Get Out of Debt Guy

Do I Have to Pay NCO?

Posted December 19, 2013

WRAL Reader Question

Dear Steve,

In 2011 I filed Chapter 13 bankruptcy and I made my monthly payments as arranged via payroll deduction. In January of 2013 I was laid off and I had to discharge the bankruptcy. A couple of months later I went back to work, with a different employer and I contacted some of the creditors included in the bankruptcy to resume payments because I was in good standing prior to the bankruptcy. One of the accounts was for a private student loan. The creditor told me that the account was turned over to a collection agency (NCO) while I was in bankruptcy. I never heard anything from NCO until a couple of weeks ago. I received a statement requesting the amount to be paid in full ($17,000). I would rather resume my previous payment schedule with the original creditor.

My question is, do I have to transact my payments through NCO? I have read a lot of negative things about NCO and I want to make sure my payments are applied properly and I will not get ripped off. Can NCO sue me? What are my rights? Any help you can provide will be greatly appreciated.


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Dear Cedric,

Thank you for writing to me for help.

I am familiar with many concerns people have expressed about NCO and collection activity. But that's really a separate issue in this situation. 

The primary concern is not if NCO is going to be both accurate and transparent, which I would hope they would be in your case, but if they have the right information to begin with.

These days a big concern over old delinquent accounts that are sent out to collections is if the underlying information about how much is owed is even accurate or collectible. I think you need to ask NCO to validate the debt before you do anything with them over this debt. Here are some sample letters you can use to do that.

I don't think there is any doubt you owe money for this private student loan. You admit you do but is the amount demanded now even correctly calculated when you consider the payments made in your bankruptcy?

What I'm perplexed about is why you just didn't go for a chapter 7 bankruptcy discharge if you were eligible for one. It seems you were initially in a chapter 13 bankruptcy and since you were and it failed, it's already noted on your credit report. If you didn't like your previous bankruptcy attorney and would like to discuss this with a new bankruptcy attorney for free, click here.

Now your primary issue with NCO appears to be a concern if they will apply your payments properly. Any collection agency should be able to provide you with a timely and accurate statement on your account and help you understand how payments are applied. The key here is only you can assume responsibility for making sure NCO is providing you the information you need on a regular basis to make sure the payments are being applied smoothly. If you begin to pay them, stay on top of monitoring your statements monthly.

In my experience the biggest complaints people have had with NCO, or any collection agency, is when they don't watch over the account. All of a sudden they become alarmed they aren't getting statements or can't understand how the account is being handled, and they explode.

Being in collections is not a fun experience but you can make it better. I would suggest after you validate the debt and feel the amount they are attempting to collect is correct that you establish a friendly relationship with the collector when they call. Work with them in a non-confrontational way to manage this collection account so there are no ongoing questions or lingering concerns.

Making the collector your friend instead of the enemy is a logical approach many never consider. But the reality is there are many good debt collectors out there who appreciate considerate debtors who don't abuse them. Can you imagine how much grief they get on a daily basis?

A debt collector is getting paid to do one thing, collect on a debt owed. As a consumer you want to make sure of one thing, that the debt is valid.

As far if NCO can sue you, you really need to identify if they are the current debt owner or just a third-party collection agency. The debt owner could always sue you to collect if they wanted to but I think if you follow all the steps above in a timely way that being sued is not a big concern right now. You will need to talk to an attorney licensed in North Carolina for a legal opinion about being sued.

Steve Rhode
WRAL Get Out of Debt Guy

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About this Blog:

Steve Rhode has had careers in opthalmology, real estate and as the head of a nonprofit debt counseling firm. On his blog, he offers hard-won, free advice about getting out of debt, consolidation and making the right choices as you manage your money.