What Happens When You Don't Pay a Collection Agency

Ignoring a debt collector won’t make them disappear. Not paying will likely lead to more aggressive collection efforts. Your debt will grow with added fees and interest. Your credit score will take a serious hit.

Collectors can sue you. If they win, they may garnish your wages or freeze your bank account. You have options to protect yourself and resolve the debt.

Stop Collection Agencies With Bankruptcy

The automatic stay stops all collection calls, lawsuits, and garnishments the moment you file. Find out if Chapter 7 or Chapter 13 can eliminate your collection debt.

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Consequences of Not Paying a Collection Agency

When you ignore debt collectors, several things can happen. None of them are good for your financial health.

Your Debt Will Keep Growing

Interest charges pile up. Late fees get added on. Collection fees make the balance even larger. The longer you wait, the more you’ll owe.

Collectors Will Contact You Repeatedly

Expect phone calls, letters, and possibly social media messages. Collection agencies are persistent. The calls can feel overwhelming and stressful.

Your Credit Score Will Drop

Collection agencies report unpaid debts to credit bureaus. Your credit score suffers. Getting approved for loans or credit cards becomes much harder.

You Could Face a Lawsuit

Creditors and collection agencies can take you to court. If they win a judgment against you, several things can happen:

Wage garnishment: Money gets taken directly from your paycheck
Bank account levy: Funds get withdrawn from your account
Property lien: A legal claim gets placed on your home or assets

What To Do If a Collector Sues You

Don’t ignore a lawsuit. Make them prove you owe the debt. Answer the summons and explore your legal defenses.

You don’t need a lawyer to respond. If you want help but can’t afford an attorney, you have options. Contact your local legal aid organization. Our partner Solo can help you draft an answer letter for a small fee.

Can’t Afford To Pay? Take Action Now

Don’t pay the full amount if you can’t afford it. Most people in collections couldn’t afford the original payment. You likely still can’t afford it now.

Consider speaking with a nonprofit credit counselor. They’ll review your financial situation and recommend solutions like:

Debt management plans
Debt consolidation
Debt settlement
Bankruptcy

Each option works differently. A debt management plan gets you better interest rates and payment terms. Debt consolidation uses one loan to pay off everything. Debt settlement negotiates for less than you owe.

Do You Have To Pay the Debt?

The answer depends on your situation. Sometimes paying is the best way to avoid lawsuits or credit damage. But you may not be legally required to pay in certain cases.

If the Debt Is Time-Barred

Old debts have a statute of limitations. After this time expires, creditors lose the right to sue you. Each state sets its own time limits. The type of debt matters too.

The statute of limitations is a defense, not an automatic protection. You must respond to any lawsuit and raise this defense. Don’t assume the creditor can’t sue.

If you think the statute expired, consult an attorney. Contact legal aid for free advice. Your state attorney general’s office can also help. The Federal Trade Commission provides information about time-barred debt.

If you prove a debt is time-barred and it’s not the original creditor collecting, you may be able to sue. The Fair Debt Collection Practices Act (FDCPA) protects consumers. Contact a consumer attorney to explore this option.

If You’re Judgment-Proof

Being judgment-proof means collectors can’t take anything even if they sue and win. All your income is exempt from garnishment. You have no assets they can legally seize.

Judgment-proof status isn’t official. Your situation can change if your finances improve. An inheritance or other windfall can make you vulnerable. Creditors can then collect on old judgments against you.

Most judgments expire based on state laws. Creditors can’t collect on expired judgments.

Being judgment-proof doesn’t erase the debt. Collectors can still contact you to check if things have changed. You can send a written notice demanding they stop calling. If they continue, they may violate the FDCPA.

If You’re Unsure the Debt Is Legitimate

Ask the collector to verify the debt. See how they calculated the amount. Make sure they have the legal right to collect it. Then decide whether to dispute, settle, or get help.

How Bankruptcy Stops Collection Agencies

Bankruptcy is the most powerful tool for dealing with debt. The automatic stay stops all collection activities the moment you file. Calls stop. Lawsuits pause. Garnishments end.

The stay remains in effect until your debt gets discharged or the case gets dismissed. Whether debt gets eliminated depends on the debt type and bankruptcy chapter.

Chapter 7 Bankruptcy

Chapter 7 is the most common consumer bankruptcy. It eliminates most debts in three to four months. Credit card debt, collection accounts, and medical bills get wiped out.

Chapter 7 doesn’t eliminate most secured debts unless you surrender the collateral. Certain unsecured debts can’t be discharged either. Recent tax debt and court-ordered support payments remain. Federal student loans require additional action to prove undue hardship.

You can speak with a bankruptcy attorney for free to see if Chapter 7 is right for you.

Chapter 13 Bankruptcy

Chapter 13 creates a three to five year repayment plan. You pay what you can afford based on your income. Remaining eligible debts get discharged after you complete the plan.

Chapter 13 lets you keep your property while catching up on secured debts. You can save your home from foreclosure or car from repossession.

Is Bankruptcy Right for You?

Your best debt solution depends on your specific financial situation. Consider all options before deciding. Review your income, expenses, assets, and total debt.

Bankruptcy offers a fresh start when you’re overwhelmed by debt. Collection agencies must stop contacting you. You get breathing room to rebuild your financial life.

Frequently Asked Questions

What happens if I ignore a debt collector?

Your debt will grow with added fees and interest. Collectors will contact you repeatedly by phone, mail, and possibly social media. Your credit score will drop when they report the debt. They can sue you and potentially garnish your wages or levy your bank account if they win a judgment.

Can a collection agency sue me for unpaid debt?

Yes, collection agencies can sue you for unpaid debt. If they win, the court grants them a judgment. They can then garnish your wages, levy your bank account, or place a lien on your property. You should respond to any lawsuit and assert your defenses.

How does bankruptcy stop debt collectors?

Bankruptcy triggers an automatic stay that immediately stops all collection activity. Collectors must stop calling, lawsuits pause, and garnishments end. Chapter 7 eliminates most unsecured debts in three to four months. Chapter 13 creates an affordable repayment plan while protecting your assets.

What is time-barred debt?

Time-barred debt is debt that's past the statute of limitations in your state. Creditors lose the right to sue you for these old debts. However, the statute of limitations is a defense you must raise if sued. Collectors can still contact you about time-barred debt.

Can I negotiate with a collection agency?

Yes, you can negotiate with collection agencies. Many will accept a settlement for less than the full amount. You can also negotiate payment plans. Get any agreement in writing before making payments. Consider working with a nonprofit credit counselor to help negotiate better terms.

What Happens When You Don’t Pay a Collection Agency?