What Happens If You Don't Pay Collections?

You do your best to keep up with your monthly payments, but one of your debts has found its way to collections. So what happens next?

While everyone's situation is unique, there are a few things that are likely to happen if you don't pay a debt in collections. But there are ways to address the situation and get yourself back on  solid financial footing.

What Happens If You Don't Pay Debt in Collections?

Several things are likely to happen if you don't pay debts in collections.

Your credit score could take a hit

Collections accounts can show up on your credit report, and they could drop your credit score. How much your score is impacted will depend mostly on what your credit already looks like. Most people have missed several payments before a debt winds up in collections, so your score could already be pretty damaged by the time you hear from debt collectors.

Most negative items stay on your credit reports for up to seven years. For unpaid debts, that clock typically starts when you miss the first payment.

You'll likely get calls from debt collectors

Debt collectors are notoriously persistent, so expect to hear from them for any debts you have in collections. That said, there are limits on what debt collectors can do or say, as well as rules about how often they can call you, so know your rights (more on that below).

You may find it difficult to borrow money

Because the collections account appears on your credit report, new creditors can see it when you apply for loans and credit cards. Unpaid debts in collections are a red flag for most lenders. This could make it much harder to get new credit. You'll generally see this reflected as lower credit scores.

You could get sued

If you ignore debt in collections for too long, the debt collector may give up trying to get you to pay directly—and instead look to the law for assistance. In other words, a collections agency could sue you if you don't pay your debts.

A lawsuit is time-consuming and expensive, so this is typically a last resort. Most collections agencies would rather work out a deal with you privately. You might also have a defense for a debt lawsuit if the debt is time-barred, meaning it's past your state's statute of limitations. 

It's worth keeping a line of communication open with your debt collector. Instructing them not to contact you at all could lead them to think that a lawsuit is the only way to collect what they're owed.

What Should You Do When a Debt Goes to Collections?

When a debt goes to collections, there are a few things to do right away.

Ask for verification of the debt

Debt collectors can make mistakes. They might be trying to collect a debt you don't actually owe, or they might be trying to collect more than you actually owe. So it's always smart to verify the debt before you move forward with any other discussions. You usually have 30 days from receiving your first communication from the debt collector to request debt verification. 

Debt collectors legally cannot attempt to collect debts until they have responded to your letter. Once they do, review the information to make sure it matches your own records.

If the debt is old, check your state's statute of limitations. The debt may be time-barred if it's more than three to 10 years old, depending on your state.

Know your rights

The Fair Debt Collection Practices Act (FDCPA) protects consumers from abusive debt collection practices. The law limits what debt collectors can do, and outlines a process for responding if your debt collector is violating the law.

According to the FDCPA, debt collectors can't:

• Contact you before 8 a.m. or after 9 p.m. without permission.

• Contact you at work if you tell them you're not allowed to receive personal calls there.

• Post about your debt publicly on social media.

• Harass or threaten to harm you or your family.

• Threaten to sue you if they don't actually intend to do so.

Additionally, debt collectors must speak to your attorney about your debt if they know you're being represented by one.

If your debt collector breaks any of these rules, you can file a complaint with the CFPB.

Come up with a plan

Debt in collections is usually purchased for less than face value, so most debt collectors are willing to work with you. You can negotiate with the debt collector to try and find a strategy for getting rid of the debt that works for your budget.

Maybe this involves a payment plan with regular monthly payments. You and your debt collector can agree upon an amount that you can afford and a payment schedule that works for you. Make sure to get any agreements in writing before you make any payments.

Alternatively, you could give debt settlement a try. This means you offer the debt collector less than what you owe, and ask them to forgive the rest of the debt. You could do this on your own if you're comfortable negotiating with your creditors. Or you could work with a professional debt settlement company like Freedom Debt Relief that can negotiate for you.

Take It One Day at a Time

Once you and the debt collector have agreed upon a plan, stick to it. You should also take a look at the rest of your finances to figure out how you wound up with debt in collections in the first place. Make the changes necessary to avoid it in the future, whether that's saving up an emergency fund or getting rid of tempting credit cards.