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The debt collection process

How it works, when you can be contacted and what you can do about it.

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Anna Serio

Updated

Fact checked

Your debt usually isn’t sent to a collection agency until you’re at least 180 days late on a bill. While collections will hurt your credit score, you can improve it as soon as you pay off the debt. But be sure you’re working with a legitimate debt collection agency before you make a payment.

How the debt collection process works

Key takeaways

  • Your debt typically won’t reach a collection agency until you’re at least 180 days behind — before that, your original creditor’s in-house team will usually try to contact you first.
  • You still owe the debt even after it’s sold to a collector. Once your creditor sells your account to a collection agency, you deal exclusively with that agency — contacting the original lender won’t help.
  • Collectors have rules they must follow. They can’t contact you before 8 a.m. or after 9 p.m., can’t discuss your debt with others, can’t threaten you with arrest, and must send written validation of the debt within five days of first contact.
  • Ignoring a debt collector can lead to a lawsuit — and if you don’t show up to court, the collector wins by default and may be able to garnish your wages or place a lien on your assets.
  • Paying off a collection account can now improve your credit score. Under the FICO 9 scoring model, paid collections are deprioritized, so settling the debt is worth doing even after it’s already hit your report.
This summary was generated by AI and may contain errors or omissions.

The debt collection process varies based on your creditor, but in general, you can expect the following to happen:

  1. You receive a notice from your creditor that your account is past due. This is typically done by your creditor’s in-house collection department.
  2. Your creditor moves your account to a “charge off” status. This typically happens after 180 days of no payment. If this is a credit card account, you’ll no longer have access to use your card. And this negative mark will stay on your credit report for seven years.
  3. Your debt is sent to a collector. Your creditor hires a collection agency to help collect payment. It may even sell your debt to the agency, which means your creditor no longer has any involvement in the process going forward. You would be working solely with the collection agency to pay back the debt.
  4. The collector contacts you to verify your identity. They may do this by mail or phone — and this can even involve calling your friends, family or employer to verify your identity. However, they’re not legally allowed to discuss your debt with anyone but yourself.
  5. You receive a written debt validation notice from the collector. Once they’ve verified your identity, you’ll receive a letter within five days stating the original creditor, the amount owed and how to proceed.
  6. You continue to receive phone calls and letters. Until you agree to pay off the debt, your collector will continue to make phone calls and send letters to you.
  7. You talk to the collector and agree to pay back the debt. At this point, you can try to negotiate with the collector to pay less than the original amount owed.
  8. The collector closes your account. Once you pay off your debt to the collector, they close your account.

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What happens if I don’t repay my debt?

If you don’t repay your debt, the collection agency might hire an attorney to sue you. You’ll receive a notice from the court system and an appearance date. If you don’t show up, you’ll lose by default and be legally responsible to pay.When you do appear in court, both you and the collector make your case to the judge. They’ll then send out a judgment and decide if you need to pay back the debt or not.

If you lose, you’ll likely be responsible for not only paying back your debt but other expenses like attorney fees, collection costs and interest. And your collector may garnish your wages or place a lien on your assets to recoup the amount your owe.

How will not repaying my debt hurt my credit score?

When a credit account goes to collections, your credit score usually drops. How much depends on how high your credit score was in the first place.The collection account used to stay on your credit report for seven years — even if you pay the collector. But now you can improve it by paying off your debts. The most commonly-used credit scoring model, FICO 9, deprioritizes collections accounts you’ve already paid. So paying an account while it’s in collections can still improve your score

Who is most likely to be researching the debt collection process?

Finder data suggests that women aged 35-44 are most likely to be researching this topic.

ResponseMale (%)Female (%)
65+4.99%3.69%
55-645.59%6.79%
45-547.98%9.58%
35-4411.28%11.38%
25-3410.28%9.88%
18-248.78%9.78%
Source: Finder sample of 1,002 visitors using demographics data from Google Analytics

When will a debt collector contact me?

Every credit provider has a different policy when it comes to overdue debts and debt collection. But generally, if you’re late with a payment, you won’t hear from a debt collector straight away. Instead, your provider may contact you by phone, email or letter reminding you of the debt and requesting payment.

If you haven’t responded to your provider or made a payment, they may then refer the account to a debt collector. This could be the case if you have a payment that’s more than 30 days overdue. But it happens more often when your account is moved to a “charge off” status after 180 days of no payment.

New CFPB ruling on debt collection communication

The Consumer Financial Protection Bureau (CFPB) issued two rulings in 2020 that clarifies what it considers to be harassment. These new rules also establish practices debt collectors must follow when communicating with debtors and before reporting to credit bureaus.

While there are no set limits on how frequently a debt collector can contact you by text, phone or email, they are now required to provide the option to opt out with each attempt at contact.

It also reinforces earlier rulings that state debt collectors can’t leave messages with the intent to harass or abuse any person — although it isn’t specific what type of messages are considered to be harassment. And it prohibits collectors from threatening lawsuits on debt that is outside the statute of limitations.

Debt collectors are still required to provide you with proof of your debt when requested.

Before you sign up with a debt relief company

Debt relief companies typically charge a percentage of a customer’s debt or a monthly program fee for their services. And not all companies are transparent about these costs or drawbacks that can negatively affect your credit score. Depending on the company you work with, you might pay other fees for third-party settlement services or setting up new accounts, which can leave you in a worse situation than when you signed up.

Consider alternatives before signing up with a debt relief company:

  • Payment extensions. Companies you owe may be willing to extend your payment due date or put you on a longer payment plan if you ask.
  • Nonprofit credit counseling. Look for free debt-management help from nonprofit organizations like the National Foundation for Credit Counseling.
  • Debt settlement. If you can manage to pay a portion of the bill, offer the collection agency a one-time payment as a settlement. Collection agencies are often willing to accept a lower payment on your debt to close the account.

How to tell if a debt collector is legit

Receive a notice from a debt collector and wondering if it’s a scam? A few telltale signs can let you know if the person on the other end of the phone is a reputable debt collector.

What to look for in a reputable debt collector

  • The company is easy to find. A reputable debt collection company will have a website, and it should be easy to find out where it’s headquartered.
  • They validate the debt. If you ask a debt collector to validate the debt, they’ll send you a letter in the mail showing where the debt came from.
  • Your original creditor can verify them. If you call the person or company you originally owed the debt to, they can confirm which collection agency the debt was sold to.

What to watch out for

  • They won’t give you their contact information. If the caller refuses to disclose their name, company, street address, phone number and professional license number, they’re likely not operating above board.
  • They won’t give you info about the debt. You have the right to ask the collector about the debt before you pay. If you don’t recognize the creditor they’re trying to collect for, it may not be legit. You can write a letter to the collection agency for more information before paying to make sure it’s actually your debt.
  • They threaten you with criminal charges. If the caller is claiming they’ll have you arrested if you don’t pay, they’re likely not a legit collector.

How will debt collectors contact me?

The most common way for debt collectors to contact you is via phone. However, they can also contact you by letter, in person or online through email.

They can’t contact you before 8 a.m. or after 9 p.m. They’re also prohibited from repeatedly calling to annoy you, though the law doesn’t specify how often they’re allowed to call before it’s considered harassment.

Debt collectors are also advised to respect any reasonable requests you have for contact within specific hours. And they can’t call you at work if you request they don’t, or continue to call at all if you send a letter requesting they stop. If you think a debt collector is contacting you too often, or not giving you an opportunity to respond, contact the company to complain or contact the Consumer Financial Protection Bureau.

Debt collectors and privacy

As well as recommendations around how often a debt collector can contact you, there are also regulations and requirements that help protect your right to privacy. For example, a debt collector is not allowed to give anyone else details about your financial situation or to reveal that they are a debt collector unless you give them permission to do so.

This means if a debt collector contacts you at home or work and you’re not there, they can’t tell anyone else about the situation. Similarly, if they contact you online, they have to be reasonably sure that no one else will see the information.

What can I do when debt collectors get involved?

If a debt collector contacts you, it’s ideal to respond to them as soon as possible so that you can deal with the overdue account. Depending on your circumstances, you may be able to consider some of the following options:

  • Keep a record of the contact. Take note of when a debt collector has contacted you and what they said. This will help protect your right to privacy and may be used as evidence if you have to lodge a complaint.
  • Explain your situation. Let the debt collector know why you haven’t made a payment. If you’re experiencing financial hardship, they may be able to offer you a payment plan without taking further action.
  • Work out how much you can afford to pay. Debt collectors may suggest a repayment plan for you based on the amount that you owe. When that’s the case, make sure you can afford the repayments based on your current circumstances. If you can’t, suggest an amount that would be reasonable for you or ask about other options.
  • Sign up for credit counseling. If you’re unsure of how to deal with your debt, consider getting professional advice from a nonprofit credit counseling agency.

How to find the right credit counseling agency

The Department of Justice has a list of government-approved nonprofit credit counseling agencies on its website that you can search by state. Once you find one you’re interested in, check with your state’s attorney general to make sure there aren’t any complaints filed against it.

If it checks out, reach out to set up a consultation — typically these are free with legitimate agencies. Your counselor will help you come up with a plan to get on top of your finances from there.

How to find out which debt collection agency I owe

Know you have an account in collections but not sure exactly who you owe? There are a few ways to figure out what agency your debt was sold to:

  • Check your credit report. Most debt collection agencies will report your debt to one — if not all — of the major credit bureaus: Experian, Equifax and TransUnion. Take a look at your credit report from each bureau — you can do this once a year for free — and you’ll likely see the name and phone number of the collector your debt was sold to.
  • Contact your original creditor. Call the credit card issuer or other lender you originally had an account with and ask if your debt has been sold. If it has, it’ll be able to give you the name and contact information for the debt collection agency you now owe.
  • Check your mail and voicemail. If your debt has been sold to a third-party agency, odds are you’ve received letters and voicemails from the collector trying to get you to pay. Debt validation notices should contain the contact information for the collector. If you just have a voicemail, try searching for the phone number online to figure out which company it is.

What if I’m contacted about a debt I don’t owe?

If a debt collector contacted you about a debt that you don’t think is yours, or if the amount of debt seems wrong, send a letter to ask for validation of the debt. Check these details against your own and then contact the provider to dispute the debt.

If necessary, provide copies of any additional details, such as payments you made that aren’t recorded on your account. If the situation still isn’t resolved, you can seek professional advice from a nonprofit group, hire a lawyer or file a complaint with the CFPB if you feel that the collector is harassing you.

Bottom line

Dealing with overdue debts can be overwhelming, but there are many ways to get back on track. Understanding how the process works and being proactive by getting in touch with any debt collectors can help you take back control of your finances. However, if your debt situation worsens to a point where you no longer think you can handle it on your own, consider a debt relief company to help you regain control of your finances.

Frequently asked questions

Our answers to common questions about debt collection practices.

When will my debt be collected by a third-party company?

Some providers and banks have their own, internal debt collection teams to help with overdue accounts. Others may pass the debts on to third-party debt collection companies, which is more common for larger debts that have been in default for several months.

Whatever the case, you should be able to discuss a range of options for dealing with the debt in a way that’s manageable for you.

How can a debt collector take money from my bank account or paycheck?

They have to sue you first. If you receive a letter telling you that you’re being sued, don’t ignore it — if you don’t show up in court, it’s almost guaranteed that the collector will win the court order to take your money.

Who do I call to settle a debt — the collection company or the company I borrowed from?

Once a debt has been sold to a collector, they’re in charge of it. At that point, contacting the original company you owed won’t help — you need to deal directly with the collection agency.

The name of the collection company calling me changed. Am I being scammed?

Possibly, but probably not. Be cautious of scams and fake collectors, and request validation of the debt to make sure a company is legitimate.

However, just because a company is new doesn’t mean it’s a scam — a collection agency can sell a debt to another collection agency. This commonly happens when the first agency isn’t able to get a payment in a reasonable amount of time.

Pictures: Shutterstock

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Anna Serio was a lead editor at Finder, specializing in consumer and business financing. A trusted lending expert and former certified commercial loan officer, Anna's written and edited more than 1,000 articles on Finder to help Americans strengthen their financial literacy. Her expertise and analysis on personal, student, business and car loans has been featured in publications like Business Insider, CNBC and Nasdaq, and has appeared on NBC and KADN. Anna holds an MA in Middle Eastern studies from the American University of Beirut and a BA in Creative Writing from Macaulay Honors College at Hunter College, CUNY. See full bio

Anna's expertise
Anna has written 117 Finder guides across topics including:
  • Personal, business, student and car loans
  • Building credit
  • Paying off debt
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