How Debt Collection Works – Debt Collecting Process

If your debts are in a collection agency, it’s time to learn how debt collection works to avoid falling into a lawsuit.


If you have fallen victim to debt in collection, it’s vital to understand how debt collection works. Your past overdue debts can cause sleepless nights because of pressure from debt collectors. In addition, having debts in collection affects your credit score if proper steps are not used.

Debt collection varies with the company you owe. For example, some companies only deal with student loan debts and medical debts. Other collection companies focus on short-term debts, whereas others focus on long-term loans. Collection also depends on various factors, including the amount owed and the duration the debt has taken before full settlement.

How Your Debts Got Into Collection

Your creditor may sell your debt to a collector if you have past overdue debts. It always begins when you have unpaid debts and, most likely, stopped paying. Then, the original creditor will try to get to you through calls and letters. If this continues for over 30 days without positive action, they will contract a collection agency and sell your debt to a debt collector. Most creditors sell debt if it’s 180 days overdue.

Collection Process

The original creditor will stop contacting you and let the collection agency do it on their behalf. The debt collector will contact you from the information in the file. They also know how they can locate you. Depending on your state law, debt collectors can use your banking information, savings, and banking accounts to determine whether you have money to repay the debt.

Collection agencies work at their best to recover the debt as they also gain. Though some operate independently, others have attorneys. The agencies work as intermediaries between the company owed and the defaulter. The debt collectors try within their capacity to collect the debt that has been due for at least 60 days.

When the collection agency collects back the full debt or a portion, they are paid a small percentage by the original creditor. If the amount is huge, they try to negotiate with you for settlement, sometimes even for a less amount. As a debtor, it’s advisable to be open to negotiations. If you cannot negotiate, seek help from Freedom Debt Relief to negotiate for you. If you refuse to negotiate or pay back, the debt collectors can file a lawsuit against the consumer.

Debt collectors have various ways to get to the customers. These include the use of phone calls, validation letters, and emails. They will try to convince the debtor to repay their debts. If they cannot reach you through the three means of communication, they will try the computer software or private investigators to locate you.

Through this, they will inquire about the assets you have to know your debt payment capacity. The debt collectors can also report to credit bureaus, which will lower your credit score and thus poor loan-taking ability.


A debt collector has no authority to seize a paycheck or collect the amount from your bank account without a judgment from the court. This means the collection agency relies on how they negotiate with the debtor.

In extreme cases, the debt collector may take you to court. If they win against you, they will have the authority to garnish your bank account and wages. But before then, they will have to get your permission and the court order. Also, they may try to sell your personal property or force you to sell an asset to recover the borrowed amount.

It is therefore important you understand how debt collection works. This will enable you to pay your debts in time, make negotiations with the debt collection agency, or plan on how to fulfill your full pay before it gets calls from the debt collector.

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