Six ways to deal with collection agents

No one likes to get a menacing call from collections. Here’s what to do if someone’s demanding payment.


From the May 2010 issue of the magazine.

When jobs are lost or emergencies strike, even diligent bill-payers can find themselves dealing with collection agents. If it happens to you, don’t panic. Simply follow these steps, and you may be able to negotiate your way to big savings while avoiding an unpleasant bankruptcy.

Prioritize your  debt
“Not all debt is created equal,” says Mark Silverthorn, a lawyer and author of The Wolf at the Door: What to do When Collection Agencies Come Calling. For taxes or Canada student loans, the government doesn’t cut deals and rarely gives up. Secured debt, such as mortgages or home equity lines of credit, is tough to get out of too, but credit card and other unsecured debt is open to negotiation.

Find out who’s calling
Most creditors try to collect their debts in-house for the first six months or so. After that, they generally farm the work out to collection agencies. After a year or two the creditor may sell the debt to a debt repurchaser for as little as half a cent on the dollar. Keep in mind who you’re dealing with: creditors want full repayment, but collection agencies receive a commission and want the most they can get as quickly as possible. Debt repurchasers are often content with smaller payments.

Could you get sued?
Collection agencies routinely threaten to sue, but this is often a bluff. Only the original creditor is likely to go to the effort. Silverthorn says the slim commissions earned by collection agencies mean fewer than one in 10,000 consumer accounts end up in court. If you haven’t been served papers within six months of missing a payment, odds are you never will be.

Handle the calls
Creditors have the right to remind you that you owe them money. But only to a point. In B.C., Alberta, Ontario, Quebec and Nova Scotia, you can legally request that collection agencies stop calling you at home. Some provinces also have rules on calls to your workplace. Plus, you can screen your calls, hang up or get an unlisted number.  “You should speak to collection agencies when it suits your schedule,” says Silverthorn.

Cut a deal
If your debt is more than a year old and you’ve avoided a lawsuit, it’s time to bargain. Silverthorn cautions against making token “good faith” payments on bills, as this restarts the debt clock. And credit counseling usually requires that you eventually repay all your debts in full. Instead, try to get your creditors to accept 30¢ to 65¢ on the dollar, less if its been more than two years. But first get it in writing.

Repair your credit rating
Unpaid debts show up as R9 on your credit report: the worst possible rating. This will stay for six or seven years, depending on your province, and have a significant impact on your ability to borrow in the future. But any debt settlement—even for pennies on the dollar—will eliminate that debt and instantly boost your credit score. That’s why negotiating a settlement is generally a better option than declaring bankruptcy.

110 comments on “Six ways to deal with collection agents

  1. A creditor at a collection agency advised me never to settle as that will look bad on your credit score, I have paid of my debt in full but they are still appearing on my credit as balance 0 but my score did not boost up as I thought it would, how long does it take for them to update the status and comments and after paying the collection agency do I need to advise or check with anyone else to fix my credit score? Lost!


  2. You are screwed…if they didn't remove the R9 rating it will be on there for seven years. You were better off not paying anything.


    • deb what do you mean? is it that after seven years if you do not pay your debt is it removed or wriitten off. the one bank write me off and it took me 2 years to find my information that i owe money but a couple off years ago the branch told me something else that is not the truth that is very misleading and they would not let me in the bank and are very rude and never told me that this is the true matter because i went to another bank branch far away and finnally got some approtaite information. that i have been mislead under false info due to so called identity theft and i myself never had that id that the bank told me was the probelm . this is only the begining again.g


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  84. When dealing with collection agencies, you have to realize, as you’ve said, that they will be satisfied with you paying just a part of your debt and they are more willing to settle to a deal than the initial creditor, wanting to have their commission. That’s why is vital to be informed who you’re talking to. The collection agencies are less inclined to sue you, even if they menace you with suing.
    It’s also important to keep in mind that in some provinces you have the right to ask them to stop bothering you, especially if they begin to call at your workplace. They have the right to remind you about your debts, but they cannot just call you forever.
    It’s certainly better to repair your credit rating, because unpaid credit might complicate your financial existence a lot, getting the R9 on your report. A debt settlement would definitely raise your credit score and will erase the debt.


    • Ok Well my debt should be written off by now its been 6 years and coming up to 7 in like 4 months.. it was in BC that i got the debt and I'm just wondering should it be written off by now?


  85. I do not care about collection agencies, nor do I care about my credit report, because I do not live my life nor intend to live it on credit. I decided long ago to keep all cash ,buy nothing, and believe me, I am not afraid to say I have millions in cash! I simply do not pay people who threaten and use a threat of credit agencies. In fact, the moment the remind me that if I do not get it settled and I can end up at the credit agency, is the moment I tell them to do so. For I do not rely on credit! And you should all do the same.


  86. my credit card debt went to a collection agency in Canada where I live and the collection agent said to get a loan on my home, but he threatened to take me to court but I told him I do not own the property my wife does, I lost my job and was in the hospital for 8 months, I had no information on collection agencies, I know they need to make money collecting bad debt , but do they allow payment plans when your on disability, he said he would not but i sent him a little money , I can not pay the debt out right but can make payments, any suggestions.


    • Hi Terry, we’ll submit your question to on your behalf. Thanks and best wishes.


      • Hi, I just received a letter from the Division of National Credit Recovery Inc. After they say they have made several attempts to contact me by phone I spoke with someone there the other day. They told me they have been sending me numerous letters but I had not received anything, they had my old address. Now I gave them my new address and with this letter it says I have ten (10) days to repay a full amount of just over 17 000.00 thousand dollars. I am not working and have been unable to for the past few years due to my family situation. I do not have that kind of money and obviously can not get any type of loan as my credit is not that great. Would I be able to negotiate this for a lower amount and to have more time to settle this? This debt is well over five (5) years old and I would like to clear it to rebuild myself. Thank you for you help.


  87. if you owe the bank money, and you pay something pity like 10 dollars a month. does this still keep it from stay out of collections? only because your still making payments therefore the account is active. Would this then prevent things from going into collections or taking some stress of you..

    I understand ten dollars may not do anything to some loans, in a sense you will be paying off intreast but is it still considereed to be better than nothing??


  88. I have debt that is at least 6 years old (2005) and they started calling again.
    I believe this is way over the limit.
    And they are claiming to have “Income Verification Information”

    I have yet to speak wit them but I’m wondering if I should just avoid the calls.

    As far as I know, my credit is good (no credit cards) and have been recently in the last 2 years approved for cable, cell phone and an apartment. All payments have been on time and no problems at all in at least 5 years.

    I had moved out of province and didn’t realize the debt was not paid off until a few years ago but then forgot about it – this is the first time I have I have heard anything and its been in the last month.

    Any recommendations?


  89. Next month I shall be 63 years old and unemployed. I collect two small pensions totaling a little over a thousand dollars a month. Unfortunately I have missed several payments for my credit card debt and as a result had my bank account frozen. I understand under the federal government collection agencies have the right to do do. My question is, will they track me down to my next bank account and do the same there? They tell me I owe over nine thousand which was the original debt back in 2012 and I have been paying $250.00 per month since May of 2012 with missed payments over the 36 months and still owe the same amount which they want up front before my account is unfrozen. Thank you


    • That is called offsetting. If you continue to deposit money into the bank that is associated with the card, they can take all the money. It does not require them to sue you. Meanwhile, they are probably charging you outrageous interest around 25%. You will probably never get this paid off. You are probably not doing too well. You should have ceased banking with them when they emptied your account. You should have opened up another account with another bank. They probably would not have sued you because they don’t sue very many people AND the balance is probably not high enough to make it worth it AND you are probably judgement proof. Pensions, ODSP, OW etc cannot be seized in a judgement by a private creditor.


  90. Hello all,

    I would like to thank you in advance for any advice offered. I received a letter from NCO financial services regarding a debt owed to PayPal amounting to $38.96. I was unaware a payment didn’t go through cause the credit card expired. The negative balance in the account is only a few months old but how should I go about dealing with the debt collector? I can pay the balance owing on my PayPal account right away but how should ideal with the debt collector? I don’t want this to impact my credit…



  91. Hi there, thanks for all the info very helpful! I have a question, a debt collection agency is trying to tell me that Royal Bank (that’s who they are calling on behalf) can file a lawsuit against me because I have cosigned my parents mortgage and they said they can force my parents to sell their house to pay off this debt for me. Could you please tell me how true this is? and also I am trying to negotiate with them (my debt of about $4,000 was just passed on to them recently) and they are saying the best they can do is to bring it down to $3,700 and I have to have to make a payment in 6 business days. Again I understand that they are making money off of me so what is the best strategy for me here? Or should I go with a debt consolidation company that will reduce all of my debt to a lot less..


  92. Hi there, thanks for all the info very helpful! I have a question, a debt collection agency is trying to tell me that Royal Bank (that’s who they are calling on behalf) can file a lawsuit against me because I have cosigned my parents mortgage and they said they can force my parents to sell their house to pay off this debt for me. Could you please tell me how true this is? and also I am trying to negotiate with them (my debt of about $4,000 was just passed on to them recently) and they are saying the best they can do is to bring it down to $3,700 and I have to have to make a payment in 6 business days. Again I understand that they are making money off of me so what is the best strategy for me here? Or should I go with a debt consolidation company that will reduce all of my debt to a lot less..


  93. I owe my former university $2500. The debt is 4 yrs old. I am trying to negotiate a settlement to pay half the amount. But thw collection agent said Ontario universitiea only allow lowest payment 65% of the debt. And if I wish to re-enter that university for further courses I would be blocked from.doing ao and required the remaining 35% of the debt. He gives me.3 days to repay part of the discounted debt and the end of the week to repay the reat of the 65%. Is he taking advantage of me? Or is there more room to negotiate?


  94. If the debt is unpaid will it still clear off your credit rating after 6 years?


  95. I have a creditor calling on all hours of day . He threatens me tells me I am lost and I should pay my bills. What can I do.


  96. Using the excuse “I never got the letter” won’t work – that’s what EVERYONE says. And I can count on my hand how many times I didn’t get a letter in the mail. Maybe once but likely none. Deal with your finances instead of avoiding them. YOU spend the money, YOU racked up the bill. PAY FOR IT.


  97. I have a debt collector calling. I am fully aware of the problem, and am willing to come up with a plan. However, they were very abusive. Demanded that I contact a member of my family or a friend to help settle this. Wanted to know “how I was supporting myself” , . Can they ask these questions? I was also had a conversation from the same company the week prior and they gave me instructions to settle this (I have to speak with the company in question ), If I came up with a certain amount from breach of contract that they may reinstate my services and I can make the usual monthly payments on the services until it is paid. This week it is something different. How do I handle this


  98. I’m the executor of an estate and there is an unsecured line of credit debt that I do not intend to pay. I have distributed to estate the beneficiaries already and the estate account is empty. Can the bank’s collections dept come after me personally? They said they will try to sue to the estate but the estate is empty. I do realize that I dispersed the funds prior to paying the unsecured debt but the debt is in fact “unsecured”. It’s been over 6 months now. What could happen?


  99. Hi Rick,

    I had a master card which i was using and just missing two payments in the enitire time i had their credit card for 4 years they closed my card and asked me to talk to credit com, its a collections agency.

    Do i have to pay them right away or i can take time to pay as its 6000$ its hard to pay in one shot.


  100. I have a friend being harassed by an agency because he aloud someone to use his name as a reference. …..then that person renagged on HIS debt …….leaving my friend on the hook. …..this is wrong, should he sue the agency for harassment


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