I Got a Debt Collection Notice. Now What?

It’s OK to freak out a little if you receive a debt collection notice.

I read and write about debt every day, and even I went into panic mode when a letter from a collector came in the mail several weeks ago. There’s an immediate sense of vulnerability, perhaps some confusion, and a strong desire to make it all go away as soon as possible.

The emotions are understandable, but it’s important to get beyond the reaction and do what you need to do.

“It’s a business transaction,” said Gerri Detweiler, Credit.com’s director of consumer education. “It’s not a judgment about your character, and it’s not about somebody trying to embarrass you.”

So here’s what you need to do when you get a debt collection notice in the mail.

1. Is the Debt Legitimate?

While you should act quickly when you receive a notice from a debt collector, that doesn’t mean you should pay right away. There are lots of scams out there, you may not owe the money, or the debt may be too old to be collected. Do some investigating before you send a check.

Ask the collector for a written verification of the debt, and you can call your state attorney general’s office to make sure the collector is licensed.

2. Do You Have to Pay?

Even if it’s not a scam, you may not owe the debt someone is trying to collect.

“Your job is to figure out whether you really owe it, and if you do, how you’re going to pay it, and if you don’t, how you’re going to dispute it,” Detweiler said. The faster you determine what you’re going to do, the better.

“That doesn’t mean you should rush to pay it or make a payment if you’re not sure that you owe it,” Detweiler said. “That’s a huge mistake that people make, especially when they’re dealing with high-pressure debt-collection scammers.”

States have different statutes of limitations on collecting debts, and it’s illegal for a collector to try to get you to pay after that time. Be careful, because if you start paying, even after the statute of limitations has expired, you could be sued for the whole debt.

3. Take Action

Once you’ve figured out what you’re going to do, whether it’s settle, pay the debt in full or dispute it, work to resolve the issue. Paying off a collections account doesn’t immediately help your credit — the account stays on your credit report for about seven years — but you don’t want to put it off and risk having it resold. That could result in multiple negative entries on your credit report for the same item.

If you’re dealing with collections accounts, you’ll want to check your free credit reports, and it’s a good idea to regularly look at your credit scores using a free tool like the Credit Report Card to see how the accounts are affecting them.