming up. 😉

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