Sense & Centsibility Blog

A Breakdown of the Collections Process

Debt, especially debt in collections, can be quite stressful. It means you're behind on payments so probably are struggling to keep up with other monthly expenses, plus you're probably getting collection calls. This post breaks down the collections process and what to do to regain control of your debt and finances.


Current Status

Payments and other loan terms are met by the borrower. The account is in good standing.

30 to 90 Days Past Due

Creditors may begin to make calls to the borrower. Monthly statement show past due status and extra fees.

90 to 120 Days Past Due
Internal Collections or Placed with Outside Collector

Collection calls continue from the original creditor or the account may be placed with a third party debt collector such as a collection service or an attorney who collects debts. The number of collection calls and letters generally increase the longer the account remains past due. 

Note: Once the account is sent to a third party debt collector, borrowers have the right to send the collector a cease contact letter requiring them to stop harassing collection calls and letters.

120 to 180 Days Past Due
Charge Off May Occur

The borrower still owes money when debt is charged off and reported as uncollectable on the original creditor's financial records. Debt collection efforts continue. Charge off status can be listed for seven years on credit reports.

180+ Days Past Due
Court Action and Judgements Are Possible

Debts may remain with a debt collector or may be sent to the court system for legal judgement. If a judgement is obtained and if you are not eligible for garnishment exemption, depending on the type of debt involved the result may be a levy on wages or bank accounts, tax intercepts, or a lien on property.

Financial Counseling

The best way to determine all of your options to conquer your debt is to meet with a financial counselor at LSS Financial Counseling. Our counselors will work with you to create a realistic spending plan and will go over your debt repayment options. A Debt Management Plan (DMP) may be a great option to deal with your debt. To get started with your free session, call us at 888.577.2227 or go to our website to GET STARTED ONLINE.

How to deal with creditors on your own

If you've met with a financial counselor and you decide that it's best to deal with creditors/collection agencies on your own, here are some tips:

  • DO let creditors know your circumstances - it really does make a difference.
  • DO get special arrangements in writing, if possible. This could protect you later on.
  • DO keep records of your creditor contacts: letters, notices, cancelled checks, copies of money orders and receipts. Keep a phone log with the date and time of call, name of caller, and what was said.
  • DO open your mail. Creditors may be telling you something new and important about the status of your account.
  • DO ask creditors if they are willing to waive or reduce interest or fees. You don't know until you ask.
  • DO be aware of the consequences when settling a debt for less than is owed. The balance may be listed on your credit report as "bad debt" and may also be considered as income for tax purposes.
  • DON'T make promises you can't keep - if you promise a payment, be sure to send the agreed upon amount on the due date. Contact your creditor if you are unable to make your payment.
  • DON'T ignore a summons or notice of intent to garnish. There will be consequences, and you may still be able to negotiate a payment arrangement with the creditor.
  • DON'T send payments without an appropriate account number.
  • DON'T send post-dated checks.

Other Resources

For information on consumer rights and protections, here are 3 excellent resources:

Federal Trade Commission

Legal Services Corporation Law Help

National Association of Attorneys General  

LSS Financial Counseling helps people every day to regain control of their finances and conquer their debt. You can do it, too! Give us a call today for your free and confidential financial counseling session. We will work with you to create a realistic plan of action for your individual situation.

** This is a general overview of the collection process and timeline, which may vary by creditor/collector. This is not intended to be legal advice.