A debt collection invoice allows a debt collection agency (collector) the means to request payment from an individual (debtor) that owes money from a past due account.
How to Pay Off Debt in Collections
For those that care about their credit score, paying off a debt collector is necessary in order to improve one’s credit score. You’ll often know about a debt when you receive a phone call by a collection agency claiming that you are in default of a payment. The best way to see if you have a debt in collections is by buying a copy of your credit report from one of the three credit bureaus (Equifax, Experian and TransUnion). If an individual does have debts, a credit report will detail each debt with the business’s name, amount owed, past due date, and a phone number. You’ll need to call the phone number in order to negotiate a settlement payment with the creditor. Some will be willing to negotiate and others will not. Ironically, if you have good credit, the creditor will not be willing negotiate. An individual with bad credit is more likely to be negotiated with as the creditor assumes they do not have much money.
Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act, which was set into law in 1977 and has been revised many times over since then, exists to protect the consumer (debtor) from abusive, deceptive, and unfair practices from collection agencies. The act also sets a standard that collection agencies must abide by, which include the following:
- Hours of Contact – Agencies may only call debtors from 8am to 9pm in their local time.
- Communication – If a debtor asks not to be called again, the agency must respect their wish. The agency is also prohibited from calling a debtor at their job.
- Abuse – Debtors are prohibited from threatening to go to the police or from publishing the debtor’s information publicly.
Statute of Limitations
A debt does not last forever. Most debts (except for college loans, child support, etc.) expire after a certain amount of years. Each state differs, but most debts expire between 5-12 years. When a debt outlast a state’s statute of limitations, a person can motion to have the debt removed from their credit report. If the debt is a tax lien, the debtor will need to file with their local registry of deeds to remove the lien.
Did you know? The statute of limitations does not apply to a college loan. Therefore, trying to wait out the statute of limitations on a college loan will not work. The individual with college debt will only rack up more interest and be left more in debt.