Debt collectors eat ostriches for lunch, so don’t bury your head in the sand. Here is why it’s important to face debt collectors head-on.

Table of Contents
  1. Debt collectors are bounty hunters
  2. Ignoring debt collectors will harm your credit
  3. You may be sued
  4. More fees will be tacked on
  5. How to face debt collectors

Article at a Glance

  • Letters from debt collectors are designed to get you to pay. If letters don’t work, a lawsuit often follows, which can spell trouble for your assets.
  • Debt collectors count on consumers being intimidated by their letters, but they have legal obligations to show you owe what they say you do.
  • Often, being proactive is the best way to settle a debt for less than what is owed.

Many are predicting a tough economy on the horizon. With American’s credit card debt reaching record highs, we are likely to see an increase in defaults and debt collection activity in the coming months and years.

If you are struggling to pay bills, it’s important not to ignore collection letters, as stressful as they may be.

Ignoring debt collectors is never a good idea. It may seem like a tempting option, but it can lead to serious consequences.

Debt collectors are bounty hunters

Star Wars fans will know the character Bobo Fett, who worked on behalf of Jaba the Hut, and other intergalactic crime bosses to catch debtors like Han Solo.

Well, modern day debt collectors are very similar.

Debt collectors work on behalf of clients, often large corporations, and are paid based on what they collect. For example, if a major bank is pursuing you for a credit card debt, it is likely the debt collector assigned to your case handles all of JP Morgan, or Wells Fargo collections.

According to the U.S Chamber of Commerce:

Collection agencies typically receive a commission percentage based on either the original invoice amount or the amount of money they collect — usually 25 to 50%. Commissions differ based on debt age, type, balance, and the number of times the account has been used.

US Chamber of commerce website

The collector will not simply go away if you ignore them.

To the contrary, they have teams in place who are trained to pursue debts until they earn a commission, and they want the payday not just for their bottom line, but to keep their clients happy.

Ignoring debt collectors will harm your credit

One of the most significant negative outcomes of ignoring debt collectors is the impact it can have on your credit score.

Debt collectors can report delinquent accounts to credit bureaus, which can lower your credit score and make it more difficult to obtain credit in the future.

You may be sued

Additionally, ignoring debt collectors can result in legal action being taken against you, which can lead to wage garnishment or even seizure of assets.

After several attempts at collection are made, many debt collectors will file a lawsuit. If you ignore the summons, the Court will issue a default judgment. The default judgment is the ticket the collector needs to get to work against your assets or wages.

Ignoring collectors for long enough gives them the upper hand, and they count on this in their business models. If you respond and dispute their claim, you gain back leverage, and often have the ability to settle the claim for less than what is owed (note that debt settlement triggers tax liability).

More fees will be tacked on

Ignoring debt collectors can also lead to additional fees and interest being added to your account, making it even more challenging to pay off your debt.

Late payments always trigger fees and penalties in a bank’s boilerplate terms and conditions.

Burying your head in the sand won’t help, it will make your debt balloon even bigger, and make bankruptcy more likely.

How to face debt collectors

It is always better to either work with debt collectors and come up with a repayment plan that works for you, or to fight the debt if you are being targeted unfairly. The debt collector has to prove you owe the debt.

Use the checklist from the Consumer Financial Protection Bureau and ask them (in writing) to demonstrate that a real debt is owed.

If you are struggling with debt, it is essential to seek help and guidance from an attorney, financial advisor or credit counselor.

They can help you develop a plan to pay off your debt and avoid the negative consequences of ignoring debt collectors. Remember, ignoring the problem will not make it go away, and it may make it even worse in the long run.

Walter Metzen

Walter Metzen is a Board Certified Specialist in Consumer Bankruptcy with over 28 years of experience. He’s represented more than 20,000 bankruptcy clients in and around Detroit where his firm is located. View his profile here.
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