When any debt goes past 90 days late, it goes into collections. For secured debt, legal action will likely commence very shortly thereafter. Once a repossession or foreclosure has occurred, any deficit is treated as unsecured debt.

For unsecured debt, the average collection rate is 15 to 20 percent of the total debt when a debtor is 90 days late or more. Since creditors know this, they will do everything they can to settle the debt at this crucial point. At this juncture, they’ll try to collect for 90 more days and may elect to use an outside collection agency.

If they are unsuccessful after 90 additional days, then they will likely turn the debt over to a collection agency and/or sell it to a third party. They really don’t want this, since their chances of collecting at this point are minimal and whatever is collected must be shared with the agency; often 50 percent will go to the collector. Your chances of negotiating a good settlement just before the debt goes to an agency are quite good, but don’t be alarmed if you can’t settle before this happens.

Bank credit cards are the most common form of unsecured debt, and after six months these creditors will charge off (write off) the debt in order to obtain a tax credit on the loss. They’ll continue trying to collect thereafter and hope that negative credit reporting will eventually force a debtor to pay up. Such debts are more likely to be sold to a third party after six months of delinquency.

Many “credit repair experts” claim that collection agencies are far easier to deal with than original creditors, since they’re far more accustomed to reducing debt and wheeling and dealing. I don’t find this to be true at all, and if there are any notable differences in what one will do over another, I believe it’s more a function of time and simple economics. Creditors can charge off debt and recover part of it in the form of a tax write-off. Debts often get sold after six months, and buyers will purchase it for pennies on the dollar. As time passes and a debt approaches the statute of limitations for collections, any debt holder will become more flexible. And, besides, collectors from agencies are usually far more unruly anyway, which can make them more difficult to deal with.

Being sued by a debt collector can be very intimidating. If you are being sued, never let a default judgment be entered. You have nothing to lose by disputing the validity of the judgment or even settling it out of court to avoid that nasty record landing on your credit reports.

The statute of limitations (SOL) on judgments is very long; usually 12 to 20 years. More and more collection agencies are starting to seek litigation simply for the fact that judgments are renewable. Once they get a judgment, it may be renewed if the creditor files a new suit seeking to renew the judgment prior to the expiration of the original judgment) therefore, technically, a judgment could follow you around for life.

Even if you pay a judgment you will be stuck with a ‘satisfied judgment” for 7 years from date satisfied not filed! This can be a hopeless situation so avoid being sued at all costs!

However, if you already have a judgments reporting on your credit report, there are ways to have them removed. There are many strategies and options one could use to remove a judgment from their credit report. You have more rights and are protected by more federal and states laws than I could ever write about in one article. The most common is disputing it with the credit bureaus. Another way is simple to negotiate with the creditor. Many people use “pay for delete” letters when negotiating. It’s always important to get the agreement between you and the creditor in writing as once you have paid; they have no other motivation to remove it from your credit report.