Does it Help to Pay Collection Debt
When your debt moves from the original creditor to a collection agency, all efforts to maintain positive customer relations come to a grinding halt. Debt collectors aren't friendly and often use fear as a collection tool. While some individuals immediately pay off collection debts due to fear of the consequences of nonpayment or a sense of duty, others aren't sure whether or not paying the collection agency makes any real difference.
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Collection Agency Contact
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One primary benefit of paying off a collection agency is that embarrassing calls and letters from debt collectors immediately stop. Paying the debt, however, is not the only way to achieve this result. The Fair Debt Collection Practices Act requires that collection agencies cease all contact with debtors who make this request to the company in writing---regardless of whether the debtor in question paid the debt or not.
Misconceptions
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If a collection agency already filed a report with the credit bureaus, the company's report will tarnish your credit rating. Although paid accounts reflect more positively on you with other creditors, submitting payment does not help your score. According to the Fair Credit Reporting Act, a collection account can appear on your credit report for seven years.
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Preventing a Lawsuit
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Paying a collection agency prevents the company from having grounds to file a lawsuit against you. This is beneficial because the collection rights a company possesses after a successful lawsuit far exceed those it has beforehand. For example, after a lawsuit, a collection agency can garnish your wages and bank accounts. A lawsuit would also result in further credit damage, as the resulting judgment would appear on your credit file and lower your scores.
Family Members' Debts
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As a general rule, family members are not responsible for paying their deceased loved ones' debts---but that doesn't stop debt collectors from demanding that they do so. Paying off a loved one's collection debt after his death neither helps you nor the deceased. Instead, instruct the collection agency to file a claim against the deceased's estate through the probate court. The collector cannot hold you legally responsible for payment nor sue you for someone else's debts.
Considerations
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While paying off a debt in collection carries certain clear benefits, such as preventing a lawsuit, these benefits are only present when the debt is relatively recent. If the debt is beyond the statute of limitations for collection lawsuits in your state and the reporting period has expired, a collection agency can neither sue you nor use a collection notation to damage your credit report. In this case, paying the debt helps the collection agency, but carries no benefits for you.
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References
- Federal Trade Commission: The Fair Debt Collection Practices Act (Section 805/p.6,7)
- Federal Trade Commission: The Fair Credit Reporting Act (Section 605/p.22,23)
- Bankrate: Debt, Collection Agencies and Your Rights; Steve Bucci; 2009
- The New York Times: You're Dead? That Won't Stop the Debt Collector; David Streitfeld; March, 2009
- MSN Money: Is There a Statute of Limitations on Debt?; Liz Pulliam Weston; 2011
Resources
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