Yes, you can often pay your original creditor instead of a collection agency, especially if you act quickly, but the creditor isn't required to agree and may only take the debt back if they haven't sold it or if you're already working with the agency. Contacting the original creditor's customer service to explain your situation and propose a payment plan is your best bet to potentially get a better deal or work directly with them before the debt is sold or fully transferred to collections, but always get agreements in writing.
It's always better to pay the original creditor, but once the debt is turned over to a collection agency, you're going to have to pay the agency. The original creditor has sold the debt to the collection agency and in most cases won't deal with you anymore.
If you have an excellent credit history, you may be able to get the original creditor or collection agency to remove the derogatory mark as a favor or act of “goodwill.” You'll generally have to pay the collection account off first, though, if you haven't already done so.
Once your debt has been sold you owe the buyer money, not the original creditor. The debt purchaser must follow the same rules as your original creditor. You keep all the same legal rights. They cannot add interest or charges unless they are in the terms of your original credit agreement.
The "777 rule" in debt collection, also known as the 7-in-7 rule, is a guideline under the CFPB's Debt Collection Rule (Regulation F) that limits how often debt collectors can call you: generally no more than seven times in seven days for a specific debt, with a mandatory seven-day waiting period after a phone conversation before another call. This rule, established by the Consumer Financial Protection Bureau (CFPB), aims to prevent harassment by setting presumptions for acceptable call frequency, applying to personal debts like credit cards and medical bills.
The worst a debt collector can do, which is also illegal, involves using force, severe harassment (like calling at all hours, abusing you, or telling others about the debt), deception (fake court letters), threatening illegal actions (jail time, which isn't possible for most debt), or taking unfair advantage of vulnerabilities like age or illness; they can't trespass or take your property without a court order, but they can pursue legal action leading to wage garnishment, asset seizure, or bankruptcy as a last resort.
Special debts like child support, alimony and student loans, will not be eliminated when filing for bankruptcy. Not all debts are treated the same. The law takes some debts very seriously and these cannot be wiped out by filing for bankruptcy.
Steps to Negotiate Directly With the Creditor
If you have money available, you could contact the creditor and offer a lump-sum settlement. Creditors are often willing to settle a debt for less than they're owed if it means getting a decent amount of cash soon. Or you could try to work out a payment plan.
8 things you should never say to a credit card debt collector
Use this 11-word phrase to stop debt collectors: “Please cease and desist all calls and contact with me immediately.” You can use this phrase over the phone, in an email or letter, or both.
In most cases, the original creditor will offer better repayment options than a debt collector will. However, if your debt has been sold to a debt buyer and the original creditor no longer owns it, you'll need to pay the collection agency to clear up the debt.
Repaying a debt in full – even a debt in collections – is beneficial for your credit score, but even the most damaged credit history can be improved over time. If your score is still in good standing, it may be worth it to pay in full.
Yes, you can dispute a debt even if it has been sold to a collection agency. The Fair Debt Collection Practices Act (FDCPA) provides you with specific rights when it comes to disputing debts and ensures that you are treated fairly during the collection process.
It's better to pay off a debt in full than settle when possible. This will look better on your credit report and may help your score recover more quickly. Debt settlement is still a good option if you can't fully pay off your past-due debt.
Depending on how much you owe, your current monthly contributions towards the debt, and the length of time the debt has been held for, you may be able to negotiate a settlement figure of around 30% of the total amount owed. However, some creditors will take a much harsher view and will expect a figure closer to 70%.
Even after you pay a collection account, it stays on your credit report for seven years. However, you can dispute collection accounts that are inaccurate. You may even be able to persuade a collection agency to remove the account once you've paid it.
The worst a debt collector can do, which is also illegal, involves using force, severe harassment (like calling at all hours, abusing you, or telling others about the debt), deception (fake court letters), threatening illegal actions (jail time, which isn't possible for most debt), or taking unfair advantage of vulnerabilities like age or illness; they can't trespass or take your property without a court order, but they can pursue legal action leading to wage garnishment, asset seizure, or bankruptcy as a last resort.
So, if you want to bypass a debt collector, contact your original creditor's customer service department and request a payment plan. They may be willing to resume control of your account and put you on a flexible repayment plan.
5 Things Debt Collectors Don't Want You to Know
Some collectors want 75%–80% of what you owe. Others will take 50%, while others might settle for one-third or less. So, it makes sense to start low with your first offer and see what happens. And be aware that some collectors won't accept anything less than the total debt amount.
This can be a red flag, resulting in a lower credit score. Negotiate with your bank to repay any remaining balance on your 'settled' Credit Card. After paying it in full, request that your account status be updated to 'closed'. This demonstrates your commitment to financial responsibility.
Using debt settlement options to reduce debt comes with several risks, including late payments on your credit report, potential charge-offs, settlement company fees, tax implications on forgiven balances, possible scams and the overall risk of settlement offers not working.
Debt-to-income ratio targets
Generally speaking, a good debt-to-income ratio is anything less than or equal to 36%. Meanwhile, any ratio above 43% is considered too high. The biggest piece of your DTI ratio pie is bound to be your monthly mortgage payment.
Debt consolidation joins all your debts together, usually by taking out a loan and using the money to pay back the people you owe. It is a popular way of repaying debt because it means there is only one monthly payment to make to the loan provider.
If you've been delinquent on your credit card payments for more than six months, creditors might charge off your debt, which means they write it off as a loss on their books. This makes the debt uncollectible from the original creditor — meaning that the card issuer won't be making further attempts to collect on it.