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Understand the Life Cycle of Your Debt


When you owe money, it seems like the collection calls and letters are never ending. They often come from different companies at different times, all seemingly trying to collect the same debt. That’s because as your debt ages, it gets passed on from one collector to another. Each collector has different motivations and will be willing to do different things with your debt.

Original Creditor

The original creditor is the company that you first incurred the debt with. It is the emergency room that treated you, the department store that you purchased a product from or your car loan company. These are collectors in the sense they are collecting a debt, but they are not “collection agencies.”

Original creditors will try to collect on debt for a limited time. However, they are not equipped to be full time collection agencies, and many companies don’t want the negative public relations that comes with debt collection.

Debt Collectors

Debt collectors (or collection agencies) are companies that collect debts for original creditors. They may work on a contingency basis, being paid a percentage of what they collect for the original creditor. An original creditor may send debt to multiple debt collectors as time goes on. However, the original creditor still owns the debt.

Debt collectors work for the original creditor, and are just performing a service (collection) for the creditor. Because of this, they may have limited ability to offer payment plans or reduced payments.

Debt Buyers

Some companies will outright purchase debts from original creditors for pennies on the dollar. These are known as debt buyers. They will often also collect on the debt they purchased, making them debt collectors for the debt they bought.

Some debt buyers sue consumers for the debt that they purchased, and can do so in their own name. However, they often do not have proof they own the debt in court.

Usually, you can get the best payoff deals from debt buyers—although by the time the debt has gotten to this stage, it probably has already had a negative impact on your credit.

Debt Collectors for Debt Buyers

Making matters more confusing, some debt buyers won’t collect their own debt—like original creditors, they will contract out with a collection agency (sometimes called a servicer). So you can have a collection agency collecting debt purchased by a debt buyer from an original creditor.

Collection Lawyers

Lawyers can be hired at any time in the collections process by any of these actors, but a lawyer is usually not retained until the debt is older.

Just because you get a letter from a lawyer doesn’t mean you are being sued. In many cases, law firms are actually acting as collection agencies (some with their own in house collection departments) and often the lawyers have no idea about you or your debt. They may not even be licensed to practice law in Florida.

Questions about handling debt or managing debt collectors? Contact Jacobs Legal to speak with one of our Miami consumer rights attorneys today.


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