Options when credit card debt is sold to a collection agency

Written by rebecca lake
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Options when credit card debt is sold to a collection agency
Debtors have several options when credit card debt is sold to a collection agency. (credit card image by jimcox40 from Fotolia.com)

If you fall behind on your credit card payments, your creditors may choose to charge off your account and sell it to a collection agency. The collection agency is then able to make attempts to collect the debt by various means, including lawsuits, wage garnishment and bank account seizures. If your credit card debt has been sold to a collection agency, there are several options available to you to help resolve the situation.

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Credit Counseling

One option you should consider if your debt has been sold to a collection agency is credit counselling. With credit counselling, you work with a credit counsellor to establish a budget that will allow you to repay your outstanding debts in a reasonable amount of time. When choosing a credit counsellor, try to find a non-profit agency that is licensed and certified in your state.

Payment in Full

If you have the money to pay, you may consider calling up the original creditor and offering them a payment in full. The original creditor may be able to eliminate some of the interest and fees that have accrued since the account became delinquent, whereas a collection agency is less likely to do so. Payment in full will erase the debt while also giving your credit score a boost.

Debt Settlement

If you don't have enough cash to pay in full, or if the original creditor is not willing to work with you, you may consider offering the collection agency a settlement. A debt settlement allows you to eliminate a debt while paying less than you would normally be required to pay. In many cases, you can save anywhere from 35 to 75 per cent off the outstanding balance depending on the creditor, the age of the debt and the amount due.

Bankruptcy

Bankruptcy is often viewed as a last-resort option when dealing with outstanding debt. While bankruptcy may allow you to erase your debts and put an end to collection actions, it can also cause serious damage to your credit. Before choosing bankruptcy, you should consider speaking to a bankruptcy attorney or a certified credit counsellor to make sure there are no other options available to you.

Statute of Limitations

A final option is to simply wait for the statute of limitations to expire on your particular debt. The statute of limitations establishes the length of time that a creditor or collection agency may sue you for an outstanding debt. Once the statute of limitations has expired, you can no longer be sued for a debt, although it does not erase the debt entirely.

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