Sense & Centsibility Blog

Understanding Collection Debt


Do you ever dread getting your mail? Does the actual idea of walking to the mailbox stress you out? I think many of us have been there. I personally think that one of the keys to dealing with debt is to be educated on what everything means. Sometimes it can seem like creditors are speaking a foreign language.

Dealing with collections can be challenging; the more you know about how to avoid and/or resolve collection status, the better prepared you will be to deal with it effectively. Grab one of your bills right now. Talk a look at it. Do you see any of the terms below?


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


Pre-Collections Creditors may begin to make calls to the borrower. Monthly statements show past due status and extra fees.


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.


Charge Off May Occur The borrower still owes the 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.


Court Action and Judgments Are Possible Debts may remain with a debt collector or may be sent to the court system for a legal judgment. If a judgment 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.

Do you want to set up payment arrangements on collection debt? There are a couple of ways to do so:

Debt Management Plan (DMP)

Father and son

One consolidated payment and a strategy for debt liquidation - our DMP may be a great option to set up new payments with all of your unsecured debts. The way our Debt Management Plan (DMP) works is that each creditor receives an amount from funds you deposit with our service monthly. Each payment is based on the balance and the creditor's policy of acceptance. As one account is paid off, that payment from the paid in full account is added to another of your creditors' payments. The rollover of payments has the powerful impact of accelerated payoff! Reduce your debt and reduce your stress!

Read our latest DMP testimonial

Make Payment Arrangements On Your Own

  • Be in touch. Make early contact and try to keep communication open.
  • Be honest. If you’ve overspent, lost your job, had medical problems, etc., say so.
  • Be sincere. Set up and send payments that are truly affordable for you - even if less than minimum due, funds are usually credited to the account and not sent back.

Note: Funds applied may not prevent creditors or their collectors from doing anything they legally have the right to do, including charging late fees or over limit fees, making collection calls or charging off the account.

Want more info?

Give us a call at 888.577.2227 and set up a time to meet with a financial counselor about your collection debt. We can help you figure out where you stand with each debt. Call today!

The Federal Trade Commission, or call (877) 382-4357, has a variety of consumer protection topics including “Debt Collection FAQs: A Guide for Consumers”

Legal Services Corporation Law Help, or call (202) 295-1500 for referrals to local legal aid and public interest law offices, basic information about legal rights, and more

National Association of Attorneys General, or call (202) 326-6000 to locate your state’s Attorney General’s Office where you may file a complaint or learn more on the topic

Note: This is a general overview of the collection process & timeline which may vary by creditor or collector.