Ask Stacy: If My Debt Is Sold to a Collection Agency, Do I Still Have to Pay It?

The internet says there's a legal loophole allowing you to dodge your debts. Here's what I say.

Ask Stacy: If My Debt Is Sold to a Collection Agency, Do I Still Have to Pay It? Photo by Iakov Filimonov / Shutterstock.com

Welcome to “Ask Stacy,” a short video feature answering money questions submitted by readers and viewers. You can learn how to send in a question of your own below.

If you’re not typically a video watcher, give it a try. These videos are short and painless, and you’ll learn something valuable. But if you can’t deal with video, no problem: Just scroll down this page for the full transcript of the video, as well as some reader resources.

Today’s question is about debt; specifically, whether you can legally dodge a debt that’s been sold to a collection agency.

This one is right up my alley. My first book is called “Life or Debt,” and I’ve served on the boards of two nonprofit credit-counseling agencies.

So, is a debt invalidated when it’s sold to a collection agency? Watch the following video and find out.

For more information on this topic, check out “9 Secrets Your Debt Collector Doesn’t Want You to Know” and “Ask Stacy: Where Can I Find Help With Credit Card Debt?” You can also go to the search at the top of this page, put in the word “debt” and find plenty of information on just about everything relating to this topic.

Finally, be sure and visit the “Debt Help” page of our Solutions Center, where you can find free help with debt problems, as well as solutions for just about any money issue.

Got a question of your own to ask? Scroll down past the transcript.

Don’t want to watch? Here’s what I said in the video

Hello, everyone, and welcome to your money Q&A question of the day. I’m your host, Stacy Johnson, and this question is brought to you by MoneyTalksNews.com, serving up the best in personal finance news and advice since 1991.

Let’s get to our question. It is from Lisa:

“I read an article that stated if a creditor sells or turns over your account to a third party collection agency they breech the original agreement, thus making that debt null and void. Is this true?”

Just to make sure we’re all on the same page, let’s boil this down. Let’s say you incurred a debt, but you didn’t pay it. It’s turned over to a collection agency, and it’s coming after you. Lisa wants to know if she can tell the collection agency, “Hey, I didn’t have a deal with you, I had it with the original creditor. Therefore, I don’t owe you anything.”

I hate to break it to you, Lisa, but that ain’t the way it works.

The original creditor — say a bank or credit card company — is allowed to sell debts to third-party collection agencies, and those collection agencies are legally allowed to come after you for payment.

I suspect Lisa got this idea from social media or some other source online where falsehoods flourish. I’ve seen similar articles. But if you think about it, that’s crazy. The debt-collection business has been around a long time, and it wouldn’t exist if this were true.

Obviously, it’s bad for your credit history to show collections, and you should do what you can to deal with them. But be cautious.

There’s a clock that begins running when you don’t pay a bill, and selling a debt to a collection agency doesn’t restart that clock. However, some debt collectors will attempt to trick you into restarting the clock by getting you to do something like making a small payment. So, be really careful when you’re dealing with these guys. We’ve got lots of articles about what to do on MoneyTalksNews.com.

Something else to know: If you’re getting harassed by a debt collector, think about getting a lawyer. You can often get one free, because a lawyer will go after debt collectors that are breaking the law, which many do. The lawyer will get his or her fee from pursuing these collectors.

Bottom line? If you’ve got debt problems, start reading. There’s info at MoneyTalksNews.com, as well as lots of other sites.

Now it’s time for our quote of the day. This one comes to us from legendary reggae star Bob Marley.

“If it takes money to be happy, your search for happiness will never end.”

Have a profitable day. Meet me right here next time!

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The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.

About me

I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

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Stacy Johnson
Stacy Johnson @moneytalksnews
I'm the founder of Money Talks News and have spent the last 40+ years in the personal finance trenches. I'm a CPA, author of a few books and multiple Emmy recipient. I'm ... More

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