How to Deal With Credit Card Debts in Collections

Credit card debts in collections are harmful to your credit scores. Late payments cause credit scores to drop and may make it difficult to qualify for new credit at reasonable rates. Card companies usually close accounts and list them as collection accounts after payments fall behind by three to six months. Card companies may transfer delinquent accounts to an internal collections team before formally closing the account and listing it as a charge-off. A charge-off is an internal bookkeeping term that updates the delinquent status of the account but doesn't resolve the debtor of responsibility for payment. After charge-off, accounts are usually assigned to debt collection agencies. Dealing with credit card debts in collections requires straightforward communication and a plan for resolving the issues.

Instructions

1

Contact your credit card company to determine the status of the account. Make the inquiry by calling the customer service number on the back of your card or on the billing statement. Tell the customer service representative that you're aware that your payments are behind and you want to know if the account is being managed by an internal collections team or a debt collection agency.

2

Ask the representative about options for ending the delinquency if an internal collections team is managing the account. Making a lump-sum payment covering the past-due amount is the most effective option and may reinstate charge privileges if they've been suspended. You may also ask if the card company has partial payment plans applicable to your situation. For example, the card company may offer special "hardship plans" for people suffering from temporary setbacks such as a job loss or illness.

3

Provide the card company with details about your current situation, if asked. The card company almost surely will ask why you haven't made payments as agreed. Disclose legitimate reasons such as excessive overall debt or unexpected home or automobile repairs.

4

Ask the card company if you qualify for a settlement agreement, as part of the discussions. MSN Money reports that card companies may agree to accept less than the full balance on accounts that are about three months behind. Settlement agreements usually range from 20 percent to 70 percent of the balance, according to SmartMoney.com.

5

Agree to a plan of action with the card company to remove the account from collections.

6

Contact the debt collection agency if an outside firm is now managing the account. Get contact information from the credit card company. It's not usually possible to reinstate an account dispatched to a debt collection agency. A preferable option at this state is to negotiate a settlement. Get all settlement agreements in writing.