How to Prevent Garnishment from a Collection Agency
Figure out who you owe., Check your credit report., Evaluate your budget and finances., Contact creditors individually., Get any payment agreement in writing., Make payments as agreed.
Step-by-Step Guide
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Step 1: Figure out who you owe.
If you receive a notice from a collection agency, you can request proof that the debt is valid and that you are legally obligated to pay it.If you send a letter disputing the validity of the debt, make a copy of it before you mail it so you have it for your records.
You might also consider using certified mail or a private delivery service that provides tracking and a return receipt so you have proof that the collection agency received your letter.Older accounts may have changed hands many times, so it may be difficult to figure out who the original creditor was just by looking at a notice from a collection agency.When in doubt, you always have the option of contacting the original creditor and finding out the name of the company to which your debt was sold.
Then you can follow the chain to the current holder of the debt. -
Step 2: Check your credit report.
You're entitled to one free credit report a year, which you can review to get a better understanding of who you owe and the extent of your debt.
If you've not yet ordered your free credit report, you can do so at annualcreditreport.com.
The website, operated by the three credit reporting bureaus, is the only site authorized by the federal government to provide the free annual report to which you're entitled by federal law.Your credit report will include entries about any collection accounts along with details regarding the company from which the collection agency purchased the debt.
The report should include contact information for every company that reported information to the bureau that issued the report.You may want to consider signing up for a service that allows you to monitor your credit report regularly.
Some websites such as Credit Karma or Mint allow you to view your credit report and monitor your accounts free of charge; others will charge a monthly subscription fee for the service., Make a list of the bills such as rent and utilities over which you have no discretion, then organize your other expenses by priority to figure out how much money you can afford to pay on your debt.
If you have any money saved, you might consider offering a lump-sum amount to settle the debt in full.
Collection agencies in particular often are willing to settle for a fraction of the total amount of the debt.Once you've looked at your finances, evaluate the size of your debts.
If you can only afford to put a small amount each month towards your debts, you may want to prioritize those with smaller balances as the creditor will be more likely to accept repayment in small installments.
In contrast, if you have a large debt and can only afford small payments, you may be better off exploring other options such as bankruptcy, since your payment likely would not even cover your interest on the debt., Even if you can only afford to pay a small amount each month, proactively contacting your creditors and letting them know your situation can keep your debt out of the hands of collection agencies.Keep in mind that when a creditor sells your debt to a collection agency, it loses money.
If you're willing to pay the debt off over time, creditors usually are willing to work with you so they get back the full amount of money you owe.Make sure you have a piece of paper and a pen or pencil before you call the creditor, so you can take notes on the conversation.
You should write down the date and time of the call, the phone number you called, and the name of the person with whom you spoke.
If that representative has a direct extension, write it down as well so if you need to make a follow-up call you can speak with him or her directly.Repeat any information you've written down to the representative before you hang up the phone to make sure you've recorded it correctly.
If a single collection agency is trying to collect more than one debt from you, and you've decided to make payments, you have the right to have those payments applied in the way that you choose.For example, if the collection agency has one debt in the amount of $10,000 and another in the amount of $5,000, you can have the agency apply your entire payment to the larger debt.
Garnishment is a tool of last resort – even for collection agencies – to try to recover the money you owe.
Filing a lawsuit also is a time-consuming and expensive process.
If you call and indicate your willingness to pay on the debt, your creditor typically will agree to work with you.Let the creditor know how much you can afford to pay per month, and don't feel pressured to accept an agreement that will put you at risk of paying your other bills., You need proof of the agreement for your records in case the creditor bills you for a different payment or later insists on different terms.
When you receive written confirmation of your agreement, check it against your notes to make sure the written notice conforms to the agreement as you understood it.
If there are any discrepancies, call the creditor to explain the problem and ask for an amended agreement to be sent.
Keep all agreements organized in a single file along with any other notices or notes from phone calls.
You'll want to keep all of these documents together, at least until you've paid off the debt and the information has been updated on your credit report to reflect that., Once you've arrived at an agreement, adhering to that agreement will ensure the creditor doesn't pursue more serious collection methods such as wage garnishment.It's best to pay using a certified check from your bank, or to set up automatic debit payments with your bank.
These methods give you a record of each payment, which you may need later on if a debt collector fails to record the payments.Avoid giving a collection agency details about your bank account, as it may pull additional payments or continue debiting your account after the debt has been paid in full. -
Step 3: Evaluate your budget and finances.
-
Step 4: Contact creditors individually.
-
Step 5: Get any payment agreement in writing.
-
Step 6: Make payments as agreed.
Detailed Guide
If you receive a notice from a collection agency, you can request proof that the debt is valid and that you are legally obligated to pay it.If you send a letter disputing the validity of the debt, make a copy of it before you mail it so you have it for your records.
You might also consider using certified mail or a private delivery service that provides tracking and a return receipt so you have proof that the collection agency received your letter.Older accounts may have changed hands many times, so it may be difficult to figure out who the original creditor was just by looking at a notice from a collection agency.When in doubt, you always have the option of contacting the original creditor and finding out the name of the company to which your debt was sold.
Then you can follow the chain to the current holder of the debt.
You're entitled to one free credit report a year, which you can review to get a better understanding of who you owe and the extent of your debt.
If you've not yet ordered your free credit report, you can do so at annualcreditreport.com.
The website, operated by the three credit reporting bureaus, is the only site authorized by the federal government to provide the free annual report to which you're entitled by federal law.Your credit report will include entries about any collection accounts along with details regarding the company from which the collection agency purchased the debt.
The report should include contact information for every company that reported information to the bureau that issued the report.You may want to consider signing up for a service that allows you to monitor your credit report regularly.
Some websites such as Credit Karma or Mint allow you to view your credit report and monitor your accounts free of charge; others will charge a monthly subscription fee for the service., Make a list of the bills such as rent and utilities over which you have no discretion, then organize your other expenses by priority to figure out how much money you can afford to pay on your debt.
If you have any money saved, you might consider offering a lump-sum amount to settle the debt in full.
Collection agencies in particular often are willing to settle for a fraction of the total amount of the debt.Once you've looked at your finances, evaluate the size of your debts.
If you can only afford to put a small amount each month towards your debts, you may want to prioritize those with smaller balances as the creditor will be more likely to accept repayment in small installments.
In contrast, if you have a large debt and can only afford small payments, you may be better off exploring other options such as bankruptcy, since your payment likely would not even cover your interest on the debt., Even if you can only afford to pay a small amount each month, proactively contacting your creditors and letting them know your situation can keep your debt out of the hands of collection agencies.Keep in mind that when a creditor sells your debt to a collection agency, it loses money.
If you're willing to pay the debt off over time, creditors usually are willing to work with you so they get back the full amount of money you owe.Make sure you have a piece of paper and a pen or pencil before you call the creditor, so you can take notes on the conversation.
You should write down the date and time of the call, the phone number you called, and the name of the person with whom you spoke.
If that representative has a direct extension, write it down as well so if you need to make a follow-up call you can speak with him or her directly.Repeat any information you've written down to the representative before you hang up the phone to make sure you've recorded it correctly.
If a single collection agency is trying to collect more than one debt from you, and you've decided to make payments, you have the right to have those payments applied in the way that you choose.For example, if the collection agency has one debt in the amount of $10,000 and another in the amount of $5,000, you can have the agency apply your entire payment to the larger debt.
Garnishment is a tool of last resort – even for collection agencies – to try to recover the money you owe.
Filing a lawsuit also is a time-consuming and expensive process.
If you call and indicate your willingness to pay on the debt, your creditor typically will agree to work with you.Let the creditor know how much you can afford to pay per month, and don't feel pressured to accept an agreement that will put you at risk of paying your other bills., You need proof of the agreement for your records in case the creditor bills you for a different payment or later insists on different terms.
When you receive written confirmation of your agreement, check it against your notes to make sure the written notice conforms to the agreement as you understood it.
If there are any discrepancies, call the creditor to explain the problem and ask for an amended agreement to be sent.
Keep all agreements organized in a single file along with any other notices or notes from phone calls.
You'll want to keep all of these documents together, at least until you've paid off the debt and the information has been updated on your credit report to reflect that., Once you've arrived at an agreement, adhering to that agreement will ensure the creditor doesn't pursue more serious collection methods such as wage garnishment.It's best to pay using a certified check from your bank, or to set up automatic debit payments with your bank.
These methods give you a record of each payment, which you may need later on if a debt collector fails to record the payments.Avoid giving a collection agency details about your bank account, as it may pull additional payments or continue debiting your account after the debt has been paid in full.
About the Author
Kelly Butler
Kelly Butler has dedicated 4 years to mastering accounting. As a content creator, Kelly focuses on providing actionable tips and step-by-step guides.
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