It is better to pay off collections than wait. While it may reach a statute of limitations or fall off your credit reports, it is still money you owe. It’s the ethical thing to do to resolve your debt problems.  

  • You can dispute any debt, even if it was sold to a collection agency. 
  • If you owe a debt that your original creditor sold to a collection agency you are obligated to pay. 
  • Sometimes it is a good idea to settle. 

It is important to know your own obligations. Keep files for all your accounts, so you don’t fall prey to scammers and incompetent collectors. If you fall behind, don’t panic. Know your rights and protections. Get help if you need and create a plan for how to deal with your situation. 

Pay Off Collections or Wait: Dispute Sold Debt? 

You can dispute a debt if it was sold to a collection agency. When creditors sell debt, often the data gets corrupt. This results in wrong balances, names, and history. You may even get contacted for a debt you don’t owe. If this happens, send a letter to the collection agency asking to validate the debt. It should include: 

  • Your personal information, including your full name and address 
  • Verification of the debt amount 
  • Name of the creditor 
  • A request that the debt not be reported or be removed from credit reports until the matter is resolved 

Don’t wait, though, because only have 30 days to respond after the collector first contacts you. If they already reported the debt, then send a letter to the credit bureaus disputing the information’s accuracy and asking them to remove or correct it. 

You should always keep files of all your debts. The better you keep these records the better chance you have of successfully disputing the collection. Whenever data gets sold, there is a chance it gets corrupted, and if you keep good records you will successfully resolve the issue.1  

Obligation to Pay When Creditor Sells Debt 

You are obligated to pay if a creditor sells your debt. There is a myth that when a creditor sells an obligation that they write it off and cancel the debt. The argument goes something like this: 

  • Creditors charge off accounts that become past due. 
  • They sell the accounts to collection agencies. 
  • You dispute the account based on the reason that the contract was canceled. 
  • This argument is wrong because your contract wasn’t canceled. 

While it’s true that you did not sign a contract with the collection agency, it is also true that your lender has the right to sell your original contract. This gives the collector every legal right to pursue payment.2  

Pay Off Collections or Wait: Settling with a Collection Agency 

It is sometimes good to settle with a collection agency. If your account becomes delinquent because you can’t pay the bill this is often the best option. While you should always try to fully pay off your debts, it’s better than not paying at all. Being delinquent damages your credit no matter what. 

  • Paying the full amount hurts it the least 
  • A settlement affects it more 
  • Ignoring it causes the most damage 

Another consideration is the age of the debt. If your creditor wrote it off and sold it to a collection agency, then most of the damage is already done. Settling at this point makes sense. Also, if it is near or over the statute of limitations for your state then you may not have to pay at all. However, on principle, you should always pay what you owe.  

Finally, think about tax implications. When you settle, the IRS considers the difference between what you pay and what you owe to be income.  You may have a hefty tax bill to pay in April.3  

What Percentage Will Collectors Settle For? 

What percentage a collector will settle for depends on your situation. You should try to reduce your balance and preserve credit. Your creditor wants to collect as much of the balance as possible without spending any more resources than necessary.  

You should prepare for this and approach it as a process. Begin by assessing your situation. Compare your delinquent debts to see which you should resolve first. Always begin with unsecured accounts, like credit cards.  

Examine your income, monthly bills, and savings. Determine how much you can afford as a lump sum payment. You need to have at least 30% of your balance to begin negotiations. Don’t use the credit card you target while you get ready. Appearances matter, and if your creditor sees you buying non-essential items it will hurt your negotiation. 

  • Call your creditor and ask to speak with a manager in the debt settlement department. 
  • Present your situation and tell them you have some money that you want to use to settle as many accounts as possible. 
  • Offer a specific dollar amount that is 30% of the outstanding balance. 
  • If they make a counteroffer higher than 50% move on to your next creditor. 

Get as many as you can to settle for 30% – 50%. Then, return to the companies with whom you couldn’t reach an agreement. Try not to settle for more than 50%. Some lenders won’t go that low, and in those cases try to negotiate terms, such as interest rates and credit reporting.  

Whatever agreement you come to, make sure to get everything in writing before you make any payment. Keep a journal of the entire process and make a file with all written communications regarding the account.4  

Accepting a Settlement Offer from a Collection Agency 

Before you accept a settlement offer you should make sure it is legitimate. Here are some things to consider before you agree: 

  • Is the collector contacting you about a debt you owe? 
  • Is all the information about your account correct? 
  • Has the statute of limitations for your state passed? 
  • How close to it being expunged from your credit reports is it? 
  • Is it a legally binding agreement? 

First of all, there are many scams to trick people into paying debts they don’t really owe. Further, legitimate agencies sometimes have the wrong information. For instance, it’s not uncommon for a collector to go after the wrong person with the same name.  

Further, collectors often reach out to see if they can get partial payments on an account that is beyond the statute of limitations. It restarts the clock if they succeed, and it gives them more time to sue you.  

If it is legitimate and you want to settle your account, you can either accept the offer or negotiate. If you do accept the offer, make sure it is legally binding and states that the account is closed. You want to make sure they won’t go after you for the remaining balance later.5  

Final Thoughts on whether to Pay Off Collections or Wait 

It is always better to pay off your debts as soon as you can. Always keep track of your spending and your accounts in case you get into financial trouble. If you keep good records creditors, collection agencies, and scammers won’t be able to take advantage of you.  

Keep files on all your accounts. Know who you owe, how much it is, due dates, and any payment issues. There are a lot of scams to frighten you into paying money you don’t owe. Also, legitimate collectors often go after the wrong people. Know your debts, so you won’t fall for a scam or pay for someone else’s incompetence. 

If you are delinquent on debt make sure you understand your situation and develop a plan to resolve your problem. There are organizations that help with debt management, and you should contact one if you feel overwhelmed. You should never ignore the problem. Always work with your creditors to bring your accounts solvent. Either by paying in full or settling. 


  1. In charge Debt Solutions 
  2. The Balance 
  3. The Clear Point Blog 
  4. Investopedia 
  5. The Balance