Should You Pay Collections?

If a debt collection agency is harassing you to pay a long-overdue bill, a slightly edited version of Shakespeare’s “To Be” soliloquy probably comes to mind.

“To pay or not to pay? …That is the question.”

The answer depends on a lot of things. Can you afford it? Does the thought of having your wages garnished freak you out? How old is the debt? Is it even legit?

You may not owe much, but debt collection agencies aren’t shy about putting the weight of the world on your shoulders to get that last dollar out of your wallet.

Here’s a guide that might lighten the load you are under.

What Are Collection Accounts?

A collection account is a bill that you haven’t paid and has been sold to a collection agency. You’ve fallen behind on the payment schedule – and somebody wants to collect the money you owe.

If that describes your situation, you are not alone. Credit card debt reached $1.2 trillion in December of 2024. Almost 12% of accounts were overdue by 90 days or more. That was the highest delinquency rate since Americans were digging out of the Great Recession in 2011. Almost 5% of federal student loans were delinquent at the start of 2025.

Whether you’re overdue paying credit card debt, student loans, car loans, medical bills, or other debt, the lender has a right to collect what it is owed. If you fail to catch up, the lender may eventually transfer your account to a third-party debt collection agency.

As tempting as it may be to disregard the phone calls and letters demanding you settle your account, that’s not a good idea.

Ignoring uncollected accounts will damage your credit score. The longer you wait to pay, the more you’ll owe in interest charges. And if all else fails, the collector could sue you, which could add legal bills to the equation.

Different Types of Collectors

There are two types of creditors. The entity that loaned you the money or provided a service in the first place. Think banks, credit unions, Mastercard, or the hospital that provided that $14,000 appendectomy after your belly suddenly started to ache.

Then there are debt collectors. The only service they provide is recovering the money you owe, and that pursuit can develop into a severe pain in the neck.

Original Creditor

That bank or credit union or hospital mentioned above is the original creditor. If you fall behind on payments, they’ll send you gentle reminders via email, letters, or phone calls.

They’ll typically do that for 180 days after you miss your first payment, and then they’ll classify the debt as a “charge-off.” That means they’ve written off the account as a loss and have sold it to a debt buyer.

Original creditors would much prefer not to do that since the debt is usually sold for much less than they are owed. If you call for help, they might be willing to work out a less demanding payment schedule or even lower the overall bill.

Consider a debt settlement plan if you’re nearing “charge-off” territory. The game changes once the debt is sold.

Debt Collector

The entire business model of a debt collection company is based on making you pay the money you owe. It buys the delinquent accounts from creditors at a discounted rate, then turns its attention to getting paid by you.

The industry has long had a reputation for being aggressive, unforgiving, and even threatening. Fear not, a bagman like Luca Brasi from “The Godfather” is not likely to show up at your house with a baseball bat.

You do have to worry about a flurry of emails, letters, and phone calls, though they can only call between 8 a.m. and 9 p.m., unless you agree to another time. You might be able to negotiate a lower amount than you owe, though the original creditor is more likely to make a deal than the debt collector.

There are no laws against debt collectors being annoying, but when it comes to consumer rights, the Fair Debt Collection Act outlawed many other tactics.

You should know your rights with debt collectors. Among the things debt collectors can’t do is use profanity, publish your name as someone who refuses to pay debts, threaten you with a jail term, make false claims or send anyone resembling Luca Brasi to your front door.

Should You Pay Collections?

If a claim is legitimate and you owe a person or a company money, you are legally and ethically obligated to pay them.

But life is not always that simple. For a variety of reasons (job loss, divorce, medical crisis), you may not be able to meet that obligation. Or you could just decide you’d rather play blackjack in Las Vegas than pay your student loan.

Whatever the case, you need to weigh the pros and cons of paying vs. not paying. If you don’t pay, you are in for a lot of phone calls, emails, and letters from a debt collector.

Your credit score will take a beating. The debt will increase since you’ll likely be charged interest and other fees. You could be sued, which could lead to a portion of your wages being garnished or some of your assets being seized to pay collections.

If you pay the debt, those potential negatives will disappear, though the collection won’t disappear from your credit report for seven years.

Before you get to the To-pay-or-not-to-pay drama, make sure the debt is valid. Request a validation letter within 30 days of being contacted, and make sure the facts are correct. If they’re not, send a letter to the debt collector disputing the bill.

If they are correct, consider seeking the advice of a consumer rights attorney and/or a financial counselor. Nonprofit agencies like InCharge Debt Solutions have certified counselors who can look at your entire financial picture and help you plot the best moves.

What Happens If You Never Pay Collections?

After weighing the pros and cons, you may decide not to pay the debt. That may well prompt the debt collector to sue you.

Since it’s a civil case, you can’t be thrown in jail. Congress abolished debtor prisons in 1833. You can, however, have your wages garnished if the court rules against you.

There could be other financial consequences based on a 100-point (or more!) drop in your credit rating. It’s hard to put a dollar figure on the emotional stress you could endure. You could be in for years of losing sleep.

Does Debt Go Away?

Uncollected debts don’t last forever. As unfortunate as it would be, you could die. In that case, creditors might get a piece of your estate to pay off some of what you owe. Family members are not liable unless they co-signed the loan or had joint ownership of the debt.

Statute of Limitations on Debt

If you can’t pay off a promissory note, don’t live in Maine. The statute of limitations for that particular debt in that particular state is 20 years. It’s between three-to-six years in most states.

Statutes of limitations are a patchwork quilt of types and time frames, depending on where you live and what category your debt falls in. There are four categories of debt – Written, Oral, Promissory Notes, and Open-Ended (credit cards and all forms of revolving credit).

Regardless of the category, the statute of limitations clock begins after the last payment was made on the defaulted account. But beware, the clock can be reset and start over again if you:

• Make a payment, even a partial one.
• Acknowledge ownership of the debt in writing.
• Negotiate a repayment plan.

How Does Collections Affect Your Credit Score?

Collection agencies report debt to the three major credit bureaus, Equifax, Experian, and TransUnion. That report could cost you 100 points or more on your credit score and the black mark will stay on your credit report for seven years.

The precise impact it would have depends on a few factors, like how high your score was to begin with and the nature of the debt.

Whatever your score, having a debt in collection is one of the most damaging things that can appear on your credit report. It is part of your payment history, which comprises 35% of the FICO scoring model and 40% of the Vantage scoring model.

The worse your score, the harder it will be to get lower interest rates on loans or other forms of credit. You might not even qualify for some of those things.

There is a small exception to the potential damage. If you have medical debt, only unpaid collections of $500 or more will appear on your credit report.

Additional Debt Collection Resources

What should you do if the statute of limitations on an uncollected debt expires in eight months, but you have the money to pay it off?

What if, after two years of unrelenting pursuit, a debt collection agency says it will settle the account for half of what you owe?

Deciding whether to pay an uncollected debt can be stressful and bewildering. If you need more guidance, here are some links that might help:

• How to negotiate with debt collectors
• Nonprofit credit counseling
• Disputing a debt with collectors

There may be no simple answer to whether you should pay collections. But with some work, you can find the right answer for you.