What happens if you don’t pay credit card debt that’s in collections?

Falling behind on credit card payments can be stressful, but it’s a common problem many cardholders face, especially now that credit card interest rates are sitting at a record high. And, if you fall too far behind, it can create a ripple effect, eventually leading to debt delivered to a collection agency. Once your debt starts to collect, it can feel like you’re stuck in an escalating situation with no clear solution. The constant calls and letters from debt collectors can be overwhelming, and the thought of face the debt head on it can seem daunting.

The consequences of having debt in collections can also extend far beyond persistent phone calls and letters. Your credit score takes a significant hit, possibly dropping 100 points or more. This negative mark can remain on your credit report for up to seven years, affecting your ability to get loans, rent apartments or even land certain jobs. Collection agencies also have several legal tools at their disposal to recover the debt, i ignoring the debt it will almost certainly lead to increasing challenges that can affect your financial future.

While it may seem tempting to ignore the debt and collection efforts, it often leads to more serious consequences that can affect your financial future. Therefore, it is important to understand what are and what are your options to deal with your debt.

Learn about your credit card debt relief options here.

What happens if you don’t pay off credit card debt that’s in collections?

Refusing to pay debt in collections causes a series of escalating consequences. Debt collection agencies usually start with frequent contact attempts by phone, mail and e-mail. Although there are laws, such as the Fair Debt Collection Practices Act (FDCPA)to protect yourself from harassment, continued communication can still be stressful.

If these efforts fail, they may initiate legal action by submitting a claim. If they win a trial, they get powerful collection tools. For example, depending on the state you live in, wage garnishment could be possibleallowing the debt collector to take up to 25% of your disposable income directly from your paycheck.

They can also freeze your bank accounts, making it impossible to access your funds until you deal with the debt. In some states, debt collectors can lien on your property or force the sale of certain assets to satisfy the debt.

Other common consequences include:

• Credit Score Damage: A collection account is one of the most damaging items that can appear on your credit report. It can cause your credit score to plummet, making it harder to qualify for loans, credit cards or even leases. The collection account can remain on your credit report for up to seven years from the date of the first missed payment, even if you eventually pay off the debt.
• Additional fees and interest: Collection agencies often add fees, interest or other charges to the original debt amount, increasing the total amount you owe. These additional costs can make it even harder to pay off debt.

Find out how to start tackling your credit card debt today.

How to get rid of credit card debt in collections

Ignoring debt won’t make it go away. Rather, it’s important to understand your options and take proactive steps to address the situation. There are several debt relief options for managing collection accounts, including:

• Debt forgiveness: Debt forgiveness (also known as debt settlement) involves negotiating with debt collectors to pay less than the full amount owed. Many debt collectors buy debts for a fraction of their original value and may agree to reduce what you owe by 30% to 50% of the original balance.
• Debt Management: Debt management plansoffered through credit counseling agencies, can help consolidate multiple collection accounts into a single monthly payment, often with reduced interest rates. These agencies also provide financial education and budgeting assistance.
• Bankruptcy: bankruptcyalthough it’s generally a last resort, it can provide a fresh start when you’re in too much debt. Chapter 7 bankruptcy typically eliminates credit card debt completely, while Chapter 13 creates a structured repayment plan. Both options immediately stop collection activities using an automatic stay.
• Debt Validation: Debt validation offers another approach. Within 30 days of first contact, request written verification of the debt. Debt collectors must stop collection activities until they provide this documentation. If they can’t prove they own the debt or provide accurate records, it can weaken their ability to collect.

The bottom line

Ignoring credit card debt in collections rarely solves the problem and often makes it worse. The impact on your credit score, potential legal consequences, and constant stress can lead to lasting financial and personal challenges. So instead of ignoring it, take proactive steps by understanding your rights and exploring the debt relief options available to you. But it’s important to act before debt collectors take legal action. Whether through settlement negotiations, credit counseling, or bankruptcy protection, tackling debt collection head-on usually leads to better results than avoidance.