What Happens If You Don’t Pay A Debt Collection?

Debt collectors are famously annoying and difficult to deal with. That being said, it’s likely if a debt has gotten to collection it’s because you don’t have the money to pay the bill to begin with. Which begs the question, what happens if you just ignore the debt collectors?

How does debt end up with a debt collection agency to begin with?

Say you end up not paying a medical bill or your mortgage. Usually after around 60 days of nonpayment (and this of course varies) your bill will go to a debt collection company, which has been hired by the company that you owe money to. If and when you pay the debt collector, usually the money will largely go to the entity that you originally owed money to but the debt collector will also take a cut–between 25 and 45% usually. The debt collector might also have “bought” the debt from whomever you owed initially, and will collect the entire amount.

How long do you have to pay the collection agency?

There is usually a grace period of about 180 days according to experts in which you have to pay the debt collector. It’s after that 180 days that things will take a turn…either for the good or bad.

Here’s the best case scenario if you don’t pay debt collectors

After that 180 day period you might get a letter from the collection company willing to settle the debts for less than the full balance. You might have a creditor stop collection efforts, altogether, deciding it’s just not worth it. Here’s the thing, even with this best case outcome, it’s still likely your credit is going to take a massive hit. After 180 days of nonpayment its highly likely that your account in collections has been reported to a credit bureau, resulting in your account getting marked. You won’t even necessarily get notified that this happened. Once this has happened, it can be next to impossible to rent a home, get a loan, you name it. And this mark can remain on your credit for seven years from the date the debt becomes delinquent.

Here’s the worst case scenario if you don’t pay debt collectors

Debt collectors aren’t necessarily just going to move on if you don’t pay up though, they have other tools at their disposal. The creditor could hire a law firm and pursue legal action, or even sell the debt to a debt buyer who could ultimately decide to take that action.

So what exactly is going to happen to your credit score?

As you are probably assuming, nothing good. In the first six months of not paying a debt you can expect your credit score to drop by as much as 100 points. Things will likely go from bad to worse after the 180 days, and how low your credit score will go after that depends on how high it was to begin with.

What are your other options?

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