Debt Collection Guide: Your Rights, Options and Next Steps

Maybe a letter arrived about an account you barely remember. Maybe a stranger called about money you owe, or a medical bill suddenly went to collections. Your first urge may be to pay, hide, or ignore it, and each of those can make things harder.

Slow down. Your first job is to find out what the collector actually says you owe, and whether that debt is yours. The Consumer Financial Protection Bureau (CFPB) says a debt collector must give you the creditor’s name, the amount owed, and how to dispute the debt. If it will not, the CFPB says it could be a scam.

This guide walks you through the steps in order, from the first contact to the options for paying, disputing, or getting help.

Step 1: Read what the collector sent before you respond

You are at the first contact: a call, a text, or a letter you did not expect. Pause before you say anything about money.

A collector may be contacting you because a creditor believes you are past due on payments. The CFPB’s debt collection hub explains what collectors do and what your rights are.

Keep every letter, envelope, and message. Write down the date, the caller’s name, and any number to call back.

If a caller will not give you details, the CFPB says that could be a scam. You can read the government impostor guide before you pay anyone, and the online scam guide if money has already moved.

Next, check whether the debt is yours at all.

Step 2: Check that the debt is yours, then reply in writing

You are now holding a letter or a call about a debt you do not recognize, or one you are not sure you owe.

The CFPB says this is your chance to find out about the debt and decide whether you really owe it. A debt collector can help you understand whether the debt is yours, even if you cannot pay right away.

If you believe you do not owe it, say so to the collector. The CFPB has prepared sample letters you can use to respond to a debt collector, with tips on how to use them. That student-loan page links to CFPB sample response letters and tips for using them.

Use the verification checklist for collection letters to see which required details are missing. Track your deadlines with the legal deadline organizer. If the account is not yours, the identity theft legal steps guide covers the reporting route.

Once you know what you owe, look at how it appears on your credit report.

Step 3: See how the debt shows on your credit report

You may already see a collection account, or you are wondering what it will do to your score.

The CFPB pages behind this guide do not give a number for how much a collection lowers a credit score. What they do say is that credit reporting must be accurate. Under the Fair Credit Reporting Act (FCRA), credit reporting companies must follow reasonable procedures to assure maximum possible accuracy, and debt collectors that report information are also subject to the FCRA.

Check the item against your own records. If something is wrong, the credit report error checklist helps you keep a record of the dispute.

For a charge on a credit card rather than a collection, the credit card charge dispute guide covers the deadline. The credit dispute guide compares ways to challenge errors and charges.

Now you know what the debt is and what it shows. Next, know what the collector may and may not do.

Step 4: Know what a collector may and may not do

You want to know whether the calls and letters are allowed, and what counts as abuse.

The CFPB says the Fair Debt Collection Practices Act (FDCPA) says a debt collector may not use unfair practices to collect a debt. The FDCPA prohibits false, deceptive, or misleading statements, including false statements about the character, amount, or legal status of a debt. A collection agency, a lawyer, or a law firm collecting a debt may each be a debt collector under that law.

You have the right to tell a debt collector to stop contacting you. The CFPB lists this among your basic rights.

For cease-and-desist letters and time limits on collecting, read the FDCPA protections guide. The CFPB pages behind this guide do not say when a debt stops being collectible, so check that guide for statute of limitations details.

If you cannot pay, the next question is what options exist.

Step 5: Compare plans, settlements, and bankruptcy routes

You may have no money to spare, and you want a realistic way forward.

The CFPB says that for private student loans, there are no standard options with a collector other than paying what is owed. For federal student loans, the CFPB lists rehabilitation, repayment, and consolidation as options, each with different effects on your credit report.

Before you hire a credit counselor or sign with a debt settlement company, the CFPB lists “whether to use a credit counselor or a debt settlement company” as a common question. Ask every fee in writing.

If you are weighing bankruptcy, these two guides compare Chapter 7 and Chapter 13 eligibility and what to expect from each.

If your debt is a medical bill, the rules are different.

Step 6: If the debt is a medical bill

A medical bill went to collections, or a provider sent you a bill that seems too high.

The CFPB says debt collection or credit reporting on medical bills that exceed amounts permitted by the No Surprises Act may violate federal law. The No Surprises Act took effect on January 1, 2022. If you believe a collector is trying to collect more than the Act allows, the CFPB says to dispute it in writing as soon as possible.

The CFPB lists these routes: submit a complaint to the CFPB online or at (855) 411-CFPB (2372) if a debt collector contacts you about a surprise medical bill, or contact the CMS No Surprises Help Desk at 1-800-985-3059. You can also complain to your state attorney general, since some states add medical debt protections.

For the hospital financial assistance process, see the medical debt patient rights guide.

If the medical bill has moved into a lawsuit or a wage garnishment, the next step changes.

Step 7: If you are sued or your wages are touched

You have court papers, a judgment notice, or a notice that your pay may be garnished.

The CFPB says ignoring a collector does not stop legal collection of a debt you owe. Its basics list garnishment and judgment as key terms, and it has a how-to guide titled “What to do if a creditor or debt collector sues you.” Private student loan collectors generally may not garnish wages without a court order.

For garnishment limits and how to challenge withholding, read the wage garnishment limits guide and the guide to challenging excessive withholding. Small claims rules vary, so check the small claims court guide for your local court.

If the debt was not yours to begin with, or it is tied to someone else’s identity, the reporting steps differ.

Step 8: Identity theft and debts after someone dies

A collector is calling about a relative’s debt, or about an account you never opened.

The CFPB pages behind this guide do not say who pays a parent’s or spouse’s debt after death, and they do not say which debts end with a person. Start with the estate guides below, and ask a local legal aid office how your state handles the question. The probate timeline guide explains how an estate moves through the process.

For basics, see the estate planning basics guide and the wills and estate planning guide.

Your next step

1. Write down what the collector said and keep every letter.
2. Ask for the creditor’s name, the amount, and how to dispute, in writing.
3. Check the debt against your records and your credit report.
4. If it is a medical bill, dispute in writing as soon as possible.
5. If court papers arrived, write down the deadline today.
6. Compare free help and any paid option, with every fee in writing.

Every guide on this topic

Dealing with a collector

• A Demand Letter Arrives: Preserve the Notice: keeping the letter and finding help.
• Unfamiliar Debt Collector? Verify It Before You Respond: checking the collector first.
• Debt Collection Letters: A Consumer Verification Checklist: required details to check.
• Legal Deadline Organizer: tracking dates, notices, and proof of service.

Credit and errors

• Credit Report Errors: An Official Dispute Record Checklist: recording a dispute.
• Credit Dispute Guide: How to Challenge Errors and Charges: challenging errors and charges.
• How to Dispute a Credit Card Charge: guidance on disputing card charges.

Collector rights and abuse

• Debt Collection Rights: What Collectors Cannot Do: FDCPA limits on collectors.
• Debt Collection Rights: Cease and Desist and Statute of Limitations: stop letters and time limits.

Medical bills

• Medical Debt Rights, Charity Care and Billing Disputes: patient rights and disputes.
• Medical Debt: Patient Rights and Hospital Financial Assistance: the hospital assistance process.

Court, judgments, and garnishment

• Court Paper Deadline: Find the Rule and Legal Help: finding the deadline that applies.
• Small Claims Court: Records, Deadlines and Local Rules: local court rules.
• Wage Garnishment: Legal Limits and Exempt Income: limits and challenges.
• Wage Garnishment: Challenging Excessive Withholding: challenging withholding.

Bankruptcy and free help

• Bankruptcy Basics: Chapter 7 vs Chapter 13 Eligibility: eligibility and what to expect.
• Bankruptcy Basics: Chapter 7 vs 13 and What to Expect: comparing the two chapters.
• Find Free or Lower-Cost Legal Help: free and lower-cost routes.

Identity theft and scams

• Identity Theft Recovery: An Official-Report and Records Checklist: reports and records.
• Identity Theft Recovery: Building an Official Action Record: building the action record.
• Identity Theft Recovery: Reporting Steps and Credit Freezes: reporting and freezes.
• Identity Theft Legal Steps: Police Reports and Your Rights: the legal steps in order.
• Government Impostor Scam: Verify the Agency Before Paying: checking an agency before paying.
• Online Scam Legal Remedies: Report and Document Recovery: reporting and documenting a scam.

Estates and deaths

• Estate Planning Basics: Wills, Trusts and Intestacy: basic estate terms.
• Wills and Estate Planning Basics: what happens without a will.
• Understanding Probate and the Estate Timeline: the probate timeline.
• Probate Process, Estate Timelines and Alternatives: probate steps and alternatives.

Other situations outside debt

• Subprime Crisis: Price, Refund and Terms: price and refund terms.
• Small Business Legal Essentials: entity types and contract basics.
• HOA Disputes: Rights, Governing Documents and Remedies: homeowner association disputes.
• Divorce Basics: No-Fault, Contested and Mediation: divorce paperwork and process.

By LegalHelpOnline.org Editorial Team