If a debt is sold to another company, do I have to pay

If A Debt Is Sold To Another Company Do I Have To Pay

If you have recently fallen behind on your bills, it’s possible that you’ve received written notice in the mail saying that your debts, such as installment loans or payday loans, have been sold to another company. Your past-due debt has likely been sold to a collection agency. And you are likely not alone, as more than one in four Americans (28 percent) have at least one debt in collections.1 Most creditors do not pass off your unpaid debt to a collection agency until it is many months past due.

Once you are a couple of months past due on your payment plan for a loan, your utilities, or a credit card, creditors will begin making phone calls to get you to pay your delinquent debt. And usually, after another three to six months, the phone calls may stop. However, this doesn’t mean you are off the hook. 

Having your unpaid balance sold to a debt collection agency might mean that you don’t need to deal with the original creditor anymore, but you can rest assured that the debt collectors are unlikely to rest until you pay what is owed. 

We understand it may be nerve-wracking to navigate dealing with third-party collection agencies, especially during financial hardship, which is usually the cause of unpaid debts. Additional resources and education might be helpful in getting through this difficult time. 

What Is a Debt Collection Company?

When a consumer does not pay their debts, the original creditor seeks to use every tool at their disposal to get payment. One of the strategies that creditors turn to when all other avenues have been exhausted is to sell consumer debt to a third-party collection agency. 

Suppose your credit card company or lender has sold your debt to a debt collector. In that case, the consumer must be given written notice in the form of a debt validation letter within five days of the debt collection agency’s first attempt to contact you. The debt validation letter must include the amount of money you owe, the company names of the original creditor, and a statement of your right to dispute the debt.

Some credit card companies or other lenders hire a debt collector to handle old debts, which would mean that you still owe the money to the original creditor. However, a significant portion of creditors sell the debt altogether to the debt collection agency, which means that you have your previous agreement with the original creditor no longer exists. In that case, you are accountable to the debt collection agency for the remainder of the money you owe.

Why Do Creditors Sell Debts?

Utility companies, credit card issuers, landlords, and lenders are in the business of lending money and receiving payments. They are not in the business of chasing down borrowers for unpaid debt. Many lenders see it as a waste of time, money, and resources. 

Instead, they sell the unpaid debts to companies that specialize in collections so they can get some of their money and get back to working with other borrowers.

Debt collection agencies can dedicate their time and resources to settling the account in ways other credit services are unwilling to. When a creditor has sold your debt, you must now work exclusively with the collection agency to solve your debt problems.

How Debt Collectors Impact Your Credit Score

Unfortunately, no matter how you slice it, an account with a debt collection agency looks bad on your credit report. There are many consequences of bad credit. Once your debt has been sold to a collection agency, the account will appear as a derogatory mark on your credit report. This will tarnish your credit history and bring down your credit scores significantly.

Having debt in collections is one of the most damaging items you can have on your credit report and a part of your credit history. The severe impact that debt collection has on your credit scores can take years to reverse, which is why it is so important to try to get current on debts before they get to that point. 

If your debt has already been sold to a debt collection agency, the effect it has on your credit report will diminish as time goes on. However, it will not fall off all of your credit reports until seven years have passed.

How to Deal With a Debt Collector

If you are forced to deal with debt collection agencies, the best course of action is to pay off your remaining balance as quickly as possible. It is best to get it over with if you have the financial means to do so, as dealing with a debt collector can be stressful. 

If you cannot afford to pay your debts, it would be wise to familiarize yourself with the federal Fair Debt Collection Practices Act so you know what your rights are, what behavior is permissible, and what is not from a debt collection agency. 

If you find yourself in a particularly sticky situation with debt collectors, it might even be a good idea to seek out legal help that could give you debt advice and answers to money questions you have while navigating this.

What Are Your Rights?

You have a right to dispute debts sold to debt collection agencies within 30 days if you believe they are not legitimate. If consumers dispute a debt, collection agencies must respond with a written verification before attempting to reach you again. This verification can be a copy of a bill with the company names mentioned of the original creditor and the amount of total debts you owe. 

Before interacting further with the debt collectors, read up on the legal information provided in the Fair Debt Collection Practices Act so that you can know what kind of practices you can expect and what type of conduct should be reported.

Fair Debt Collection Practices

While a debt collector may take extreme measures to get a balance paid, the collector’s ability to take certain actions is restricted to protect the consumer from harassment. For example, a collector cannot contact you before 8 a.m. or after 9 p.m. unless you state otherwise. The agency is also not allowed to call you to collect a debt during work hours if your employer does not permit personal calls.

A collector cannot engage in harassment or abuse, meaning that they cannot threaten you with violence, lie to you about how much money you owe, or use obscene language. Additionally, if you have an attorney and the debt collectors are aware, they must communicate with your legal representation and not you directly.

Recovering From Debt Collection

To say that dealing with debt collection can be a headache would be a major understatement. But once it is over and the debt has been handled, you can start the recovery process to get on a better track toward financial prosperity. 

Here are a couple of pieces of advice to help you recover from the detrimental effects of debt collections:

Rebuild Your Credit

Your credit reports are likely to be damaged in the aftermath of collections. But the good news is that you don’t need to wait for the derogatory marks to fall off your credit report to improve your credit. Instead, you can use that time to rebuild your credit history by paying your other debt on time. 

You could obtain a credit-builder loan or a secured credit card to improve your payment history and increase your credit score. Another way to quickly boost your credit is to have a family member or partner add you as an authorized user to a long-established credit card account that’s in very good standing.

Being an authorized user of another person’s credit card will allow you to benefit from their payment history and account age. Simply being added as an authorized user could have a massive impact on your credit score.

Pay Off Debt

One of the best pieces of debt advice you will ever receive is to keep your debt minimal. Paying off your debt will protect you from losing control of it. When you have a significant amount of debt, your monthly budget is taken up by the minimums you need to pay for every credit account, such as credit card debt or loans you have. We recommend paying off the higher-interest debt first, like no credit check loans or credit card debt, to save yourself some money.

Paying off as much of your debt as you can will leave you with more money to spend on the things that make your life better. Instead of wasting all the money you pay on interest and fees, you can put that money towards saving for a stable financial future. 

Here are some additional tips to pay off debt:

BudgetingCreate a detailed monthly budget, ensuring you allocate a significant portion to debt repayment.
Snowball MethodFocus on paying off the smallest debts first, then move onto larger ones.
Avalanche MethodPay off the debts with the highest interest rates first, then tackle lower-interest debts.
Debt ConsolidationCombine multiple debts into a single loan with a potentially lower interest rate.
Balance TransfersTransfer high-interest credit card balances to a card with a lower interest rate, often with a promotional 0% period.
Extra Income SourcesSeek part-time jobs, freelance opportunities, or sell unneeded items for additional income.
Cut Unnecessary ExpensesReview and reduce discretionary spending, such as dining out, entertainment, or luxury purchases.
Negotiate Interest RatesContact creditors to negotiate a lower interest rate or a more manageable payment plan.
Prioritize PaymentsPrioritize debts by either size or interest rate, ensuring you stay organized in your repayment strategy.
Automatic PaymentsSet up automatic payments to ensure you never miss a due date.

FAQ on Debt Collection, Debt Collectors, and Sold Debts

Does the sale of the debt increase the amount I owe?

Not necessarily. However, interest and late fees might accumulate on the original debt amount with debt collectors. It’s crucial to check the breakdown of what you owe when contacted by a collection agency.

Can multiple agencies try collecting debts from me?

If one agency is unsuccessful, the debt might be resold to another agency. However, two agencies shouldn’t simultaneously chase the same debt.

What if I’ve already paid the debt that’s now with a debt collector?

Keep all payment records. If you can prove you’ve settled the debt, the collection agency should cease attempts to collect.

What’s the difference between a “charge-off” and a sold debt?

A “charge-off” means the original creditor has written off the debt as a loss on their financial statements, often after six months of non-payment. However, this doesn’t mean the debt is forgiven. It can still be sold to a collection agency.

How can I ensure a debt purchaser is legitimate?

Always ask for written verification of the debt with a debt purchaser. Additionally, research the agency online and check for any complaints or reviews.

How does the sale of a debt affect my credit report?

When a debt is sold, the original creditor will often update the account status to “sold” or “transferred” on your credit report. The debt purchaser or collection agency they hire may also list the debt separately, leading to a negative impact on your credit score.

Do debt purchasers report to credit reporting agencies?

Yes, many debt purchasers report to the major credit bureaus. If they’ve bought your debt and you remain delinquent, it could appear as a negative entry on your credit reports.

Can a debt purchaser initiate debt collection lawsuits?

Debt collection lawsuits are legal actions taken by creditors or debt purchasers to recover the money owed by a debtor. If they win the lawsuit, they may be able to garnish wages, levy bank accounts, or put liens on property, depending on state laws.

Yes, if you don’t pay the amount owed, a debt purchaser has the legal right to file a lawsuit against you in an attempt to recover the debt. However, they must do so within the statute of limitations for your state.

What is the statute of limitations regarding debt?

The statute of limitations refers to the period during which a creditor or debt purchaser can legally sue you for an unpaid debt. This time frame varies by state and type of debt. After the statute of limitations has expired, the debt becomes “time-barred,” meaning they can no longer sue you for it.

If the statute of limitations has expired legally, you still owe the debt, but the creditor or debt purchaser can’t sue you for it. However, they can still attempt to collect it from you, and the debt might remain on your credit report.

Some Advice From CreditNinja: Attain Stability in Your Finances

After experiencing what it’s like to work with a debt collection agency or debt collectors, you likely would be willing to go to great lengths to avoid having to do that again. The best advice CreditNinja can give you is to ensure that you never require a collector’s services ever again to become fully stable in your finances. 

Approach all debt with caution and keep your credit utilization rate under 30%. Have a large emergency fund so that you stop relying on a creditor to survive unexpected expenses. Stop living paycheck to paycheck by building your savings so that even if you experience temporary job loss, you won’t be in any financial danger. These goals will take time to reach, but true financial stability brings a peace of mind that is well worth the effort. 


  1. State of Debt Collection: Industry Stats & Practices | CallMiner
  2. Dealing With Debts Sold to Collection Agencies and Other Companies | StepChange Debt Charity
  3. What Happens When my Debt is Sold to a Collections Agency? | Equifax
  4. The Truth: Should You Never Pay a Debt Collection Agency? | SoloSuit Blog
  5. If a debt is sold to another company, do I have to pay? | DAC
  6. Ask Stacy: If My Debt Is Sold to a Collection Agency, Do I Still Have to Pay It? | MoneyTalkNews

Read More
loans like dollar hand
There are various online loan options to choose from when you need fast cash. However, it can be overwhelming trying to determine which lending option…
loans like check city
Check City is a lender that offers payday loans, installment loans, title loans, prepaid cards, and other financial services. But are loans like Check City…
loans like better day loans
Better Day Loans was a former lender that offered installment loan products. They no longer originate loans. However, plenty of other loans, like Better Day…
Loans like finwise
FinWise is a Utah-based financial provider that offers business loans and personal checking accounts. FinWise may be able to help you out if you own…

Quick And Easy Personal Loans Up To $2500*