Collection Agency Will Sell Your Unpaid Balance After Debt Settlement

One of the tricks in every debt collector's arsenal is offering you a debt settlement. They'll start out high and reduce the amount as time goes by and you don't play ball. If the debt is particularly old, the collector may agree to settle for a paltry sum. Either way, you can rest assured that if you have an account in collections you'll get a debt settlement offer sooner or later. If you plan on taking that debt settlement offer, however, you need to be aware of the fact that the collector may just sell your account to another collection agency after you pay the settlement.

Selling Accounts After Debt Settlement

Ok kids, let me tell you how collection agencies make money. On the front end, they buy debts for pennies on the dollar from creditors and collect on the debts for far more than they paid. The way they make money on the back end, however, is far more sinister.

Here's a story that, for some of you, is all too familiar...

Julia's car was repossessed two years ago. She was left owing $3000 to the bank. The account eventually went to collections. Julia agreed to settle with AAA collection agency for $1700. She used her tax refund to pay off the settlement, breathed a sigh of relief and put the incident behind her.

Six months later Julia starts receiving phone calls from a XYZ collection agency. XYZ collection agency claims that Julia owes them $1550 for an unpaid debt. Julia has no clue what debt they are referring to. After endless phone calls and a whole lot of stress, Julia discovers that AAA collection agency accepted her $1700 settlement payment and then sold the remaining balance of $1300 to XYZ collection agency. XYZ collection agency added $250 in fees and began the collection process anew. It's also reporting the debt on her credit report. She doesn't have the money to settle the debt a second time and, even if she did, she is worried that XYZ will also sell the unpaid balance of her settlement to yet another collector.

This hometown horror happens more often than you'd think. There is no law prohibiting a collection agency from negotiating a debt settlement with you, accepting your settlement payment and then selling the unpaid balance to yet another collector. Remember, debt collectors will make money any way they possibly can. This is a lucrative way. The saddest part? They generally make very little on the debts they sell since these debts are only purchased by junk debt buyers. Unfortunately, junk debt buyers are the worst of the worst and will harass you endlessly for a debt that, technically, you don't owe anymore.

Protect Yourself From Having Your Account Sold After Settlement 

If you want to pay a collection agency's settlement offer but don't want to end up on the hook for the remaining balance somewhere down the line, there is a simple way to get around this: get it in writing. I probably use that phrase more than any other. It's crucial in this business.

Tell collectors to put it in writing.
We are accustomed to doing business with companies who play by the rules. If they say they're going to do something, they usually do it. If they don't do it, its due to an oversight and enough irate phone calls from us later, they do it. Collection agencies do not work this way. If you reach an agreement with a debt collector over the phone, demand that the company put the agreement in writing before you pay them a dime.

Now, the collector is trained to request that you make a good faith payment before the company does anything. You are going to politely decline until the collection agency draws up a good faith statement outlining the terms of the agreement. It's perfectly reasonable to tell the collector that he works for a collection agency and you don't trust them. Tell them they can email you a pdf document on company letterhead outlining the settlement terms, you'll even stay on the phone and wait. But whatever you do, don't pay first!

What to Request on Your Debt Settlement Agreement

A document outlining the amount you'll pay and when isn't enough. Your debt settlement statement has to provide you 100% protection from your account being sold to another collector after you've already paid. This, of course, is the very thing the collection agency doesn't want to give you. Why? Because they have every intention of doing just that. Don't be another victim.

Your statement from the collector should include the following:


  • The amount of the settlement
  • A statement from the collector noting that, once this amount is paid, your debt is satisfied. 
  • A statement from the collector agreeing not to sell the remaining balance to another collector 
  • The statement should be on company letterhead and signed


Be polite, but make it clear (and you'll probably have to calmly restate this over and over) that until you have that statement in your hand, you cannot make the first payment. You see, once you make that first payment, they can sue you (paying resets the statute of limitations). If I could spend my days hovering over your shoulder and protecting you from collection scams, I would. Unfortunately, I can't, and no one is going to protect your rights but you. So do it. Demanding a statement containing the terms of your debt settlement agreement is the only surefire way to prevent a collection agency from selling your debt to another collector after you've already paid.

Related Posts:

Can You Reset the Statute of Limitations on a Debt?

Send a Cease and Desist Letter to Debt Collectors

The Debt Collection Lawsuit Threat

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Collection Agency Will Sell Your Unpaid Balance After Debt Settlement
Collection Agency Will Sell Your Unpaid Balance After Debt Settlement
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