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What Happens When a Debt Is Sold to a Collection Agency?

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Scott Nelson

Managing Director

MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.

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Janine Marsh

Financial Expert

Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.

Learn more about Janine
· Feb 6th, 2024
Could you legally write off some debt? Answer below to get started.

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What Happens When A Debt Is Sold To A Collection Agency

For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.

Have you received a letter from a debt collector and are unsure what it means when your debt is sold to a collection agency? You’re at the right place. 

Every month, more than 170,000 people each month visit our website looking for guidance on debt matters. You’re not the only one dealing with this. 

In this article, we’ll give you simple and clear information on:

  •  What a debt collection agency is.
  •  Why creditors sell debt to collection agencies.
  •  What happens when your debt is sold to a collection agency.
  •  Steps you can take if your debt has been sold.
  •  How to manage if you cannot afford to pay your debt.

We know how worrying it can be to get a letter from a debt collector. After all, nearly half of individuals who deal with debt collection agencies have experienced harassment or aggression1.

Some of us have been in your shoes. We have plenty of helpful advice and examples to help you figure things out.

Let’s get started!

Could you legally write off some debt?

There are several debt solutions in the UK, choosing the right one for you could write off some of your unaffordable debt, but the wrong one may be expensive and drawn out.

Answer below to get started.

How much debt do you have?

This isn’t a full fact find. MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.

Why Do Creditors Sell Debt to Collection Agencies?

Creditors and companies will sell debt to debt collection agencies because they do not have the resources, staff, time or a combination of these things to chase the debt.

Looking for debtors and getting them to pay is a difficult job, and these businesses would rather focus on running their business than chasing debts. Consequently, they sell the debt to the agency instead.

Debt collection agencies buy billions of debt annually at rock bottom prices – at an average of 10p to £1!2

It should also be noted that some debt collection agencies will buy debts from other debt collection groups that go out of business. This can cause serious confusions amongst debtors.

If My Debt Was Sold To a Collection Agency, Do I Have To Pay?

If your debt was sold to a collection agency, you still owe the full debt. However, you now owe the debt collection agency, rather than the original creditor.

For example, if your debt of £1000 is sold to a collection agency, you now owe £1000 (plus any interest and charges) to the agency.

The reason you owe the full amount and not the much lower amount that the debt collection group pays for the debt is because they are a commercial company wanting to make a profit out of you.

Debt collection is not easy, and these companies need to pay people to chase the debt from you.

How a debt solution could help

Some debt solutions can:

  1. Stop nasty calls from creditors
  2. Freeze interest and charges
  3. Reduce your monthly payments

A few debt solutions can even result in writing off some of your debt.

Here’s an example:


Situation

Monthly income £2,504
Monthly expenses £2,345
Total debt £32,049

Monthly debt repayments

Before £587
After £158

£429 reduction in monthly payments

If you want to learn what debt solutions are available to you, click the button below to get started.

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What Happens When Your Debt Is Sold to a Collection Agency?

When your debt goes to a collection agency, all future repayments must be made to the agency rather than the original creditor. You will receive correspondence from the debt collection agency to discuss your repayment options.

It is likely that the debt collection agency will first state that they want full payment. If you don’t make a full payment, they may threaten court action.

However, if you contact them and negotiate a feasible repayment plan, they are likely to accept. Never agree to repay until the collection agency can prove you owe the debt with a signed agreement!

If you ignore the debt letter, it may be that your debt goes to the county court. If the debt is then proven to be genuine and live, the court can force you to pay. This is when bailiffs may be used to come to your home and request payment or repossess items.

Typical Debt Collection Process

To keep debt collectors from filing a CCJ against you, you should be aware of the key stages of the debt collection process. That’s why I’ve created this table. For more information or further advice, please check out our specialized guide.

Stage Actions What you should do:
Missing one or two small payments Calls and letters from the debt collector asking for payment. They may enquire about reasons for missing payments. Contact the debt collector and offer to pay what you can. If you are struggling to pay the debt, get in touch with us to explore your options.
Missing large or multiple payments Their contact will become more frequent, urgent, and threatening. Contact the debt collection agency and offer to pay what you can. You may also make a complaint if you think the letters are a form of harassment.
Debt collector visit After a few months, if the debt is significant (£200+) you will receive notice of a debt collector visit. They have to notify you before arriving. Debt collectors cannot take anything from your home – they may only ask for payment. If a debt collector shows up at your home, ask them to show proof of the debt and their ID through a window. Do not open your door or let them in. You can arrange a payment plan with the debt collector, but make sure to get a receipt of this.
Court If you still do not pay your debts to the original lender/debt collector agency, they will take you to court and either attempt to:
– File a CCJ against you.
– File an attachment of earnings order.
– File a lawsuit against you.
You must show up to your court date. From here, you can either dispute the debt, or the judge will likely suggest a manageable repayment plan for you.

My Debt Has Been Sold On – What Can I Do?

If the debt is yours, you should contact the new owner as soon as possible to agree upon a repayment plan. Doing so will ensure that further enforcement action is not taken against you.

» TAKE ACTION NOW: Fill out the short debt form

If you don’t believe that the debt is yours, you should request that the new owner proves that you are the debtor. If they cannot prove that you are the debtor, you do not have to pay. However, you may need to be persistent.

The Bank Sold My Debt To a Collection Agency – What Can I Do?

If your loan, overdraft, or credit card debt is regulated by the Consumer Credit Act, the bank is legally permitted to sell your debt to another company if you stop repayments. In this case, your legal rights are maintained and the debt purchaser is obliged to follow the same regulations as the original creditor.

If, for example, your credit card debt is sold to a debt collection agency, you now owe the agency. You will receive notification from the collection agency, usually in the form of a letter and follow-up phone calls. It is important that you respond quickly and make a feasible repayment arrangement as soon as possible.

A Collection Agency Sold My Debt – What Can I Do?

If a debt collection agency has been unable to recover a debt from you, they are permitted to sell it to another collection agency. If this happens, you now have to pay the new collection agency.

However, it is worth noting that the date of the delinquency won’t change if this happens. As such, the new debt collection agency cannot report the old debt as new debt.

Medical Debt Sold To Collection Agency – What Can I Do?

If your unpaid medical bill was sold to a collection agency, you now need to pay the agency. You should contact the agency as soon as possible to discuss your repayment options. If you don’t, further enforcement action could be taken against you.

Thousands have already tackled their debt

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Can I Ignore a Debt Collection Agency?

I always recommend responding to debt collectors – even just to question the debt’s validity. Remember, you have the right to request proof of the debt. They have to prove it, or they can’t charge you.

Ultimately, it is always best to avoid the debt going to court and don’t ignore any debt letters. There are limited times when you can ignore a debt collection agency. This is when:

  • You have asked for proof that you owe the debt and they did not supply it, but they continued to ask for money. You must keep the communications showing you asked them for proof. And you should complain about their actions to the Financial Ombudsman (this is harassment).
  • You have told the debt collection agency that your debt is statute barred (too old to be legally enforced) and they continue to ask for payment. Again, you should complain if they continue to harass you.

What Can I Do if I Cannot Afford to Pay My Debt?

If it has been proven that you owe the debt, but you cannot afford to pay the full amount, always contact the debt collection agency to explain your circumstances. They may be able to offer you a repayment plan that works for all parties and leads to you becoming free of debt.

If you are unsure of how much you can comfortably afford, you can contact UK debt charities, such as Step Change, to get advice and support.

Lastly, you can always investigate other debt solutions discussed in an easy-to-understand way on Money Nerd. Check out our other content, today.

Could you legally write off some debt?

Answer below to get started.

How much debt do you have?

This isn’t a full fact find, MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.

References

  1. Indebted Debt Collection Survey
  2. Jubilee Debt Campaign
The authors
Scott Nelson Profile Picture
Author
MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.
Janine Marsh Profile Picture
Debt Expert
Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.