3 Ways to Pay Off a Debt in Collections

To pay off a collections account, you can make a payment plan, settle the debt or pay it off in full.
Sean PylesAug 5, 2021

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Paying off a  can get debt collectors off your back and put you on the path to restoring your credit and reclaiming your finances.

Before you make a payment on a debt, first determine whether the debt is past the so you can handle it properly. If it's not, you have three main options to pay off a debt in collections:

Here’s a breakdown of each tactic to pay off a collection agency. No matter which route you take, make sure you get the agreement between you and the debt collector in writing to ensure both parties stick to the plan.

Creating a payment plan lets you set a payment schedule and amount that works for your budget.

Comb through your finances to see how much you can afford to pay each week or month, whether it's $20 or $100. Then contact the debt collector by phone or mail to propose the plan. If the collection agency agrees, it should send you a document outlining the deal. Make sure the terms of this agreement are correct before making a single payment.

This option can help you pay off the debt in a manageable way. It also can lead to the debt being marked “paid in full” on , which can offset some of the damage done by delinquent debt.

Be sure you set an amount and schedule that won't strain your budget to the breaking point. If you miss a payment, the debt collector may abandon the agreement and try to sue you for payment, which can lead to .


If you come into money through a tax refund or inheritance, or if you just , paying off the debt in full with a single payment can quickly resolve your debt collection woes.

First, make sure this fits your financial situation. Weigh the pros and cons of funneling money into wiping out debt versus the loss of money for other expenses.

Paying in full can get the debt off your back for good, but make sure you get the agreement in writing first. Keep this proof in case the payment isn’t recorded correctly or the debt somehow gets resold to another collector.

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Negotiating a settlement for a single payment of less than you originally owed can make the debt easier to pay off. You can do this yourself, even though many will try to get you to pay them for this service.

There are risks. Ramon Khan, a former debt collector in Texas who now works in online marketing, says it’s routine for debt collectors to tell a consumer that they will take a partial payment as a settlement, only to sell the remainder of the balance to another debt collecting company.

“It can put you in a vicious cycle where you still have to pay the rest of the debt, but now there’s another company that’s calling to collect the rest of it,” Khan says.

Note, too, that if you have more than $600 forgiven, the IRS can consider that taxable income. You may receive a 1099-C form that you must then report on your taxes. There are exemptions to this, so you may want to consult a tax expert.

Negotiating a settlement takes persuasion and caution. Explain to the creditor why you can't make full payment. The greater the debt — and the longer it’s been in collections — the more likely the creditor is to accept a settlement. As with any negotiation, start lower than your target. If you want to settle for 50% of what you owe, for example, try starting at 30%.

Khan advises being explicit about the terms of the settlement and getting everything in writing. You can start the conversation on the phone, but don’t make the payment until the debt collection company sends you a written agreement. It should state:

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