What to Do When a Debt Collector Demands a Full Payment

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A Credit.com reader recently wrote in with this issue:

I have been paying a collection agency $100 per month for a hospital bill for 7-8 months now. They now want me to settle this debt in full and say I owe: $9,131.20. They don’t want to work with me and want me to take out a loan to pay them in full but I can’t afford it. The statute of limitations for Oklahoma is 3 years and I want to pay it but they don’t want to work with me. What are your suggestions before I speak with them?

Dealing with an outstanding collection can be nerve wracking, especially when you’re trying to do the right thing and make every effort to pay your debt. And as you’ve experienced first-hand, it’s even more stressful when the debt collector refuses to work with you.

Unfortunately, your situation is a little more complicated and exacerbated by the fact that you’d made prior arrangements with the collection agency to make monthly payments. For future situations like this, I would urge anyone dealing with an unpaid collection to review and follow the steps outlined in our infographic on what to do if a debt collector calls before agreeing to any type of payment plan. Often it may be in your best interest to negotiate a settlement over opting for a monthly payment plan — or at the very least, getting the payment arrangement in writing. Before I answer your question, it’s important to clarify a few details on collection agencies, how they work and the statute of limitations on unpaid debts.

[Related Article: The First Thing You Must Do Before Paying Off Debt]

The deal with debt collectors

First, collection agencies aren’t legally obligated to accept or agree to payment plans. In short, debt collectors don’t have to work with you or agree to any payment schedules based on what you’re reasonably able to afford. Their goal is to collect as much of the debt as they can, as quickly as they can. I’m also going to go out on a limb here and assume that the $100 payments that you’ve sent so far are based on what you’ve been able to afford, not on any amount that was agreed to by the collection agency. I say this solely because collection agencies rarely work out extended or long-term payment plans. They are collectors, not lenders, unfortunately. They aren’t interested in slowly collecting monthly payments. Based on your current payment schedule it’ll be more than seven years before they are able to collect the full amount, which is why they don’t want to work with you and are being more aggressive and pushing for you to pay in full “now.”

Second, the statute of limitations (SOL) for creditors/collectors to file a lawsuit is based on the date of the last payment on the debt. In your case, the statute of limitations restarted when you began making the payments 7-8 months ago and will now be based on the date of your last payment. And while SOLs on debt collections vary by state, according to Oklahoma Statutes the 3-year SOL applies only to contracts “express or implied not in writing.”  If the original contract with the hospital was a written contract and was agreed to in writing, the SOL would be 5 years instead of 3:

§12-95.  Limitation of other actions.

A.  Civil actions other than for the recovery of real property can only be brought within the following periods, after the cause of action shall have accrued, and not afterwards:

1.  Within five (5) years:  An action upon any contract, agreement, or promise in writing;

2.  Within three (3) years:  An action upon a contract express or implied not in writing; an action upon a liability created by statute other than a forfeiture or penalty; and an action on a foreign judgment;

[For a state-by-state list of SOLs, please see our interactive resource "Statute of Limitations On Debt Collection by State"]

What should you do now?

If you can’t afford to pay the debt, it’s a bad idea to take out a loan to pay it in full. I’d also argue that it would be better to settle the debt for less instead of trying to pay it in full with long-term monthly payments — especially if your financial situation is already precarious. In your case, it may even be worthwhile to consider holding off on the monthly payments and setting aside the $100 per month until you’ve collected a larger sum of cash that you can use as incentive to negotiate a settlement. Debt collectors are more likely to negotiate a settlement, often at much lower amounts, if they think there’s a chance that they may not be able to collect at all.  In many cases, collection companies purchase these debts from creditors (or the hospital in your case), for pennies on the dollar. Obviously, they want to collect as much as possible, but as long as they are able to collect more than they paid for the debt, it’s still a profit for them.

It’s important to do what’s right and pay the debt, but if you are truly under a hardship and unable to pay, it may not make sense to even struggle or agree to try. At the very least, it may be more feasible for you to stop making the payments while you save up a settlement fund. It won’t stop the collector from suing you but the fact is, they could technically do that now if they choose. Remember, collectors don’t have to accept payments and can still sue you in an attempt to collect the debt if they think there’s any chance that they would win. However, if you are truly unable to pay the debt, they may decide that it isn’t worth the time and money to go after you for it.

Sadly, I can’t speak to your personal financial situation in regards to income, assets and other financial obligations, so with that in mind, if the collector does pursue legal action, you should speak with a collection attorney. Most consultations are free and they’ll be able to help you better understand your options based on your individual financial liabilities and assets, and advise you accordingly. Hopefully, it doesn’t reach that point and you’re able to negotiate some sort of settlement to effectively resolve the debt.


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