What Happens When a Bill Is Sent to a Debt Collector?

Credit card companies and other lenders often sell or assign delinquent debts to debt collectors. Usually the original creditor gives up trying to collect on the account after the debt falls six months behind, although some lenders send past-due accounts to debt collectors sooner than that. Before transferring the debt to a debt collector, the creditor usually closes the account, lists it as charged off and sends that information to the major credit bureaus.

Considerations

The debtor remains fully responsible for the debt even after the original creditor lists it as charged off and places it with a debt collector. A charge off is merely an accounting term. Debt collectors will attempt to collect the full amount due on the account, although some will accept settlement offers for less than the balance -- a process known as debt settlement.

Control

Original creditors who assign debts to debt collectors maintain overall authority over the collection of the account. Debt collectors working on assignment earn a commission for collecting, but the creditor has the final say on settlement offers or payment plans. Creditors who sell debts to debt collectors no longer own the debt. Debts several years old are sometimes sold to so-called "junk debt buyers" for as little as pennies on the dollars. Junk debt buyers are debt collectors and their potential for profits is high. A junk debt buyer could purchase a $10,000 credit card debt for $500 or less -- and then demand full payment from the debtor.

Process

Debt collectors usually begin the collections process by contacting the debtor by phone. Federal law requires the debt collector to follow up within five days by sending a written notice identifying the original creditor and the amount due. However, the law also allows the debtor to challenge the letter and force the debt collector to prove that it has the legal right to collect the debt. Debtors can accomplish this by writing a letter to the debt collector within 30 days of receiving initial written notice from the debt collector. The Fair Debt Collection Practices Act forces the debt collector, upon receipt of correspondence from the debtor, to stop all collection efforts while it submits information to the debtor verifying that the debt and the collection effort are valid. Proof could include copies of the debtor's most recent billing statements or the original credit application.

Tactics

Debt collectors rely a lot on phone calls as they attempt to collect and may call a debtor several times a day. However, federal law gives the debtor the right to tell the debt collector to make contact only in writing -- or not at all. Some debt collectors resort to civil lawsuits in a final attempt to collect. Lawsuits are an effective means of collection for the debt collector because they can lead to a court judgment and permission to garnish the debtor's bank account or wages for the full amount of the debt.