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Having a debt in collections can be nerve-wracking, especially when you’re trying to do the right thing and make every effort to pay your debt. It can be even more stressful when the debt collector refuses to work with you. Learn what you need to know about collection agency payment plans below.

Can a Debt Collector Refuse a Payment Plan?

It’s important to know that collection agencies aren’t legally obligated to accept or agree to payment plans. Debt collectors don’t have to work with you or agree to any payment schedules based on what you’re reasonably able to afford. Their goal is to collect as much of the debt as they can as quickly as they can.

Collection agencies don’t often work out extended or long-term payment plans. They are collectors, not lenders. They aren’t interested in slowly collecting monthly payments.

Is My Debt Past the Statute of Limitations?

The statute of limitations for creditors/collectors to file a lawsuit is based on the date of the last payment on the debt. The statute of limitations, which varies by state, restarts when you make any payment to a creditor. If you have attempted to make small monthly payments because you assumed the collector would ease up if they saw any money coming in, then you might simply have extended the collector’s ability to file a lawsuit on the debt.

Best Step: Pay Off a Debt in Collections

You can take some actions to validate the debt and ensure it’s accurate and truly owed. Make sure you understand your rights and stand up for them. But once you know you owe the money, the best step is often to pay off the debt. Even if you can’t pay off all of your debt, try to pay as much as you can.

What About Collection Agency Payment Plans?

If you can’t afford to pay the debt with cash on hand and can’t manage to restructure debt or loans to cover the balance, then you may need to make arrangements with the collection agency. You typically have two options: a settlement or a payment arrangement.

What Is a Settlement?

A settlement occurs when you pay part of the total owed, and the collector agrees to consider the account paid in full. Debt collectors are more likely to negotiate a settlement, often at much lower amounts, if they think there’s a chance that they may not be able to collect at all. You may be able to settle a debt for 50% or less of the total balance, for example.

In many cases, collection companies purchase these debts from creditors for pennies on the dollar. Obviously, they want to collect as much as possible. But as long as they collect more than they paid for the debt, it’s still a profit for them.

To negotiate a settlement, you’ll need some cash immediately to pay the agreed-upon amount. You may also owe taxes on the amount that is forgiven. The IRS considers forgiven debt as income for that year.

Do Collection Agencies Do Payment Plans?

Some collection agencies do consider payment plans. However, they are not legally obligated to agree to a payment plan. And in some cases, even if they agree to a payment plan, they may change the agreement later or file a lawsuit for the remaining amount owed. When entering into a payment agreement with a collection agency, make sure you get everything signed and in writing.

What Happens If You Don’t Pay a Collection Agency?

If you don’t pay a collection agency and you do owe the money, the collection agency may eventually file a lawsuit against you. If the agency gets a judgment in that lawsuit, it can seek repayment of the debt via legal methods such as wage garnishment or freezing your bank accounts.

What to Do if a Debt Collector Won’t Accept a Payment Plan

If you can’t pay the original creditor for any reason and the debt collector won’t work with you on a payment plan, you may need to find another way to make good on this debt. Luckily, you might have some options for other types of debt relief.

Consider a balance transfer card or consolidation loan to pay off the debt and make it “new” again. While you’ll still owe the money, you’ll owe it to a new creditor that has agreed to an account setup that lets you make monthly payments. It keeps you in debt a little longer, but if you make regular agreed-upon payments, it could raise your credit score in the long-term to make up for any hit you took on the collection

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