What Happens If You Don't Pay a Collection

Any time you fall behind on a payment, there’s a risk of your account going to a debt collector. This applies to credit cards, loans, cell phone payments, cable service and anything else that has a monthly payment. Many people incorrectly assume they no longer have to pay off an account because it’s been sent to a collection agency. However, you still owe a debt, even when it’s been sent to collections, and there are still consequences of not paying your collection account.

Consequences For Your Credit

Once an account has been sent to a collection agency, there’s a good chance it’s already on your credit report. Some creditors have a pre- collections processed where you have a little time to pay off your account to avoid having a collection listed on your credit report. If that’s an option, you can pay the debt in full to avoid more damage to your credit report. After the collection is listed on your credit report, it will affect your credit score. Collections stay on your credit report for seven years.

Calls From the Collection Agency

One of the ways debt collectors get people to pay their accounts is by calling and asking for payment. When you have a collection, you’ll continue to get frequent phone calls from the debt collector. You can legally stop debt collection calls by sending a written letter and asking them stop calling you. At that point, the debt collector can only contact you one more time to let you know what action it plans to take next. Keep in mind, the written letter, known as a cease and desist letter only applies to a particular debt collector. If a new collection agency gets your debt, you’ll have to send another letter to stop calls.

Difficulty Getting New Approvals

Having a debt collection on your credit report makes it harder to get new applications approved. This is especially true if the collection is recent. Paying off the collection doesn’t erase it from your credit report, but it makes it easier to get approved for some accounts.

Higher Interest Rates on Loans

If you’re approved for a credit card or loan and you have a recent, unpaid collection, you’ll have to deal with higher interest rates than if you had no collections at all. Some services may require you to pay a security deposit before you can have services turned on in your name. While a deposit does mean you have to pay more cash upfront, you’ll get the deposit back as long as you keep your account in good standing.

Risk of Lawsuit and Garnished Wages

A collector could file a lawsuit against you. It doesn’t matter how much you owe, a debt collector can sue you for a debt any time as long as the debt is still within the statute of limitations for your state. The statute of limitations ranges from 3 to 15 years and varies depending on the type of debt and the state you live in. You should never ignore a lawsuit summons for a debt. If you think the statute of limitations has passed, you can use that to get the case thrown out. Talk to an attorney to learn more about what to do if a collector sues you.

If you ignore a lawsuit and fail to show up in court, the debt collector could automatically win the lawsuit against you. Once the debt collector has won a judgment, they can ask the court for permission to garnish your wages or levy your bank account to take care of the account. This is why it’s important not to ignore a lawsuit summons – things could get much worse.

Before You Pay a Collection, Do This

As much as you may not like to pay off a collection, if you’re certain it’s your debt and you know the collector has the right to collect it, paying the collection could be best for your credit in the long run. Avoid paying for bogus debts by writing to the collector and asking for proof that the debt is yours before you make any payment or payment arrangement.