What Happens When You Don’t Pay Collections? Real Consequences
Ignoring debt collectors leads to growing debt, damaged credit, and potential lawsuits with wage garnishment. You have several options including debt management plans, settlement negotiations, or bankruptcy to eliminate qualifying debts and stop collection actions.
Get Free Credit CounselingIf you don’t pay a debt collector, you’ll face increasing collection efforts. Phone calls, letters, and even social media messages will pile up. Not paying will hurt your credit score. The collection agency can sue you to collect the debt. If they win, they may garnish your wages or bank account. You can defend yourself in court or file bankruptcy to stop collection actions.
Should You Ignore a Debt Collector?
Ignoring a debt collector is rarely a good idea. They won’t stop sending letters or making calls. The debt won’t disappear either. You need to learn your rights and take action on your unpaid debt.
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Start Free ConsultationStart by asking the debt collector to verify the debt. Send a debt validation letter. You’ll see how they calculated the amount. You’ll confirm whether they have the legal right to collect. From there, you can decide your next move.
Consequences of Ignoring Debt Collectors
You face several potential consequences when you ignore a debt collector:
- More debt from added interest and fees
- Increased collection attempts
- A lower credit score
- The possibility of a lawsuit
Your Debt Will Continue Growing
If you ignore collection attempts, your total debt keeps increasing. Interest charges pile up. Late fees or collection fees may be added too. The longer you wait, the more expensive the debt becomes.
Debt Collectors May Ramp Up Collection Efforts
Debt collectors can legally contact you until you tell them to stop in writing. They often make repeated phone calls and send frequent letters. They can also text you and contact you on social media. The stress can be mentally exhausting.
Federal laws like the Fair Debt Collection Practices Act (FDCPA) protect you from harassment. State debt collection laws provide additional protection. If a collector violates these laws, report them to the Consumer Financial Protection Bureau (CFPB).
Your Credit Will Take a Hit
Most debt collectors report unpaid debts to credit bureaus. The unpaid debt shows up on your credit report. Your credit score can drop significantly in the short term. But remember, the damage isn’t permanent. You can rebuild your credit score with time and effort.
You Could Face a Lawsuit
The original creditor or collector may sue you in court. If you don’t defend yourself, they can get a judgment against you. A court judgment allows them to pursue aggressive collection measures. For example, they can garnish your wages directly from your paycheck.
If a creditor sues you, don’t give up. Make them prove that you owe the debt. Answer their summons and mount your defenses. You may want to hire a debt collection attorney. If you can’t afford a lawyer, contact legal aid.
You can use our partner Solo to draft your debt collection defense. They’ve helped over 280,000 people respond to debt lawsuits.
When You Shouldn’t Pay a Debt Collector
In some cases, paying a collection account may not be your best choice. You should still contact them to explain your situation. Here are three scenarios to consider.
When You Can’t Afford to Pay the Debt
Don’t pay the full amount if you can’t afford it. You probably couldn’t pay the original creditor either. You likely can’t afford to pay the debt collection company now.
Consider speaking with our partner Cambridge Credit Counseling. A credit counselor will review your financial situation and make recommendations. They may suggest:
- Debt management plan
- Debt consolidation
- Debt settlement
- Bankruptcy
Each option helps in a different way. A debt management plan means better interest rates and payment plans. Debt consolidation uses a loan to pay off all your debts. Debt settlement negotiates a lower amount than you owe. Bankruptcy can eliminate qualifying debts entirely.
When the Debt Is Time-Barred
If the debt is old and the statute of limitations has expired, it’s called time-barred debt. The creditor loses the right to sue you. Each state sets its own statute of limitations. The time limit may vary by debt type or contract.
The statute of limitations is a defense, not an automatic bar. You must respond to any lawsuit and raise this defense. If you think the statute has expired, consult with an attorney in your state. You may be able to get free legal advice through legal aid.
If you can prove a debt is time-barred, you may be able to sue the debt collector under the FDCPA. Contact a consumer attorney to explore your options.
When You Are Judgment Proof
Being judgment proof means collectors can’t seize anything even if they win a lawsuit. All your income is exempt from wage garnishment. You have no nonexempt assets that collectors could seize.
Being judgment proof isn’t an official status. Your situation can change if your finances improve. You might receive an inheritance or lottery money. If you’re no longer judgment proof, creditors can collect on any judgment. Most judgments do have an expiration date determined by state laws.
Remember, being judgment proof doesn’t mean you don’t owe the debt. Creditors will likely continue contacting you. If the debt collector is not the original creditor, you can send written notice demanding they stop. If they don’t stop, they may violate the FDCPA.
How Bankruptcy Can Help With Collection Agencies
Bankruptcy is the most powerful tool to deal with any debt. The automatic stay stops collection efforts the minute you file. The stay remains in effect until the debt is discharged. Whether the debt is discharged depends on the debt type and bankruptcy type.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is the most common type of consumer bankruptcy. You can eliminate most debts like credit card debt and medical bills. The process takes three to four months. Chapter 7 doesn’t eliminate most secured debts unless you surrender the collateral.
Certain unsecured debts can’t be discharged in Chapter 7. Recent tax debt and court-ordered support payments remain. You may be able to discharge federal student loans. You’ll need to prove they’re causing undue hardship.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy creates a repayment plan over three to five years. You make monthly payments based on your income and expenses. After completing the plan, remaining qualifying debts are discharged. Chapter 13 helps when you need to catch up on secured debt like your mortgage.
Is Bankruptcy Right for You?
Your debt solution depends on your particular financial situation. Everyone has unique financial circumstances. Carefully consider your personal finances and all debt relief solutions. Making the right choice requires understanding all your options.