Got Debt in Collections? Everything You Need to Know

About 70 million Americans have at least one debt in collections, and depending on the state, they account for 20% to 51% of civil court filings.

The debts are usually relatively small: According to the Consumer Financial Protection Bureau (CFPB), the average debt in collections is $382. But that doesn’t make the debts any easier to pay when you don’t have the money to pay them off. 

Here’s what to do if you have debt that’s already in collections.

How Does Debt Collection Work?

Consumer debt collection efforts typically begin 30 days after a payment is past due. At that point, the debt is marked delinquent and is reported to the three major credit bureaus. 

You may start receiving calls at this point or get a notification by mail. 

Efforts will intensify as months pass and the debt remains delinquent. Collectors may get more aggressive if they can’t reach you or you dodge their calls. 

Pro tip: After about six months from the original due date, the creditor will “charge off” the debt and it may be sold to a third-party debt collector, who now assumes both the debt and the right to collect it.

Debt collectors primarily contact you by letter or phone call. They may even try to call your friends and family members to embarrass you into paying them. 

However, they are limited in the amount and ways they can contact you by a federal law known as the Fair Debt Collection Practices Act.

You Won’t Go to Jail

It’s important to understand that no matter what a debt collector tells you, you will not go to jail simply for having an unpaid debt. Lenders can only take you to civil court; U.S. courts can only order jail time for criminal offenses.

There are two types of offenses:

  • Civil: These are legal proceedings between individuals or organizations. One party sues another for failing to perform a legal duty. Fines and other means of reparation are the only legal punishments.
  • Criminal: These disputes are between the government and individuals or organizations and are heard in criminal court. Common punishments in criminal cases usually involve fines, incarceration and, in some cases, acts of restitution.

Pro tip: It’s important to be aware that you could land in jail for other issues, like failing to appear in court or ignoring a court order, so it’s important to take debt collection lawsuits very seriously.

READ MORE: Can you go to jail for not paying a loan?

Know Your Rights

The federal Fair Debt Collection Practices Act governs debt collection practices. It prohibits debt collection agencies from using abusive, unfair, or deceptive practices. The FDCPA covers personal, family and household debts. It does not cover business debts. Nor does it cover collection efforts by your original creditor.

The FDCPA expands the definition of a debt collector to include collection agencies, lawyers and debt buyers. Any debt collector must provide you with certain information whenever they contact you about a debt. 

Limits include:

  • Time: Debt collectors are typically prohibited from contacting you before 8 a.m. or after 9 p.m. Place: If a debt collector knows you can’t receive personal calls at work, they cannot contact you there.
  • Social media: A debt collector cannot publicly post on social media, though they can contact you by direct message unless you request that they stop.
  • Harassment: They can’t harass you (or your friends) over the phone, by text or through email.
  • Representation by attorney: If a debt collector knows that an attorney is representing you, the debt collector must contact the attorney directly.
  • Information disclosure: The law prevents collectors from telling others about your debt, except for your spouse and your attorney (if you have one and have given the okay).
  • Cease and desist requests: The FDCPA also allows you to cease communication with a debt collector. If you don’t want the collector to contact you, you can tell them, and they’re legally obligated to stop.

When a debt collector contacts you, keep all documents, record dates and times of conversations, and notes of your discussions. These can help you if your rights are violated.

READ MORE: Will this 11-word phrase stop debt collectors?

Pro tip: If you believe a debt collector is using illegal collection activities, file a consumer complaint with your state attorney general’s office and the Federal Trade Commission at

What is a Debt Collection Agency?

When you default on a bill, sometimes your original creditor will have its own in-house debt collection department. They customarily will try to collect your payments for at least a few months. If they don’t get results, your debt may be turned over to a debt collection agency.

This is a third-party company that focuses on collecting delinquent debts from individuals or businesses. Sometimes it works on behalf of your original credit card, but sometimes it has purchased your delinquent debt and is working independently. Debt collectors are regulated by federal and state laws

How Do Debt Collection Agencies Work?

Debt collection agencies focus on difficult-to-collect debts. They will be more aggressive than your typical creditor, contacting you within the boundaries of federal law (and sometimes, going beyond what the law allows them to do.)

If a collection agency successfully collects a debt for the creditor, your creditor will typically pay them a percentage of what they’ve collected. This typically ranges from 25% to 50% of the total amount the agency has recovered.

Pro tip: It is easier to work with your original creditor, so try to take action before your debt is turned over to a debt collection agency.

Some collection agencies are willing to negotiate settlements with borrowers for less than the total amount they owe. Debt collectors may also file a lawsuit in an attempt to collect.

How to Dispute Debt Collection

Just because a debt collector contacts you doesn’t mean you legitimately owe the debt. Mistakes are made all the time. 

Request a Debt Validation Letter

Any time a debt collector contacts you, your first step should be verification of the debt. After all, it’s possible you’ve been a victim of identity theft, particularly if the debt sounds completely unfamiliar. A debt validation notice is a letter sent to you by the debt collector to “prove” that you owe them the money they say you owe. 

Pro tip: A debt verification letter is a letter you send to your creditors asking them to validate the debt. Though the two terms are often used interchangeably, they serve different purposes.

Every debt collector is required by federal law to send a validation letter within five days of their first contact with you as a critical first step in their collection efforts. It should include the name of the creditor and the amount of the debt. 

READ MORE: How to request a debt validation letter

Check Your Credit Report

While waiting for the debt to be verified, carefully review your credit reports, particularly if you aren’t entirely certain the debt is legitimate. Each of the three major credit bureaus — Experian, Equifax and TransUnion — offers one free copy of your credit report per year at Pull copies of all three and review every item to ensure the debt is legitimate.

Pay particular attention to unsecured debts. This includes credit card bills, student loans, medical bills and personal loans. Secured debts are unlikely to be sent to collections.

Contact one of the three credit bureaus immediately if you find a mistake.

READ MORE: How to check your credit report

Is It Illegal for a Collection Agency to Buy Your Debt and Come After You?

Though debt collection laws vary by state, it is perfectly legal for a third-party debt collection agency to purchase your debt from another creditor.

When you fail to repay your debt, your original creditor will usually give you a few months to make your payment. After several consecutive months of missed payments, the debt will be charged off. 

Pro tip: Charged off means the creditor has given up hope of the debt being repaid. Debts usually aren’t charged off until you’ve gone four to six months without paying.

After the debt has been charged off, your creditor can (and often will) sell your unpaid debt to a third-party debt collector, usually for pennies on the dollar. Because the debt collector paid for the debt, they will then aggressively pursue debt collection efforts.

READ MORE: How to pay off debts already in collections

Can I Pay My Original Creditor Instead of a Debt Collection Agency?

It depends. If the debt collection agency is working in partnership with your creditor, then yes, you can contact your original creditor and offer a payment. However, if a debt collection agency has purchased the debt from your creditor, the debt is now owned by the debt collection agency, and if you make payments to your original creditor, the debt collector is unlikely to credit you for those payments.

READ MORE: How to deal with debt collectors

Do You Need a Debt Collection Attorney?

You don’t necessarily need to hire a debt collection attorney, and in general, the legal fees will cost as much as the debt repayment. However, there are a few exceptions:

  • The debt is not yours
  • You believe your rights have been violated
  • You owe a significant amount of debt
  • Your debt is near your state’s statute of limitations on debt

How Much Do Debt Collection Agencies Pay for Debt?

On average, debt collection agencies pay about 4% of the total debt you owe to purchase the debt from your original creditor. They will then attempt to collect the full amount, so there’s an opportunity for them to earn a big profit.

This is why debt collectors are more likely to take you to court than your original creditor. 

Debt Collection Lawsuits

While it probably isn’t worth the court costs for your original creditor to collect a $300 debt, it is a much better deal for debt collectors who purchased the debt for $12 to file a lawsuit to collect that $300.

How to Answer a Summons for Debt Collection

If you receive a court summons, a lender or debt collector has taken legal action against you to collect the unpaid debt. It’s important to respond. You may need to file paperwork within the time provided and appear for your scheduled court hearing.

Debt collectors will win by default if you fail to respond to the lawsuit. Don’t let that happen. Show up for your hearing with the appropriate evidence and you may be able to win in court.

How to Win a Debt Collection Lawsuit

If you’re organized, you can actually win your debt collection case. Many debt collectors are assuming you’ll be unprepared and so won’t have the appropriate documentation. 

Here’s what to do to improve your chances of beating your debt collector in court:

Respond to the lawsuit: You typically have a couple of weeks to submit your response.

Verify your debt: Individuals can be sued for debts they don’t owe, for incorrect amounts or for debts that aren’t collectible. The burden of proof is on the debt collector.

Review your records: Compare account statements with the debt collector’s claims. Are the amounts correct? Are the charges legitimately yours? Have you already paid the debt? Make the debt collector validate the debt in writing and list the name of your original creditor, proof that your account was purchased and information about the debt.

Review defense strategies: Ask yourself a few key questions.

  • Is the debt legitimately mine? 
  • Is the debt amount accurate?
  • Has the debt actually been sold
  • Is the statute of limitations still in effect?

If the debt is valid, you can try to settle the debt with the debt collection agency. They are usually willing to compromise if they know you’ll fight back in court. They can walk away with a profit and avoid court costs.

Consider bankruptcy: If you have a significant amount of debt and are eligible to file for Chapter 7 bankruptcy, you can file and the debt will be wiped out. However, you should consult a bankruptcy attorney if you’re seriously considering this.

What Happens If You Don’t Show Up In Court for a Debt Collection Lawsuit?

If you don’t appear for your court hearing, a judge could automatically rule against you and order wage garnishment. If you’re unemployed, sometimes your bank account can be garnished. If you ignore a court order, you could even end up in jail.

What Happens If You Lose a Debt Collection Lawsuit?

It’s important to note that you will not go to jail if you lose a debt collection lawsuit. It is a civil matter; no criminal charges will be filed and no arrest warrant will be issued. 

However, there could be significant financial repercussions, including wage garnishment and property liens.

How Long Can a Debt Collector Legally Pursue Old Debt?

This will depend on the laws in your state. Each state has what’s known as a statute of limitations on debt. Once that lapses, the debt is considered time-barred, and debt collectors cannot sue you (however, you still technically owe the debt.)

What is the Statute of Limitations on Debt Collection?

The statute of limitations doesn’t prevent them from attempting to recover their money, it just stops them from initiating a lawsuit against you for the time-barred debt.

In most states, they can and will still attempt to pressure you into paying through other means. 

READ MORE: State-by-state breakdown of statutes of limitations on debt

How Long Can A Collection Agency Try to Collect a Debt?

Seven years is how long a delinquent debt remains on your credit report (and drags down your credit score). However, just because it no longer appears or the statute of limitations has expired is not a surefire way to avoid court. The exact timetable will depend on your state’s laws. In some states, it will take 10 to even 20 years for the statute of limitations to expire, depending on the type of debt. And even once the clock runs out, the debt collector could still try to sue you for other reasons. 

  • For example, they might try to:
  • Argue that the statute of limitations isn’t applicable
  • Argue that the statute of limitations clock isn’t correct
  • Try to challenge a debt that originated in a different state with a longer statute of limitations 

Statutes of Limitation Don’t Apply to All Types of Debt

Though a statute of limitations covers most debts, there are a few exceptions. That means creditors can sue you for these balances no matter how old your accounts are.

These include:

  • Federal student loans
  • State taxes (in some states)
  • Child support (in some states)

How Much Can a Debt Collector Garnish from Your Bank Account?

Though they may try to tell you differently, the debt collector cannot garnish your wages or bank accounts. However, a judge can. But before your wages are garnished, you’ll receive a notice that you’ve been sued and will have a scheduled hearing. You will need to appear at that hearing to prevent wage garnishment.

Child support is the most common reason wages are garnished, but it’s far from the only reason. Common debts include:

  • Creditor garnishments
  • Student loans
  • Tax levies
  • Voluntary wage assignments
  • Bankruptcy

Title III of the Consumer Credit Protection Act limits the amount of your disposable income that can be garnished for creditor garnishments to 25% of disposable earnings or the amount by which disposable earnings are 30 times greater than the federal minimum wage

Pro tip: Title III restrictions do not apply to specific bankruptcy court orders, state and federal tax debts and/or voluntary wage assignments.

If state laws provide more protection, the employer must garnish the lower of the two totals.

How to Remove Collections from Credit Reports

There aren’t many ways to remove a legitimate account in collections from your credit reports. You can wait seven years from the original due date, settle the debt for an amount that’s less than you owe (at which point the debt will switch from “charged-off” to “paid-settled,” or ask your creditors for what’s known as a “goodwill deletion,” which is when the creditors agree to remove the delinquent status from your credit report, usually in exchange for at least a partial payment. 

Pro tip: If you’re willing to make payments toward your debt, you can contact your creditor and offer to “pay for delete,” where you agree to a payment plan, and once those payments are completed, the debt collector will delete the delinquent debt from your credit reports.

How Does Debt in Collections Affect My Credit Score?

Any time debt is sent to collections, it means your credit score has already suffered some damage — and it will fall even more.

Every time you make a payment at least 30 days late, or skip a payment, it affects your credit score. When a debt is sent to collections, that means the creditor has basically given up hope of getting paid and the debt is “charged-off.” This is one of the most-damaging black marks you can have on your credit report. It can drag your credit score down as little as 50 points (if your score is already bad) or as much as 200, if your current credit score is pretty good.

The charge-offs will remain on your credit reports for seven years, or until you complete a payment plan with your debt collector.

How to Respond to a Debt Collection Letter

If you’re dealing with a letter notifying you about unsecured debt, it’s probably best to wait for a phone call. You don’t want to accidentally do anything that could confirm that the debt is yours. Instead, use that time to research the debt. 

  • Is it yours? 
  • Does it appear on your credit report?
  • What is your state’s statute of limitations?
  • Are you being contacted by your original creditor or a third-party debt collector?
  • Could it be a scam?

If the debt collector follows up with a phone call, you should have all of the appropriate information at your disposal. Ask them to validate the debt and tell them you won’t speak with them further until that has happened. Take down the debt collector’s name and phone number so you can call and verify that the person contacting you is legitimate. And if you can afford it, start stashing away a small amount of money each week so that you can offer a lump-sum settlement (and avoid a lawsuit.)

How Can I Pay My Collection Debt?

If you’re ready to pay the debt collector, don’t just simply agree to pay the debt outright. Do some negotiating. After all, if this is a debt collection agency, they probably purchased your debt for pennies on the dollar and stand to make a hefty profit even if you offered them half of what you owe.

For example, if you have an $1,000 debt and the debt collector works for your creditor, you may be able to reach a settlement for about $750. But if your debt Is held by a third-party debt collector, you may be able to reach a deal for $500.

If the debt is legitimately yours and the statute of limitations is nowhere close to expiration, here’s what to do next:

  • Calculate how much you can afford to pay (don’t be afraid if it’s less than what the debt collector demands)
  • Contact your debt collector and negotiate a repayment plan
  • Request that they delete the account from your credit report once it has been paid
  • Make your payments (by money order or cashier’s check; don’t give them your bank account details
  • Get all of the details in writing

READ MORE: How to deal with debt collectors

Pro tip: Don’t offer electronic access to your bank account or give them a personal check. They can use your account information to attempt to withdraw more money from your accounts. 

READ MORE: How to pay off credit card debt in collections

What Happens if a Debt Collector Refuses Payment

Debt collectors are not obligated to accept settlements. Some will try for the full amount if they believe they can win a debt collection lawsuit. But many are willing to work with you, particularly if they worry that the alternative is bankruptcy, which leaves them with nothing. 

How to Get Out of Debt Collection

Don’t wait until the debt collector contacts you. Start looking for ways to pick up some extra income. Whether you’re selling unused items, making food deliveries or selling plasma, set aside what you can so that you’re prepared when the call inevitably comes.

How to Tell if a Debt Collector is Legit

  • They refuse to validate your debt
  • They request information they should already know
  • They won’t provide company information (including the company name, address and phone number)
  • They refuse to answer your questions
  • They threaten you or lie
  • They insist on immediate payment
  • They demand payment by questionable methods (gift cards, wire transfers, etc.)

READ MORE: How to spot debt collection scams

How Much Will a Debt Collector Settle For?

There’s no surefire way to know. It will depend on the creditor and your circumstances. The American Association for Debt Resolution reports that the average settlement amount is 48% of the balance, but it can range from as low as 10% of the total amount you owe all the way up to 80%. Start your negotiations low, and expect the debt collector to start high.

READ MORE: Debt settlement

Debt Collection Success Story

Dan’s wife had to undergo cancer treatment, and his family didn’t have health insurance. During the treatments, Dan was unemployed and his wife was unable to work. Their income was limited to unemployment and short-term disability. 

After the treatment was successful, they owed more than $25,000. The hospital billed them $500+ per month, which they repeatedly said they couldn’t afford. Eventually, the debt was sold to a debt collection agency. When Dan spoke with the debt collector, he explained the situation. He told the debt collector that he could afford payments of $100 per month. A payment plan was worked out where the family would pay $5,000 over fifty months. Both were happy: The debt collector recouped his investment and the family paid what they could afford for the life-saving treatment. The delinquent account was removed from their credit reports once the payments were complete.

First-Person Experience: Why is a Debt Collector Calling Me?

Shortly after I purchased a home several years ago, I started getting debt collection calls about debt of almost $1,000 on a Neiman Marcus store credit card. I did not (and have not ever) had a Neiman Marcus credit card, so I knew the debt was not legitimately mine. A debt collection agency had linked the debt to my new address, a home I had just purchased. I requested a debt validation letter, which was sent to me and I determined that the debt had actually been accrued by a tenant of the previous owner.

However, the debt collection agency kept calling me at least once a day, and even called my office, trying to embarrass me into paying a debt that wasn’t mine. They offered to “settle” the debt if I paid them $300. I reiterated that the debt was not mine and told them to stop contacting me, but they continued to call using the name of a different debt collection agency. I reported them to the FTC, and the calls finally stopped. Eventually, I received a court summons. I filed a response showing the dates the debts were accrued and the date I purchased my home, and the case was dismissed. 

The key takeaway: If a debt collector is calling you, they will be persistent. They will not necessarily follow the laws, so you have to know your rights. You will have to prove that the debt is not yours or expect to get a court summons. But if you do end up having to go to court, the burden of proof that the debt is yours will be on the debt collection agency.

Other Options

The Bottom Line

Dealing with debt collectors isn’t easy. After all, if you had the money to repay the debt, you would have paid it. But there are steps you can take to protect yourself. Learn your rights, and always make them verify that the debt is legitimately yours.


What is CACI Debt Collection?

CACI stands for Consumer Adjustment Company Inc. It is a legitimate debt collection agency located in St. Louis, Missouri. The agency was founded in 1967.
The mailing address is: 12855 Tesson Ferry Rd, St. Louis, MO 63128 and the phone number is  (314) 729-1133. You can find the website here.
CACI is facing some legal challenges alleging violations of the Fair Debt Collection Practices Act. They include: 
Sharpe v. Consumer Adjustment Company Co., Inc.
Tinsley v. Consumer Adjustment Company Inc

If you’ve experienced problems with CACI and believe your rights have been violated, please contact the Federal Trade Commission or the Consumer Financial Protection Bureau.

Can Social Security Be Garnished?

According to the Consumer Financial Protection Bureau, your Social Security benefits will be protected from garnishment due to debt in collections as long as you have the funds deposited directly to a bank account or onto a prepaid card.

What is LVNV Funding?

LVNV is a debt buyer. The company buys your charged-off debt from your original lender. They hire a debt collection agency (Resurgent Capital Services) to collect the debt. Though LVNV is the company that’s listed on your credit report, Resurgent employs the people calling you, sending you mail, etc.
READ MORE: What is LVNV Funding?

Scroll to Top