Paying a credit card or loan in good standing is a pretty simple task – you just go online or send a check to the address on your statements. However, if you have older bills that you were not able to pay in the past but now have the means to take care of, it may not be so easy. If you have been lucky enough to avoid a barrage of collection calls and letters, you may not know who is holding the debt. You may also be unsure about the best way to deal with a collection agency or if it is even a good idea to pay the debt.

Before trying to pay an old debt, you should first confirm how long it has been since you last made a payment on it. Every state has a statute of limitations that determines how long a creditor has to sue you to collect a debt. (You can find out what it is for your state at While there are many reasons that people pay a debt past the statute of limitations, such as a lender requiring it to get a mortgage or feeling a moral obligation to, some people may not feel that it is necessary if they do not have to worry about legal action being taken against them. Your statements should show when you last made a payment, but if your records are incomplete, you can check your credit report. You can obtain a free copy of your credit report from each of the three credit bureaus, Equifax, Experian, and TransUnion, once a year from the Annual Credit Report Request Service (, 877-322-8228).

Viewing your credit report may also help you locate the current holder of the debt. If there are multiple listings for the same debt, see which agency has the most recent report date. Ideally, the collection agency’s contact information will appear on your credit report, but if not, you may have to search for it online. Another possible way to locate the debt is to call the original creditor and ask what collection agency they sent it to. Then call the collection agency to see if they still have the debt. If not, ask who they sold it to. You may have to repeat this a few times before locating the debt.

Once you find the agency that you believe is holding your debt, send them a letter asking them to verify if they have it. If they do, you can negotiate a payoff. Collection agencies are often willing to settle for less than the full amount owed if you pay a lump sum. Generally speaking, the older the debt, the bigger the discount you can get. You should always get a settlement agreement in writing before sending money. If making a lump sum settlement is not affordable, the agency may accept smaller monthly payments, although you will probably have to pay the full balance. Keep in mind that in most states, paying even one dollar on a debt restarts the statute of limitations.

About a month or so after paying off the debt, it is a good idea to pull your credit report and see how the account is being reported. (If you are paying several accounts, you may want to wait until you have taken care of all of them.) It should show that it was paid in full or settled, whichever you did. If the account is being reported incorrectly, you should send a dispute letter to the relevant credit bureau(s). Include with the dispute letter any documents that support your claim, such as a checking account statement showing the payment to the collection agency. The credit bureau has 30 days to investigate the claim (45 days if the report was obtained through the Annual Credit Report Request Service) and fix any mistakes.

With a little bit of research and negotiation, you can check paying off old debts from your to-do list.

1. Open and organize all mail from creditors and collection agencies, even if you cannot pay the accounts right away.

2. Be honest with collectors, and don’t make a promise to pay more than you can afford to. They may not give you a second chance.

3. Send all letters to creditors and collection agencies via certified mail. This gives you proof of contact and lets you know if they actually received what you sent.

4. If a collection agency is harassing you at work, ask them to stop contacting you there. Under the Fair Debt Collection Practices Act, they are required to abide by your request.

5. If a creditor or collection agency sues you, don’t ignore it. If you do not respond and go to court, a default judgment may be entered against you. Seek legal assistance if you do not feel comfortable handling the lawsuit on your own.

6. If you cannot currently pay your collection accounts but would like to in the future, start saving whatever you can now. Small amounts add up over time.

7. If you settle a debt, be aware of the tax consequences. In most circumstances, forgiven debt is considered taxable income. See for more information.

8. Avoid using a debt settlement company. Many are scams, and even the legitimate companies tend to charge high fees. You can negotiate with collection agencies.

9. Prioritize your bills. Don’t pay a collection agency before you pay your mortgage or rent and other essential expenses.

10. When dealing with a collector over the phone, stay calm and polite. If you – or they – cannot do this, stick to written communication.

Copyright © 2011 CCCS
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