Discover Debt Freedom!

Many people today are finding themselves on the wrong end of the debt collection process for the first time.  The number of late payments and missed payments has skyrocketed over the last couple of years as many families have seen the loss of a job, a decline in their wages, and credit lines cut down to the bare minimum.  Knowing how the debt collection process works can help reduce some of the fear and shame that many people have when faced with financial problems that lead to debt collection.

Initial Steps

There are certain steps that are typically followed during the debt collection process that makes the process predictable.  In many cases, a creditor will not take any action within the first thirty days of non-payment on an account other than adding a late payment charge to the account balance.  The reason for this is that many people miss payment deadlines and make up the missed payment within the first thirty days of delinquency.  Many businesses feel that chasing after individuals that are less than 30 days past due on their accounts wastes money and is a bad business practice.

After the account has been delinquent for more than thirty days, representatives of the creditor company will begin trying to make contact with you regarding the missed payment or payments.  These contacts may be by mail, by email, or by telephone depending on the company and their policies.  At this point, you are still dealing directly with the company and may be able to negotiate some type of payment plan to bring the account current.

Additional Steps

If the company is unable to contact you or still has not received a payment after 30 days, the company will take further action to encourage the account holder to bring the account current.  First, they will report the delinquent account to the major credit bureaus, effectively reducing the person’s credit score and placing a negative mark on the person’s credit history for the next seven years.  Once this information has been placed in the person’s credit history, there is no way to remove it unless the information is inaccurate and the inaccuracy can be proven to the credit bureaus.

If this does not produce the desired effect of having the customer bring their account current, the creditor may choose to enlist the help of a debt collection agency.  Because the debt collectors are typically paid on commission and only make money when they get you to pay money, they are much more aggressive in getting you to settle your debt than the representatives at the original creditor company.  The debt collection company will continue to call your home or office and send notices by mail to try to get you to pay off your debt until the statute of limitations for collecting the debt has passes, typically a period of seven years.