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How To Handle A Credit Card Debt in Collections

By Erik Folgate

A Money Crasher’s reader recently sent me a message about a credit card balance in collections. I thought that you all would benefit from his/her question and how I answered it.


I have a credit card debt of a little of 8,000. It went to collection, and I just don’t have the money to pay it off. I thought I would be able to use my student loan to pay it off, but it didn’t come through. Do you think it would be possible for me to set up a payment plan with the collection agency, and if so, how should I go about it? I know that I won’t be able to pay a lot at first because I just don’t have the money while in school, but once I get done (may 09), I’ll be able to pay it off a lot quicker.

My answer:

Thanks for being a reader! I answer questions based on what I would do, so here it goes:

I would not negotiate a payment plan with the credit card company for three reasons. They never stick to their promises, they most likely won’t agree to put a payment plan in writing, and they’ll try to persuade you to give them electronic access to your bank account. NEVER give a credit card company access to your checking account. They will wipe out your account, and then you can’t eat.

Instead, get on a written budget and set up your OWN payment plan. Make sure you have enough money to pay for essentials like food, shelter, utilities, gas, etc. Then, with whatever money you have left over, send that to the credit card company each month until you start making more money to pay it off. The company will deposit every check you send them no matter what the collector tells you.

I hope this helps, take care!

Editorial Note: The editorial content on this page is not provided by any bank, credit card issuer, airline, or hotel chain, and has not been reviewed, approved, or otherwise endorsed by any of these entities. Opinions expressed here are the author's alone, not those of the bank, credit card issuer, airline, or hotel chain, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

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  • poor boomer

    Government cheese!

  • elizabeth banks

    I have 820.00 to a debt collector first he told me i had to pay all and I said Icould not afford at this time,then he put me on hard ship but the payments were 150.00 I could not afford at this time not acceptable he said,this other guy comes on and wants to know where i work and social and told me to get a lawyer and file bankruptcy,they have never sent letters or called til today and i will not give him my number.P;ease help me in what to say or a letter to write and maybe i want need a lawyer. The man made alot of threats and my work was not good very upset. Thanks

  • http://www.cicreditrepair.com Scott

    You should not feel ashamed, afraid or nervous, if you’ve been contacted by a collection agency. Just keep calm and stay firm. Stand your ground and don’t allow anybody to manipulate or bully you into doing something that could worsen the situation. Arm yourself with adequate knowledge and learn your rights. Prepare to fight back to protect yourself from abusive practices. Keep in mind that you can’t be jailed for not paying a debt and even if you legitimately owe the creditor, you are still entitled to your privacy and that should be respected. Remember, you deserve to be treated fairly.

    It’s not uncommon for some agencies to think that they can get the best results through intimidation. Since most collections are done through telephone, they feel that they can say whatever they want to say to the point of making personal insults and false accusations so they can regain their client’s money. They think they can get away with it as there are no paper trails.

    Some would even attempt to use your credit score to harass you, telling you that they can ruin your credit score or file a claim against your credit score. You shouldn’t fall for this. Know that your credit score is instantly affected when you default on your payments; but there is nothing that a collection agency can do to make it any worse. In most cases, you can definitely be eligible for credit still.

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