How to pay off debts that are in collections?

[mamamilkers]

I have heard horror stories about giving a creditor a check or your account info over the phone because they apparently can be so shady as to take money from your account without you knowing. Anyone know if this is true? It seems like that would be illegal, but I guess I don't really know! We want to pay off some debts in full but I want to make sure we don't create any new problems for ourselves. Would it be in out best interest to pay in the form of a money order, cashier's check or credit card (and then pay off the credit card with the money we have for the debt), instead?

TIA!

[LEAW]

First, pay off any current debt you might have... anything you make payments on, anything not in collections.. once that is done, and you have a small savings fund for emergencies, then do teh old debt..

First, call the lender, not the collector, and see if they will settle with you (if they didn't sell the debt to a collector yet, they will likely settle with you for less than you owe.) Get it in writing from them what the "deal" is - i.e. youwill pay $1400 to them and theywill set your account status to "paid in full, nothing owed" for the $3000 you do owe them.

If your debt was sold to a collection agency, then I'd suggest paying them with a money order/cashiers check (since it's not linked to your personal $ in any way) and NOT use a cc to pay off another debt. Yes, some shady collections folks (and some not so shady ones) will take your checking acct. number adn then withdraw whatever they want.

Mkae sure you get it in writing from them that you have paid. Make copies of the check and letter when you send it in, store it together, etc. so you have proof for the credit agencies later on.

Never give them access to a cc (they can submit multiple charges) or your checking acct or debit card #.

Good luck!

[mamamilkers]

Originally Posted by lisa2976

First, pay off any current debt you might have... anything you make payments on, anything not in collections.. once that is done, and you have a small savings fund for emergencies, then do teh old debt..

Why is this? We were jst sort of snowballing ALL of our debts, so alot of the ones in collections are at the top of the list, since they are smaller amounts.

Thank you for the advice!

[phatchristy]

Originally Posted by lisa2976

First, call the lender, not the collector, and see if they will settle with you (if they didn't sell the debt to a collector yet, they will likely settle with you for less than you owe.) Get it in writing from them what the "deal" is - i.e. youwill pay $1400 to them and theywill set your account status to "paid in full, nothing owed" for the $3000 you do owe them.

If your debt was sold to a collection agency, then I'd suggest paying them with a money order/cashiers check (since it's not linked to your personal $ in any way) and NOT use a cc to pay off another debt. Yes, some shady collections folks (and some not so shady ones) will take your checking acct. number adn then withdraw whatever they want.

:

Yes, often the debt is sold to a collection agency for pennies on the dollar. I'd say to get them to settle for lower. Get that, just like she said IN WRITING before paying by money order. Make sure to keep a copy of the money order/letter they sent as proof.

Oh, and another thing, make sure to get that free copy of your credit reports each year... and check them for accuracy.

[sincitymama]

By focusing on current payments/debts first you make sure that nothing NEW goes to collections or gets behind. The stuff that is already in collections, will still be there when you are ready for that step, and in the meantime won't be building more interest/late charges. Also, if you focus first on current debts you will get them paid off faster and be able to throw larger amounts at the stuff in collections whent he time comes.

At least I think this is part of the reasoning behind handling everything that's still current, first.

[mamamilkers]

Yes, we have gotten our credit reports recently, but infortunately DP was sooooo bad with money before me he wouldn't even know if it was correct or not. Most of it sounds familiar to him, though, so that's the best we can really do.

It sounds like many of them aren't willing to settle, either. Not sure why. We are definitely requesting that we get a statement indicating the debt has been paid in full and will be keeping copies of everything.

Oh, and we're doing so much better financially. We are doing great paying on our current debts (like car loan and student loans) so we're not concerned that paying off the stuff in collections is going to put us behind on anything else. We working our booties off to get this debt paid and definitely aren't going to ever get in this spot again!

[LEAW]

Basically, the stuff in collections has already hit your credit report and done it's damage.. it can't hurt you any more than it already has... other than annoying collections calls all day long.

SO pay off the stuff that's current... any cc balance, your loans for school, the cars, etc. until you are out of debt, then go back and deal with those collections ones...

It is just making your money work harder for you to benefit you faster... you get far more "benefit" from getting those student loans paid off than paying off old debt that is just sitting there..

And once you have no current payments for car, student loan, etc. you can snowball the heck out of the collections ones and kill them in one fell swoop!

[ashleyhaugh]

i just gave them my checking account info, and they took e-checks out every month, and i never had any problems with it... i had issues with 2 cc's i got when i was 18/19, and its ruined my credit (2 $500 limit cards got to almost 2k each with late fees and over the limit fees each month before it finally went to collections).... but theyre finally paid off (for a year now, yay)