Let’s face it – no one enjoys getting collection letters in the mail. That envelope with the window that allows you to see the ominous letter inside is enough to make your heart sink. The first instinct is often to pretend it doesn’t exist and toss it straight into the trash.

But ignoring collection letters is about the worst thing you can do. While burying your head in the sand might seem easier in the moment, it can lead to some massive financial headaches down the road.

Trust me, I get it. Debt feels overwhelming. You dread confrontation. And collectors don’t have the best reputations. Still, communicating is far better than avoiding. I’ve seen so many people dig themselves into a deeper hole by trying to pretend a debt didn’t exist.

In this post, I want to have an honest discussion about why ignoring collection letters is a bad idea. I’ll explain how the collections process works, consequences you may face, and tips to take control of the situation. My goal is to convince you that, while scary, reaching out to collectors promptly gives you the best shot at resolving debts in an affordable way.

Let’s dive in!

Why People Bury Their Heads About Debt

Before we talk specifics, it helps to understand why so many people stick their heads in the sand when they get that first collection letter. Here are some of the most common reasons for avoidance:

The Collection Process

To understand why ignoring collection letters is harmful, you need to know how the debt collection process typically works:

Demand Letters

The first communication from a collector is usually a demand or “dunning” letter. The letter informs you that the original creditor hired the collection agency, explains how much you owe, and requests payment.

At this stage, you have the right under the Fair Debt Collection Practices Act to request debt validation within 30 days. Sending a debt validation letter can require the agency to prove you actually owe the debt.

Lawsuits 

If the debt remains unpaid after the demand letter, the next step for a collection agency is often filing a lawsuit to recover the money. If you are sued and don’t respond, the court will likely issue a default judgment against you. This gives the agency legal authority to pursue payment through garnishment or asset seizure.

Wage Garnishment 

If a collector wins a judgment, they can seek a court order to garnish your wages. This requires your employer to withhold a portion of each paycheck and send it to the creditor. Federal law protects a minimum portion of earnings, but any non-exempt amount can be taken.

Bank Levies

A collector with a court judgment can also attempt to levy your bank account. The levy requires your bank to freeze account funds and turn over any non-exempt monies. This can completely empty out accounts and prevent you from accessing cash you need to live on.

Property Liens

In some cases, collectors may try to place liens on your property after receiving a judgment. Property liens allow them to eventually force the sale of property to satisfy unpaid debts.

As you can see, collectors have legal methods to enforce payment if debts remain unresolved. Simply ignoring the issue won’t make it go away.

Your Credit Score Will Be Damaged 

Another consequence of ignoring collection letters is harm to your credit score. Here’s how it happens:

– The original creditor writes off your account as a charge-off once it’s seriously past due. Charge-offs alone cause a big hit to your score.

– The creditor sells or outsources the debt to a collection agency, who reports it to the credit bureaus. This results in a separate collection account on your report.

– As the collection agency attempts to collect, they will repeatedly report updates and renew the entry. These additional reports drag down your score further. 

– If the debt goes to court and results in a judgment, that hammer drops your score too. A credit score can plummet 100 points or more from the damage caused by an unpaid collection account. 

This destruction of your credit score impacts your ability to access new credit, qualify for loans, rent an apartment, get affordable insurance rates, and more. The damage can last for years.

Continued Interest and Fees

Debt collectors often add substantial fees and continue accruing interest on unpaid debts they acquire from original creditors. These charges are spelled out in the initial account agreements. But they are still quite legal for debt buyers as well.

By ignoring collection letters, you allow these additional charges to pile up unhindered. The balance you owe grows larger the more you avoid and delay payment.

What may have started as a few hundred dollars in credit card bills can swell to several thousand with compounded interest and collection fees. The debt increasingly becomes a financial albatross around your neck.

Harder to Resolve the Debt 

You also lose bargaining power the longer you avoid dealing with collections letters and agencies. Collectors grow less willing to accept low settlements or set up payment plans as time goes on.

After a lawsuit is filed, collectors invest significant time and legal expenses into obtaining a judgment. Out of principle, they become much less likely to settle for pennies on the dollar at this advanced stage.

Ignoring the issue closes doors that would have remained open if addressed earlier. The debt becomes more difficult to resolve. judgements and garnishments begin to appear inevitable.

Debt Validation

When you get your first letter from a new collection agency, you have the right under the Fair Debt Collection Practices Act (FDCPA) to request debt validation within 30 days. This requires the collector to provide proof that you owe the debt and its exact amount. 

Sending a debt validation letter is important for two reasons:

1. It can identify mistaken debts. Collection agencies sometimes pursue the wrong person over a debt or try to collect inflated account balances. Disputing errors early is your best chance to avoid paying debts that aren’t actually yours.

2. It stalls collections. After receiving a validation letter, collectors must cease all collection efforts until providing the requested evidence. This buys you some critical time.

Once you pass the 30-day window to request validation, the law no longer requires collectors to validate debts. Ignoring letters eliminates your opportunity to dispute potential errors and halt collections through a validation letter.

Your Wages Can Be Garnished

When a collection agency receives a court judgment, they can legally request an order to garnish your wages. Wage garnishment forces your employer to withhold funds from each paycheck and send them to the creditor.

Federal wage garnishment law provides some limited protections that vary based on your income and marital status. But collectors can still take a portion of disposable earnings.

Some states offer additional protections, but creditors can garnish wages in most jurisdictions. In some cases, collectors may attempt to “double garnish” your wages by filing multiple lawsuits for different debts.

With garnished wages, money is taken directly out of your paycheck before you ever see it. This can wreck financial havoc and make it impossible to keep up with your basic living expenses.

Your Bank Accounts Can Be Frozen and Seized

Collectors can also pursue bank account levies to satisfy judgments. The collector serves an order to your bank, which is then required to freeze any funds requested and turn over available non-exempt monies. 

Levies can result in your accounts being emptied out completely. And they often hit at the worst possible time – such as bill payment day. A levy immediately cuts off your access to cash needed to pay rent, utilities, and other necessary expenses. 

Checking accounts are the most vulnerable to levies, as they can immediately drain any deposited funds. Savings and money market accounts may be protected based on state laws. Retirement accounts like 401(k)s generally can’t be taken.

But a collector that wins a judgment against you can feasibly freeze and wipe out your liquid assets. Being unable to access your own money is a catastrophe most people can’t afford.

Your Tax Refunds Can Be Taken

Federal and state tax refunds are also fair game for collectors with judgments. Through tax intercept programs, they can have your expected refund checks seized and sent directly to pay the debt.

Losing your refund eliminates what many families depend on as an annual financial windfall. It’s money you likely planned to use for bills, debt repayment, or essential expenses.

Just as with bank levies, a tax refund interception can blindside you right when you need the funds the most.

Your Property Can Be Seized 

For larger debts, collectors may try placing liens on your real estate or personal property. The lien attaches to the property’s title and allows the creditor to eventually force a sale to access equity.

Property liens make it impossible for you to sell the home or vehicle until satisfying the debt. And they could ultimately result in seizure if you can’t pay in full.

Even sentimental personal property without much monetary value, like jewelry or heirlooms, may potentially be up for grabs to a very aggressive collector.

You Could Be Sued

Debt collectors often file lawsuits and attempt to win court judgments against those who ignore their letters. Around 20% of collections end up in court. If you don’t respond once sued, it’s almost guaranteed the collector will win a default judgment.

Lawsuits trigger expensive court costs that get tacked onto your balance. They also allow the collector to access enforcement orders like wage garnishment and bank levies.

Once sued, settling and resolving the debt becomes much more difficult. The creditor has already invested substantial resources into pursuing the judgment. Just showing up helps your case, but few consumers bother once sued over unpaid debts.

Bankruptcy May Be Your Only Option

For some deeply indebted consumers, the financial devastation caused by not responding to collectors eventually leaves bankruptcy as the only viable option. Medical bills, in particular, are the most common cause of personal bankruptcy filings.

Bankruptcy stays on your credit report for 7-10 years with severe score impacts. And it provides only temporary relief before debts potentially spiral again. It’s obviously not an ideal outcome.

Ignoring collectors despite an inability to pay can box you into bankruptcy. If you’d opened communication earlier, other options may have been available.

Tips for Responding to Collection Letters

Now that you understand the risks of ignoring collection notices, here are some tips to respond properly:

Work With the Agency

Once in default, avoiding and ignoring collectors is the worst thing you can do. Communicate openly with the agency about your situation.

Be honest about what you can afford. See if they’ll agree to a reduced lump-sum settlement or set up a monthly payment plan based on your budget. Document everything in writing.

If the debt is valid, working constructively with collectors from the start gives you the best odds of resolving it without further damage.

Request Debt Validation

Within 30 days of the first notice, send a certified debt validation letter requesting complete verification of what you owe. Dispute any errors with supporting documentation.

This halts collections until they validate the debt and ensures the amount is accurate. Follow up if their response is inadequate.

Negotiate a Settlement 

Offering a lump-sum settlement lets you resolve the debt for less than the full amount. The collector removes their claim in exchange for an agreed payment by a set date.

Start low with an offer of 20-30% of the balance. Negotiate from there based on what you can pay. Get any deal in writing before sending payment.

Set Up a Payment Plan

If you can’t offer a settlement, request an extended monthly payment plan of around 12-24 months. This allows you to resolve the debt through affordable installments over time.

They may charge a setup fee, but payment plans let you get squared away without further collection efforts. Automate payments from your bank account.

Pay the Debt in Full If Possible

Paying off collection accounts in full won’t undo the damage already done to your credit. But it gives you a clean slate going forward.

If you have the means to pay, biting the bullet may be worthwhile – especially if the creditor agrees in writing to remove negative marks from your credit reports afterward.

Seek Help From a Credit Counselor

Talk to a NFCC-certified nonprofit credit counselor if you’re struggling with high debt and bills. They help assess your situation and identify the most appropriate debt relief solutions.

Credit counselors can negotiate with all creditors on your behalf and set up free debt management plans. This can consolidate multiple payments into one and secure reduced interest rates. For people in real hardship, they also advise on bankruptcy.

Conclusion

While scary and unpleasant to deal with, ignoring collection letters will almost always make a bad situation much worse. Responding promptly and intelligently lessens the financial impact and expands options for resolving the debt.

Now that you understand the serious consequences, take action if you’ve made the mistake of avoidance. The collector will typically prefer to work with you constructively if you reach out. Deal with the issue head-on and move forward.