If debt collectors are calling you about debts they say you owe, you might be wondering whether it’s an option to just not pay them. Are there any consequences to doing so, besides, of course, the collectors continuing to hassle you?
Unfortunately, the answer is yes. Ignoring debt collectors often has serious consequences.
With that said, there are still some cases where it actually does make sense to not pay your debt collection agency. In this article, we’ll explain what these circumstances are and what consequences you’ll ultimately face for failure to pay.
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Do you have to pay debt collectors?
Strictly speaking, you don’t have to pay debt collectors—failure to pay isn’t a criminal offense, and you can’t be sent to jail for not paying a debt.
However, assuming the debt is real and the debt collector is legit, they have the right to sue you if you don’t pay, unless the debt is so old that it’s become time-barred. There’s a good chance that not paying will eventually lead to a lawsuit, especially if your debt is relatively large.
If the debt collector wins the lawsuit, the judge may issue a court judgment against you, giving the debt collection agency the right to:
- Seize your assets
- Garnish your wages
- Take money from your bank accounts
The upshot is that simply refusing to pay your debt is quite risky. However, there are still circumstances where it’s your best move.
When should you never pay a debt collection agency?
When it comes to debt collection, words like “never” and “always” are a bit too strong—you should always consider your unique financial circumstances when deciding whether or not to pay.
However, there are four situations in which paying probably isn’t your best move:
1. You don’t owe the debt
Never pay a debt collection agency before confirming that the debt is legitimate. Mistakes happen all the time, and it’s possible that the agency has confused you with someone else, the debt is too old to legally be collected, or the debt collector is a fraudster.
How to verify a debt
Under the Fair Debt Collection Practices Act (FDCPA), debt collectors are required to send you a debt validation letter within 5 days of first contacting you. 1 This letter should provide information about the debt and your original creditor who you initially owed the money to.
After receiving your validation notice, send the debt collection agency a debt verification letter. This is a letter that forces them to provide further evidence that you owe the debt. 1
If you send your letter within 30 days, your collector will be obligated to stop contacting you until they provide this evidence. If they’re unable or unwilling to, they have to permanently stop trying to collect the debt.
2. The debt is past its statute of limitations
There’s a time limit on how long creditors and debt collectors can legally sue you over unpaid debt. This is known as the statute of limitations, and once it’s passed, your debt collector has no way to compel you to pay.
The statute of limitations on debt varies from each state. It generally falls within the range of 3–6 years, although it can last up to 15 years in some states. 2
You should never pay a collection agency without checking whether your debt is time-barred or not. Sometimes, making a payment on an old debt can actually restart the statute of limitations, exposing you to future lawsuits. Most of the time, not paying time-barred debt is actually your safest option.
3. Paying it will put you deeper in debt
If you’d need to borrow money to pay off your collections, then it might not be worth it. Opening a new credit account (e.g., by getting a new loan or credit card) if you can’t afford to pay the money back is never a good idea.
If you fail to pay back your new creditor, they’ll eventually charge off that credit account as well, and you’ll end up with yet another debt in collections.
If you just don’t have the money to pay your debt collector, you’re better off exploring other debt-relief options, such as getting help from a qualified credit counseling agency or, in extreme cases, filing for bankruptcy.
4. Paying debt collectors goes against your values
Even though you have a legal obligation to pay debt collectors for recent (valid) debts, not everyone feels a moral obligation to pay. You might choose not to pay if you’re opposed to debt collection on a moral or religious level and strongly feel that people should never pay debt collectors.
If this is your view, then standing by your principles is a valid reason for not paying off your debt. However, you should be prepared to face legal and financial consequences for not paying.
4 reasons to pay a debt collection agency
If none of the situations listed above apply to you, then paying off your debt is probably the right move.
Paying your debt collector will let you do the following:
1. Avoid lawsuits
As mentioned, debt collectors can sue you for not repaying a debt. Dealing with a lawsuit isn’t only a nuisance—it can also put a serious strain on your finances.
You’ll probably have to hire an attorney, which will be expensive, and if you lose, your debt collector may be able to garnish your wages and bank account and put a lien (a legal claim) on your property. 3
Paying your debt collectors (or negotiating a repayment plan or debt settlement) will stop them from suing you, potentially saving you money and a lot of stress.
2. Stop debt collectors from calling
One of the more obvious benefits of paying collections is that it’ll get debt collectors off your back. If you’re sick of getting calls, letters, or emails from debt collection agencies, then simply giving them what they want will put their collection efforts to rest.
Paying up will also stop debt collectors from reaching out to your family, friends, employer, or neighbors to squeeze information about you. Debt collectors can’t discuss your actual debt with third parties, but they are allowed to call them to get your contact information. 1 Paying off your debt collector can protect your privacy.
3. Prevent your debt from growing
When your debt is sitting in collections, it can still grow by accumulating interest according to the terms set out in the original contract you signed with your lender. Paying off the debt will stop it from growing, and doing so sooner rather than later will reduce the amount you have to pay overall.
4. Improve your credit
Even though both paid and unpaid collection accounts stay on your credit report for up to 7 years and can affect your eligibility for future loans, lenders look more favorably upon accounts that are “paid in full” or “paid as agreed” than those that are simply left unpaid. 4
What’s more, paying off collections can improve your credit score, although whether or not it does depends on how much you owe, the scoring model you use, and whether you pay in full or settle your debt. The exact number of points gained from paying collections varies from person to person, but in some credit scoring models, it can be substantial.