There can be a lot of confusion for debtors once collection agents and collection companies enter the picture. Even more confusion occurs if the debt is sold and resold a number of times to different collection companies. In order to understand what’s going on with your debt, you may want to wrap your head around how the collection process actually works.
How the Collection Process Works
Usually creditors do not turn accounts over to collections until at least 90 days has passed without payment. If you are trying to pay on your account or have at least made an effort, you are probably safe. What people don’t realize is that creditors do not want to have to give your account to a collection agent. Most of the time, the debt collector purchases the account for far less than is owed, meaning the original creditor takes a loss.
For this reason, it is not in a credit card company’s best interests to sell your account to a collection agency unless it absolutely has to.
Once the debt is purchased from the creditor, the collection company begins attempting to collect on the debt. If your account has already been transferred to a collection agency, you will want to be aware of your rights. For instance, collectors are not permitted to harass or intimidate you, nor can they call you at inconvenient times, usually not before 8 a.m. or after 9 p.m. Additionally, if you notify them in writing to stop contacting you, they have to cease contact.
Negotiating Debt Settlement With Collection Agencies
If your intention is to pay the debt that is owed to the collection company, keep in mind that the collection account will still remain on your credit report for 7 years. When settling with the collection agency, you may be able to negotiate removal of the collection account from the credit report completely.
Most important when negotiating however, is the settlement payment. The collection agency usually pays pennies on the dollar for the account. For a recently charged off account, about 6 – 7 cents per dollar; older accounts that have already been sold a couple times 1.5 to 2 cents to the dollar. This means if the collection agency is attempting to collect a debt of $5000.00 from you, they may have only paid $300 for the account and would be more than happy to settle on $1000 for a profit of $700. Remember that each time the account is sold, it is sold for less. The collection agencies are only interested in turning a profit and will settle for far less than they are asking.
Who do you pay when your debt gets sold to a collection company?
A reader recently sent us this question:
I had an HSBC credit card in 2002 for $200. My account was sold to FFPM Carmel, LLC. FFPM filed for bankruptcy. FFPM sold account to LVNV. FFPM is still suing me for almost $2000.00. Am I to payFFPM eventhough they filed bankruptcy and sold the account to LVNV? Incidentally, I have not received any correspondence from LVNV.
To make matters even more confusing than the collection process already is, often accounts are sold and resold and even when consumers go to file bankruptcy, they may not have any clue who it is that they owe for the debt. In this case where the consumer is unsure of whom to pay for the account, I would recommend contacting the most current. If FFPM sold the account to LVNV, this means they no longer own it, regardless of filing bankruptcy. However, being that a lawsuit has been filed for $2,000, I would check with a collections or debt attorney to find out how to handle the lawsuit.
An attorney could possibly just send out a letter requesting the lawsuit is dropped as well as the information for the current holder of the debt. It is possible that while filing bankruptcy, the lawsuit remained as an error or was forgotten about.
You will also want to check the statute of limitations on debt in your state. If it has been sold a few times already, the debt may be passed the statute of limitations and too old to still be collected.