unpaid credit card went to collection agency, too late to undo?
May 13, 2018 11:05 PM   Subscribe

Whoops! I ran out of money and rather than talk to the credit card company, I ignored it for a few months, figuring the worst that would happen would be an accumulation of fees and interest that I would pay later when money came in. Nope! That wasn't the worst - just got a letter from a collection agency. Is there a chance that the CC company will take the debt back if I talk to them, or should I just deal with the collection agency?

This debt (card 1) is about $20K, ignored for about six months. I have a second card (card 2) with about a $12K debt, ignored for three months but you bet I'm gonna call them soon; and a third card (card 3) at about $6K where I am (for now) current in payments - in case the other debts might affect card #1's decisions. I'm unemployed and have no prospect of seeing money in the near future, so I can't really send even a token payment to collections, card 1, or card 2, though I can probably still scrape up the minimum for card 3.

Would also appreciate hints about dealing with credit card companies (and collection agencies) when you just don't have any money to send.
posted by anonymous to Work & Money (12 answers total) 2 users marked this as a favorite
 
What some credit card companies do initially with a debt is they send it to their in-house collections department (there might be another word for what it is) and they send you a scary letter that looks like it's from a collections agency but it is in fact from them and they can in fact "take the debt back," as you describe it, but IIRC, you have to send them some money to get them to do it.

If it has gone to an actual collection agency, the credit card company has sold it to them and written off the debt. They are done with it; they won't talk to you; they don't care anymore.

Now, take a deep breath: I don't want to scare you, but to prepare you and reassure you. Credit card companies can be awful to talk to in this situation, as in make-you-cry awful. Talking to the IRS is like wrapping up in a warm fuzzy blanket and being handed a mug of cocoa in comparison. Credit card companies don't care that you have no money and are unemployed. They will bully you and say things like "Well you have to pay us [ridiculous sum that even many employed people would have trouble coming up with on the fly] or X will happen." THEY ARE TRYING TO SCARE YOU. Don't let them scare you. You have rights.

Unfortunately, they don't care if you want to do the right thing and send them a little bit of money that is not the amount they are demanding. Payment plans are set to their convenience, not what you can manage.

If you have $38K in credit card debt and are unemployed, I urge you to look for a bankruptcy attorney or three who can do a free/low cost consultation and talk to you about your options for debt relief, including bankruptcy. Given your options, BANKRUPTCY IS NOT THAT BAD. I promise you. You are not going to be able to get on top of this debt in the situation you are in, and it is just going to be more stressful the longer you draw it out. Don't waste your money throwing it at the minimum debt on card 3. Set it aside to pay the lawyer for your bankruptcy. (It could cost several hundred or more than $1,000 depending on how complicated your situation is.)

You are not a bad or irresponsible person if you do have to declare bankruptcy. The economic and financial system in this country is fucked. Rich people play it like a game; they don't worry about the ethics of "not paying my debts" etc. Credit card companies are assholes; they play on people's desire to do the right thing, but in truth they'll just write this debt off as the cost of doing business. You need to take a hard-nosed, pragmatic approach to this.

You're going to be fine. I am rooting for you!
posted by tiger tiger at 11:32 PM on May 13, 2018 [28 favorites]


P.S. If you have money in a retirement account, DO NOT CASH IT OUT AND GIVE IT TO THEM. They may suggest this to you when you call. "Don't you have a source of money somewhere, a retirement account...?" However, if you declare bankruptcy, in almost all cases, money in a retirement account is exempt--that means you can keep it despite your declaration of bankruptcy.
posted by tiger tiger at 11:37 PM on May 13, 2018 [23 favorites]


If any of your cards are still in good standing, prioritize the "best" one (assuming that you can afford to continue paying until you get a job, it can be worth hanging on to an open card with a manageable balance for credit rebuilding later) and declare bankruptcy ASAP. Once you file, new derogatory reports stop, again making the process of rebuilding credit after that much easier.

To answer your actual question, most issuers don't sell the debt immediately once they close the account. They contract with a debt collector for 3-6 months before selling it, usually. Prior to sale, you can still deal with the OC directly. After that, you have to convince them it's worth buying the debt back if they even will. It varies by issuer, of course.

As for dealing with them, don't, beyond sending a letter in response to the eventual dunning letter you get from a scumbag debt buyer telling them that they may only communicate with you by mail so that you stop getting bugged by their incessant phone calls. If they actually serve you with a lawsuit, rather than blustering, that's when you actually have to do something. That's not terribly likely if your credit report continues to make it look like you have nothing for them to take. If you later start opening a bunch of new accounts before the statute of limitations expires, that's when they'll pounce. Obviously, none of that applies if you declare bankruptcy and wipe out the debt.

Declaring when you are jobless is advantageous under current law, so don't wait until you're employed and subject to the means test and risk getting forced into Chapter 13.

Never feel bad about stiffing banks. They almost certainly made enough money in fees/interest they charged you plus their cut of the fees paid by merchants to make back every cent they paid out on your behalf and then some. Even if they didn't, screw 'em, it's not like they're doing you some kind of favor, it's just business.
posted by wierdo at 1:02 AM on May 14, 2018 [2 favorites]


Credit card debt is unsecured. Don't let them scare or threaten you.
posted by DarlingBri at 3:16 AM on May 14, 2018


Never feel bad about stiffing banks. They almost certainly made enough money in fees/interest they charged you plus their cut of the fees paid by merchants to make back every cent they paid out on your behalf and then some. Even if they didn't, screw 'em, it's not like they're doing you some kind of favor, it's just business.
posted by wierdo at 3:02 AM on May 14


I lost what little respect I had for any and all banking institutions, and their relationship with our government, when they pulled that "too big to fail" jive, and then gave themselves fat raises and huge bonuses.

Fuck. them.

You owe these scum beings nothing. Look out for you. Period. Do talk to a bankruptcy attorney, get all of your options laid out on the table; they'll give you the lowdown, what to do, what not to do. Then, do what is best for you. Period.

Our fearless, peerless leader, Ol' Trump, he's sunk about a zillion companies. Funny how it is -- if it's banks, and/or wealthy people, hey, it was a business decision, pure and simple. It's those of us staggering around trying to live in about any way we can, we are the ones who get castigated.

May I repeat: Fuck. them.

One thing not to do is take any of their phone calls, by sending them a letter requesting this only be handled by mail.

You've done the hardest step already, by coming here for answers; proves you're ready to do this thing.

You're doing great.

Good luck.
posted by dancestoblue at 4:55 AM on May 14, 2018 [10 favorites]


Yes fuck banks. But that’s a lot of debt. Definitely consider bankruptcy. If you have no chance of earning the significant amount of cash you’ll need to resolve 30k+ in cc debt then bankruptcy is probably your best option. And bankruptcy is hip! 50 cent does it all the time
posted by dis_integration at 5:54 AM on May 14, 2018 [1 favorite]


Nthing that you should seriously consider bankruptcy. A friend I’ve known for 20 years has long struggled with CC debt. Over the years, a 15k balance turned to 20k turned to 30k and with her credit history, her APR sat at a frankly usurious 29 percent. There was no way she could ever catch up, and if she just paid minimums she’d be paying well into old age. She refused bankruptcy for years because she felt ashamed, and she always thought she’d find some way to get ahead of it.

She finally met with a bankruptcy lawyer and it was like a weight has been lifted after years of sleepless nights. Now she is working on building back her credit and setting up some savings. It was the best possible outcome. Her only regret was not doing this 10 years ago. The sooner you do this, the sooner you can rebuild.
posted by mochapickle at 5:56 AM on May 14, 2018 [7 favorites]


You may want to consider a Chapter 13 bankruptcy, which is the best of the bankruptcy options out there. But speak to a lawyer, they may have something to suggest that may work for you, but the sooner you do it, the faster you can recover.

Good luck to you.
posted by Alexandra Kitty at 7:19 AM on May 14, 2018


IANAL, but years ago there was a book saying you could refuse to deal with a collection agency and they would have to kick it back to the company. I can’t find the book now, and the laws might have changed, but if no lawyer weighs in here and even if one does, it would be a good idea to check with a lawyer. It seems like you would probably be eligible for some kind of legal aid. You can tell a collection agency not to contact you, and legally, they have to stop, but these people are scum and don’t always follow the law.

Also, if you at any time are advised to work with a credit counseling agency, remember that they are paid by credit card companies. They will advise against bankruptcy because their goal is to get you to pay. I agree with those who say you should consider bankruptcy.
posted by FencingGal at 7:45 AM on May 14, 2018


I should have added that, while you can tell a collection agency to stop contacting you, they can still sue you if you owe the debt. This article on protecting yourself seems pretty good.
posted by FencingGal at 8:12 AM on May 14, 2018


Would also appreciate hints about dealing with credit card companies (and collection agencies) when you just don't have any money to send.

I'm a lawyer who specializes in this type of work. I'm not your lawyer, and I'm probably not licensed to practice law where you live—and state laws matter, so keep that in mind. With that said, I'll gladly offer some generalized information.

First off: it matters which bank we're talking about. Some banks sell their charged-off accounts, some banks sue on them, and some banks just toss them in the trash. If you're in the second category, then you'll hear from a law firm soon. Those banks have quick turnarounds. If you're in the first category, then you'll probably receive a collection letter soon, but a lawsuit might be years away.

If you're dealing directly with a bank (original creditor), you may not get a lot of leeway in terms of payment. They want what they want when they want it. By contrast, if your debt has been sold to a debt buyer (Midland, PRA, etc), then you'll have considerably more leeway. Most of their purchased accounts don't return any profit. That doesn't mean you'll get an 80 percent discount, but it does mean they're more likely to negotiate.

There are lots of questions to ask, questions that depend on your specific situation. Do you want to pay? Can you pay? If you're going to pay, does it make more sense to begin making monthly payments now, or does it make more sense to let the debt sit while you stockpile a lump-sum settlement? Is it accruing interest—and if so, is that interest that'll disappear once someone sues, or is it interest that's there to stay?

Collection agencies don't buy debt. They're hired to collect it. Some debt buyers handle their own collections, others set up an affiliate company to collect, and others hire collection agencies. It's relatively easy to get a collection agency to leave you alone, but the debt's owner is another story. Some are smart enough to go quiet when a consumer disputes an alleged debt. Others won't. If you're dealing with a law firm, they'll probably sue. It's illegal for collection agencies to misrepresent themselves as law firms, but it happens.

For both debt buyers and collection agencies, this business is low-margin and high-volume. They don't have time to waste on accounts that aren't going to pay. There are pros and cons to communicating with them honestly. Sometimes it makes sense. Generally speaking, if you're going to pay the debt, they will offer flexibility on one of two fronts: either they'll reduce the amount for a lump-sum settlement, or they'll accept lower payments toward the full amount over time.

If you have specific questions, feel free to ask. I'll say—again, generally—I don't normally advise people toward bankruptcy if their sole liability is credit card debt. There are reasons for that, but maybe those reasons don't apply to you or in your jurisdiction. Maybe your situation is more complex and bankruptcy would make sense. This area of law is somewhat specialized, and facts matter.
posted by cribcage at 1:08 PM on May 14, 2018


You should care about the bank exactly as much as the bank cares about you.

Recent good article from Current Affairs on this subject.
posted by EmptyEmpire at 2:45 AM on May 15, 2018 [1 favorite]


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