No More Stress: Your Guide on How To Pay Collections

Having a debt go into collections can be stressful, especially with the seemingly incessant calls from debt collectors. Take control of the situation with these steps.

Stressed young woman holding paper document, bank debt notification, looking away.
Updated May 13, 2024
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Although phone calls from debt collectors may seem scary, you can take control of the situation by verifying what you owe and negotiate payment terms that fit your financial situation. Let’s look at the steps for how to deal with collection calls and establish a payment plan so you can feel less stressed over your debt.

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How to pay off a debt in collections

If you’ve missed several payments on a debt you owe, there’s a good chance your debt will be sent into collections. Some creditors have their own in-house collections department, while other creditors will sell your debt to third-party collection companies. Once that’s done, your phone will start blowing up with calls for you to pay that debt.

When considering how to pay off debt in collections, you should know your rights in the debt collection process, verify the debt being collected is yours, educate yourself on the statute of limitations in your state, and negotiate a payment plan or lump-sum payment that you can afford.

1. Verify the debt is yours

The first thing you should do when a collection agency calls about an outstanding debt is verify what the debt is for and that you actually owe it. The types of debt that can be sent to collections include:

  • Credit card debt
  • Medical debt
  • Student loans
  • Auto loans
  • Mortgages
  • Personal loans
  • Government fees and fines
  • Utility bills
  • Bank overdrafts and fees
  • Payday loans

Collection agencies are required to provide you with a debt validation letter within five days after they first contact you. The information should include:

  • The collection agency’s name and address
  • The name of the original creditor of the debt
  • How much you owe, including fees, interest, payments, and credits
  • How to dispute the debt
  • Your rights in the debt collection process

It’s also a good idea to check your credit report to verify the debt. Even if you’re aware you owe an outstanding financial obligation, your credit report can tell you how old the debt is so you know whether it falls within the statute of limitations for collection.

If you don’t think the debt is yours, you need to send a letter disputing it within 30 days after receiving information from the collection agency. The debt collector then must send you written verification of the debt before they can continue trying to collect.

2. Check your state’s statute of limitations

The statute of limitations on how long a collection agency can go after you for a debt differs depending on your state. This time frame can be anywhere from three to six years, beginning from the month you stopped paying the bill.

Once the statute of limitations has expired, the collection agency can’t sue you to collect the debt. Collection agencies can still try to collect payments from you after the statute of limitations has expired, but they have no legal recourse for forcing you to pay the bill.

In some states, the statute of limitations time frame can restart if you make any kind of payment or acknowledgment of the debt. For example, if you stopped paying a medical bill in March 2019 and the statute of limitations in your state is three years, then you can’t be sued for that debt after March 2022. But if you made a payment in April 2022, after the statute of limitations expired, then the statute of limitations resets and you can be sued for the debt.

3. Know your debt collection rights

It’s important for you to know your rights regarding debt collections and the protections you have under the Fair Debt Collection Practices Act (FDCPA). Under this federal law, debt collectors are prohibited from harassing you, threatening you, or using profanity while attempting to collect on a debt. They can’t lie or misrepresent themselves as attorneys or law enforcement officials.

Debt collectors aren’t allowed to call you at work or between the hours of 9 p.m. and 8 a.m. They’re also restricted from calling you more than seven times over seven days. If, at any time, you tell a debt collector they’ve called you at an inconvenient time or you don’t want to be contacted via email, text message, or private social media message, they must stop such communication. They’re also strictly prohibited from publicly posting on social media regarding anything about your possible debt.

Debt collectors also must stop contacting you once you enlist an attorney to represent you. Their collection calls should be directed to your attorney instead.

Consequences of ignoring debt collectors

You shouldn’t ignore the collection agency’s efforts to get you to pay your debt. If you don’t make a payment arrangement to settle it, the collection agency could take legal action as long as the statute of limitations hasn’t expired. Then you may have a harder time negotiating a payment arrangement or settlement amount.

Attorneys for the debt collector could ask the court to garnish your wages or put a lien on your home to pay off your obligation. You may also be required to pay court and attorney fees and interest on the amount you owe.

Sometimes, a debt collector may attempt to get you to pay an old debt after the statute of limitations has expired. While you still technically owe the money, you can’t be sued to collect it. Again, that’s why you need to know the details of the debt because if you make a payment on an amount owed, you could possibly reset the statute of limitation timeline.

4. Create a debt payment plan

The best thing you can do if you have a debt that goes into collections is to negotiate a payment plan or settlement amount to pay it off. Take a good look at your finances to determine how much you can pay every month. That way, you’ll take the reins in your negotiations with the debt collector rather than have them run the show.

5. Contact the debt collection agency

When negotiating with a collection agency to pay off your debt, you have two payment options for settling it. You could agree to make installments of a set monthly amount over a certain period, or you can negotiate to settle the debt in a lump-sum payment.

Lump-sum payments are typically less than the amount owed, but they also save collectors time and money that they would spend continuing to try and collect payments. You may even get a debt collector to agree with a lump-sum payment that’s half of the full balance you owe.

Lump-sum payments pros and cons

  • You can negotiate to pay less than the full balance of the debt.
  • You can prevent an extension of the statute of limitations on the debt.
  • Settling the debt is over and done quickly.
  • You need to have at least 30-50% of your debt on hand.
  • Your credit report may list it as a partial payment.

Installment payments pros and cons

  • Breaking your debt into more affordable monthly payments could make paying it off easier for you
  • It could take years for you to pay off the debt.
  • If you miss one payment, you reset the statute of limitations.

No matter what payment plan you and the debt collector agree on, make sure the collection agency puts the agreement in writing before you make any payments.

6. Stay on track with payments

Once you start making installment payments, ensure that you keep records of every payment you make. Send the payments using certified mail through the U.S. Postal Service so you have proof that your payments are being received.

If you made a lump-sum payment or have paid the final installment payment, ask the debt collector to provide you with a letter stating that the debt has been satisfied.

7. Review your credit report

Unfortunately, debt collections can appear on your credit report for seven years, which may be long after you’ve settled the debt. It could also hurt your credit score, negatively impacting your ability to borrow money. Even when you pay off the debt with a lump-sum payment, if the amount you pay is less than the full balance, it may show up as a negative mark on your credit report.

You can write a “goodwill letter” to the original creditor asking to remove the collections account on your credit report, but they aren’t obligated to do so. After you pay the debt off, review your credit report at least annually to ensure the debt falls off your payment history when it should.

Does debt collection impact credit?

A debt collection can impact your credit if the debt is sold to a third-party collection agency (instead of the creditor’s internal collections department) and if that agency reports it to the three credit bureaus (Equifax, Experian, and TransUnion). However, not all debt collectors will report the debt to the credit bureaus, and they’re not obligated to do so.

Also, a debt collector must contact you about the debt before they can report it to a credit bureau. This communication can be done in person, over the phone, via a mailed letter, or via electronic communication like email. If the collector sends you a letter or email, they must wait about 14 days to ensure their communication is delivered.

Once a debt collection is on your credit report, it remains there for seven years, regardless of whether or not you pay the debt off. You can try to remove paid collections from your credit report by asking for a “goodwill deletion.” However, there are no guarantees that your request will be granted.

Tips for dealing with debt collection

If your debt goes into collections, the worst thing you can do is ignore it. Your debt won’t go away. If you don’t respond to the debt collector’s calls, you may find yourself in court having your wages garnished to pay for it.

Here are some tips for dealing with debt collectors.

  • Ask the debt collector to verify in writing that the debt is yours.
  • Know your rights regarding debt collection. The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) are good resources for unfair practices.
  • Make sure the debt hasn’t expired according to the statute of limitations in your state.
  • Look at your finances and propose a payment plan or settlement cost that fits your budget.
  • Once a payment plan is in place, make regular payments so as not to reset the statute of limitations.
  • If needed, enlist the help of an attorney or credit counselor from the National Foundation for Credit Counseling (NFCC).


What is the best way to pay collections?

The best way to pay collections is to put the ball in your court and negotiate payment with the debt collector. You can opt for a payment plan or lump-sum payment, whichever fits best for your budget.

How do I settle a collections debt?

You can settle a collections debt by agreeing to make a lump-sum payment on the debt. The settlement amount doesn’t have to be the full balance amount of the debt; the American Fair Credit Council estimates the average settlement is about 48% of the debt owed. But remember, when you settle a debt for less than the balance due, that settlement will be reflected negatively on your credit report.

Is it worth paying debt in collections?

While paying off a debt in collections may not help repair your credit report right away, it’s still worth paying the debt rather than ignoring it, especially if the statute of limitations hasn’t expired. If you don’t address the situation, the debt may end up costing you more than you originally owed. The collection agency could sue you for wage garnishment, and you may also be held responsible for the court fees associated with the lawsuit.

Bottom line

Having a debt in collections can be stressful, but it doesn’t have to be if you take the lead and work with the debt collectors on a plan to pay off what you owe. However, if you’re sinking in a quicksand of debt, you may want to consider looking into government debt relief programs to help. Check out our guide on government debt relief programs for more information.

National Debt Relief Benefits

  • No upfront fees1
  • One-on-one evaluation with a debt counseling expert
  • For people with $30,000 in unsecured debts and up

Author Details

Danielle Letenyei

Danielle Letenyei is a professional writer living in Madison, Wisconsin. Her interests include budgeting, travel, credit cards, insurance, and creative side gigs. She hopes her work on these topics can help others navigate the intricate landscape of personal finance.