How to Avoid a Bill Going to a Collection Agency

If you lose your job or other primary income, it may become difficult to pay your bills. Once your income drops substantially, it sometimes unavoidable to narrow your spending to the basics, such as food and housing. Credit cards and even medical bills might be too much for your budget. An extended period of missed payments -- typically six months -- can cause your account to be sold off to a collection company. To forestall this circumstance, take action as soon as you find you cannot afford to pay a creditor.

Step 1

Contact the original creditor. Before you miss even one payment, it is advisable to get in touch with your creditor and try to work out a reduced payment plan. Not all creditors will go for it, but if you are suffering a long period of unemployment, a creditor may prefer receiving some portion of the principal to nothing at all. If the first-line customer service representative is not cooperative, ask to speak to a supervisor, who will more likely have the authority to approve special payment arrangements.

Step 2

Call a credit counselor. Credit counseling organizations are typically non-profits that help overwhelmed debtors by arranging more palatable payment arrangements. If you are behind on payments to more than one creditor, the credit counseling agency can work with all of them, consolidating all the bills into a single monthly payment. You make the one combined payment to the agency, and it distributes the amounts to the various creditors.

Step 3

Make your payments on time. Whether you work directly with the creditor or through a counseling concern, failing to make your scheduled payments will usually void the reduced-payment agreement. Interest and fees that may have been waived will begin to accrue once more, and the clock that marks the march toward charge-off and sell-off to a collection agency once again starts to tick.

Tip

  • Bankruptcy -- Chapter 7 or Chapter 13 -- may also be an option. It allows you to consolidate all creditor bills into one payment. Your state's laws determine whether you are eligible. However, bankruptcy is the blackest blot that your credit report can reflect, and it remains on your report for seven years. Exhaust all other options, and seek professional legal and financial advice, before resorting to bankruptcy.

About the Author

D. Laverne O'Neal, an Ivy League graduate, published her first article in 1997. A former theater, dance and music critic for such publications as the "Oakland Tribune" and Gannett Newspapers, she started her Web-writing career during the dot-com heyday. O'Neal also translates and edits French and Spanish. Her strongest interests are the performing arts, design, food, health, personal finance and personal growth.