Trigger: The creditor has been unable to get payment and writes off the debt as uncollectible.
What to expect: The creditor may sell or contract the account with a third-party debt collector. The creditor will notify the credit reporting agencies that your account is a charge-off and has gone into third-party collections.
The third-party debt collector will call and send emails and letters. They must abide by the Fair Debt Collections Practices Act, which outlines when third-party collectors can call and how often.
Your options: Get verification of the debt from the third-party collector and confirm the collector's identity with the original creditor. Set up a payment plan or offer a settlement. Try to negotiate a settlement with the original creditor, which may offer more flexibility. The creditor or debt collector probably won't settle for less than half the balance.
"But shoot for the moon on your first offer," says McClary, "because you never know."
Get the offer in writing with a clause that states the collector or creditor won't sue you if you make the payments. Ensure that your credit report reflects any settlement as settled in full, which indicates your obligation to the creditor is fulfilled.