Can Debt Relief Take Care of Debt When the Account Has Been Turned Over to a Collection Agency?

A person must pay his debts or face the possibility of lawsuits. However, in some cases, rather than sue, creditors will sell an individual's debt to debt collection agencies, or they may hire these agencies to act on their behalf. Whether a person can receive debt relief after a debt has been turned over a collection agency will depend on several factors.

Types of Debt Relief

The term debt relief can refer to several kinds of debt management practices. One of these is debt consolidation, in which an alternate lender agrees to provide a loan that will pay off a person's existing debts, but provide the borrower with a new debt. In addition, debt relief can refer to debt settlement, in which a creditor agrees to accept less than the amount owed as full payment on the debt.

Debt Consolidation

Debt consolidation usually is still available to a person after his debt has been turned over a collection agency. This is because a person can obtain a debt consolidation loan without the permission of his creditor. Therefore, whether the debt is controlled by the creditor or a collection agency is irrelevant in this case. However, the person must be able to qualify to receive a consolidation loan, which may be difficult if he owes money to a collection agency.

Debt Settlement

Whether a person can settle with the collection agency for a lesser sum depends on the collection agency's policies. In some cases, the collection agency is willing to settle for less money that the person owes. However, the collection agency is not required to accept partial payment and may choose to demand the full amount, in which case it would not be willing to negotiate a settlement.

Considerations

Whether a collection agency is willing to provide debt relief also depend on whether the collection agency controls the debt or is collecting the debt on behalf of the original creditor. If the collection agency owns the debt, it can make decisions on its own. However, if it is working for a creditor, the creditor must decide whether a settlement is acceptable.