What Is Debt Collection?

When you fall too far behind on payments for credit cards, medical debt, or some other big bill, it will likely go into debt collection. A debt collector is a third-party for-profit company that has one purpose – to collect the money you owe.

Usually, a debt will go into collection if no payment has been made for 90-180 days.

Ignoring phone calls from a debt collector won’t make the calls stop – they’ll likely get worse. The eventual consequences of not responding to debt collection efforts may be a court date, wage garnishment, a big hit to your credit score and a bad mark on your credit report that will remain for seven years.

Examples of Debts Pursued by Debt Collection Agencies

The most common type of debt in collections is medical debt, according to a 2025 Congressional report. But all sorts of debt can be pursued by debt collectors. Some of the most common are:

• Medical debt
• Credit card debt
• Student loan debt
• Personal loan debt
• Car/auto loan debt
• Unpaid utility or telephone bills

What Does a Debt Collector Do?

Debt collectors let people know that they are behind on payments and ask them to pay it. Most people, except possibly co-signers, already know they’re behind, though they may underestimate how far behind they are until the collector comes calling. Debt collectors will pursue someone who owes money to the very limits of what they’re allowed by law, including telephone calls, letters, email, and even social media messages.

How Does Debt Collection Work?

A debt collector’s job is to get you to pay the money you owe. They are not a debt settlement company but are a collector who is looking for you to pay the bill.

The steps in the debt collection process are:

1. You fall behind in your payments to a creditor. The creditor contacts you by letter and/or telephone to ask you to catch up and informs you that if you don’t, the debt may go to a collection agency. The contact may begin as early as one missed payment.
2. When payments on a debt reach 3-6 months past due, the creditor either refers or sells the debt to a debt collection agency, or hands it off to their in-house collections agency.
3. The debt collector will contact you, informing you that they are collecting a debt. During the initial contact, or within five days of it, they must send you a validation notice, by mail or electronically, detailing the debt.
4. If you don’t immediately pay what you owe, debt collectors will continue to contact you using any information they have – work or home phone numbers, your address, even contacting your relatives.
5. They may access your financial information, including savings and investment accounts, to determine if you have the means to pay what you owe.
6. If you don’t pay, they may file a lawsuit in order to garnish your wages, or have the court order you to pay.

Consumer Protection and Regulations

Debt collectors can be relentless in their attempts to get you to pay, but there are rules they have to follow. It’s important to know your rights when it comes to debt collection. Federal and state regulations protect consumers from predatory or unethical debt collectors.

Even if a debt collector contacts you by phone, after first contact (you answering the phone and talking to them) they are legally required to send a letter with certain information, which will go to the address you have on file with your creditor. The collection agency can also send the notice by email if you’ve previously communicated with your creditor about the debt by email.

A debt collector, when contacting you to collect a debt, is required to:

• Tell you they are contacting you to collect a debt
• Give you the name and mailing address of the debt collection company
• Provide the name of the original creditor
• Provide the amount of the debt still owed, including interest and fees.
• Provide all this information in a written notice within five days of the initial contact, known as a verification letter, which contains all the required information in writing.
• Inform you that you have 30 days to dispute the debt, as well as ask for verification of the creditor’s information. The letter will have a form that you can fill out to dispute the debt, as well as information on how to do it electronically or by mail.

The Fair Debt Collection Practices Act (FDCPA)

The Fair Debt Collection Practices Act (FDCPA) protects consumers from unethical or illegal practices by debt collectors.

Under the FDCPA, debt collectors can not:

• Pretend to be an attorney, law enforcement officer, or anyone other than a debt collector
• Lie about the debt, including false claims about where it came from or the amount
• Seize assets without court approval
• Use deceptive or abusive practices, including threats of arrest
• Contact debtors before 8 a.m. or after 9 p.m.

A debt collector can:

• Call as many times as they want during the allowed hours
• Call relatives or your workplace if you don’t answer your personal phone (they can only ask for you and not tell anyone who answers they’re calling to collect a debt)

How to Report a Debt Collector

If a debt collector has crossed the line into harassment, you can file a complaint with the Consumer Financial Protection Bureau, the Federal Trade Commission or your state’s attorney general. The FDCPA allows consumers to sue a debt collector that has engaged in deceptive practices. If you win, the collector must pay your attorney fees, and possibly damages.

There is also a process to stop debt collection calls, particularly if the collector has been abusive or is otherwise breaking the rules.

How to Deal with a Debt in Collections

If you’re being contacted by a debt collector, don’t panic. There is a process to deal with debts in collections, and if you follow it, the end result will be that the debt is taken care of and the calls stop. Be sure that you do your homework and know what you owe, and who you owe it to, so that you can challenge the collector on any errors.

The steps for dealing with a debt in collections are:

Step 1: Verify the Debt Is Yours

Creditors can make mistakes. Before you agree to pay anything to a debt collector, wait for the required debt validation letter. The letter is required, even if you talk to a debt collector on the phone but tell them that you will wait to receive it before you agree to pay. The information on the debt validation letter will allow you to confirm that you owe the debt and how much you owe. Check it against your credit reports from the three credit reporting agencies – Experian, Equifax and Transunion. Be sure to check all three since they may have different information. You have 30 days to dispute any errors.

Also verify the debt hasn’t exceeded the statute of limitations. While a debt collector can still contact you about an old debt, they can’t take you to court if the statute of limitations has expired.

Step 2: Assess Your Payment Options

A debt collector usually offers two repayment options: a lump sum or a repayment plan. In most cases, the debt collector letter will have an online portal to pay the sum you owe as well as a phone number to call if you want to talk about a payment plan.

There is a statute of limitations on debt collection. Talking to the collector may restart the clock on it. If you’re not sure how or if you can pay, wait until you figure it out before you pick up the phone.

If you plan to pay the amount requested (once you’ve determined it’s what you owe), be sure you pay before the deadline date on the letter, or the debt collector may not accept the payment, and you’ll owe more in fees and interest. Even when paying online, don’t wait until the final day to do it.

A debt collector, unlike a debt settlement company, wants to collect the full amount owed, but if they’ve bought the debt from your creditor, they may settle for a lower amount. If that’s the case, you will have to pay income tax on what you didn’t pay if it’s above $500. The fact that it’s an unpaid debt will stay on your credit report for another seven years.

If you don’t feel as though you can pay the debt collector, particularly given the deadline, consider options like debt settlement or a debt management plan.

Step 3: Alternate Payment Options

If you want to pay off the debt, but can’t afford to pay the amount owed, there are other options.

For-profit debt settlement. The debt settlement company negotiates with creditors on a lower payment. You make payments to the debt settlement company, and they pay the creditor a negotiated lump sum. You’ll have to pay a fee, as well as taxes on the unpaid debt. The fact that you didn’t pay the entire debt will stay on your credit report for seven years.

Debt management plan. A nonprofit credit counseling agency will work with your creditors on lower interest rates and to waive fees. This is an option if the debt collection agency accepts debt management plans. With a debt management plan, you make one monthly payment to the credit agency, and they pay the full amount you owe over 3-5 years. Since payments are made on time and the full debt is paid, it won’t damage your credit score. One benefit to a debt management plan with a credit counseling agency as opposed to a payment plan with a debt collection agency, is the credit counseling agency works with creditors to lower your payments, meaning it could cost you less.

» Learn More: How to Pay off Collections

Step 3: Ask for a Written Agreement from Your Creditor

If you negotiate a repayment plan with debt collectors, whether it’s an agency or your creditor, be sure to get a written agreement spelling out the plan. Check it closely to make sure it’s accurate before you start making payments.

It’s important, no matter what’s discussed on the telephone, to get any agreement in writing. If you do talk to a debt collector on the phone, take notes as you talk, including the time, date and what was discussed. Documentation will be important if there are differences between what you think was agreed to and what the debt collector claims was.

Step 5: Make Payments

If you pay the entire sum the debt collector is seeking, be sure that you get an electronic or written receipt showing that you paid and that the debt is cleared. Check your credit report after 30 days to make sure that it appears there.

If you agree to a payment plan, make sure you get receipt of payments, as well as what your balance is, every month. If you are not getting this information, contact the debt collector and request it. Your bank statement may show you’re making payments, but you want written acknowledgement that the debt collector is crediting you for paying.

It’s important to make payments on time, and not to fall behind or ignore the payment plan. If you don’t pay, it will be another hit on your credit report, result in more fees and interest, and start the clock over on the statute of limitations on your debt.

Debt Collectors and Your Credit Score

The cost of falling behind on debt payments is more than just late fees and accrued interest. Creditors report nonpayment to the credit bureaus, which has a negative impact on your credit score. That means it will be harder and more expensive to get future loans and may have an impact on things like insurance premiums and being approved for an apartment lease.

A debt in collections can remain on your credit report for as long as seven years.

One exception is medical debt. The three credit bureaus voluntarily do not include medical debt less than $500 on credit reports and also remove paid medical debt. A Consumer Protection Finance Bureau rule to require this in 2025 was withdrawn, but the credit bureaus are still adhering to the policy.

Talk to a Credit Counselor About Your Debt

Like most things, dealing with debt collectors isn’t one-size-fits-all. You may feel you need some expert advice. The good news is that it’s available, and it costs you nothing.

Credit counseling from a nonprofit agency like InCharge Debt Solutions helps you evaluate your finances and identify debt relief programs. A discussion with a certified counselor, which usually takes 30-45 minutes, can help you regain control of your financial situation.

If the counselor suggests a debt management program, it can help end the constant phone calls from debt collectors, as well as even worse consequences of unpaid debt, like wage garnishment. Credit counseling can also help you craft a budget and provide other tools to help you make the best credit decision. For convenience, online credit counseling is also an option.

Contacting a nonprofit credit counseling agency can be the first step to not only ending that ringing phone but building a strong financial foundation that will help you make on-time payments and put the possibility of debt collection behind you.