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Can I Pay My Original Creditor Instead of a Debt Collection Agency?

Hannah Locklear | December 07, 2023

Summary: You can pay off a debt to the original creditor if they haven’t sold the account to a debt collection agency yet. There is a chance the debt may have been transferred to collections, but that doesn’t mean it’s too late to reach out to your creditor and settle the debt once and for all. SoloSettle can help you settle a debt when you feel in over your head.

Sometimes, despite our best intentions, a situation spirals out of control. That's especially true when it comes to repaying loans. You never meant to get behind on your payments. Now, debt collectors are hounding you night and day for money. But can you even pay your original creditor instead of a debt collection agency?

Navigating the world of debt collection alone can be difficult. Debt collectors operate by a set of rules that the average person knows nothing about. Let's discover whether you should pay your debt collector or if you can pay your original creditor instead.

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Can I pay my original creditor instead of a debt collection agency?

They say that money makes the world go ‘round. That paradigm holds especially true in the US where our economy essentially runs on debt. As of 2022, about $15.84 trillion of consumer debt exists in the US. The average American uses debt to buy cars, homes, and even groceries.

Given those numbers, it's not surprising that at least 1 in 3 Americans have a debt in collections. So don't be ashamed. You're not alone.

Debt passes into collections after the borrower misses a few payments. The lender may not have the ability to track the borrower down or they may view it as a waste of money.

To recoup some of their losses, the original lender has two options. First, they can pay a third-party agency to collect the debt for them. Or they can sell the debt outright. Either way, the original lender no longer controls the debt.

If your debt passes into collections, you may face some serious consequences. It'll wreak havoc on your credit score. Collectors will harass you constantly, demanding money that you don't have. Finally, if a debt languishes unpaid for too long, the collector may sue you to recover it.

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Even if a debt has passed into collections, you may still be able to pay your original creditor instead of the agency. Contact the creditor's customer service department. You may be able to explain your situation and negotiate a payment plan. The creditor can reclaim the debt from the collector and you can work with them directly.

However, there's no law requiring the original creditor to accept your proposal. Your best bet is to contact them as quickly as possible. Creditors are most willing to work with you before expenses begin piling up, usually within six months of passing your debt to a collector.

Note that the original creditor can remove the debt from collections if you pay it off, either in full or partially.

If a creditor sells a debt, are you obligated to pay?

Unfortunately, you're still obligated to pay a debt even if the original creditor sells it to a collection agency. As long as you legally consented to repay your loan in the first place, it doesn't matter who owns it.

You may be able to pay less than you actually owe, though. Remember, the original creditor is simply trying to cut their losses and extract some money from the debt. As a result, original creditors are generally more open to negotiations than collection agencies.

That means you have a bargaining chip. Since the original creditor is just trying to get something from your debt, you may be able to pay off your debt for less than you actually owe. Payments can often be made either in one large sum or smaller monthly installations.

But before you pay the original creditor, make sure they still have the rights to the debt. If they sold your debt to a collector outright, this won't be an option for you. Instead, you'll have to deal directly with the collector.

So, if you find yourself asking, “Can I settle a debt with the original creditor?” — the answer is yes!

Now, let’s break down an example.

Example: Lauren has fallen seriously behind on her credit card payments. She is $3,000 in debt, and after a few months of missed payments, the creditor sends her account to collections. When the debt collectors start calling, Lauren knows she needs to act. Unfortunately, she can’t afford to pay off the full debt right now, so she reaches out to her creditor to explain her situation. Luckily, the creditor still owns the debt and is willing to negotiate a debt settlement. Lauren uses SoloSettle to send an offer and start negotiations. After a few rounds of offers and counteroffers, they reach a settlement agreement of 70% of the debt amount, or $2,100 to be paid in a lump-sum payment before a specific deadline.


Check out this video to learn more about how to settle a debt:

Should I pay a debt collection agency?

If the original creditor has sold your debt outright, you have some choices to make. You may have heard that you should never pay a collection agency. The truth is a little more complex than that.

When to not pay a debt collection agency

If your debt has passed into collections, it'll put a hefty ding in your credit score. But paying it off may not fix that. Paying a debt collection agency may do more harm than good to your credit score.

That's because actually paying your debt will lower your credit score. You heard that right. You can get punished for trying to pay what you owe. Luckily, there's a loophole.

Your credit report isn't a permanent record. Events that affect your credit score—from debt collections to bankruptcy—disappear from your credit report after seven years.

As a result, if your debt has been in collections for nearly seven years, you may want to avoid paying it. Once you pass that seven-year mark, your credit report will be clear.

When to consider paying the debt collection agency

Sometimes, it's best to play the game. If you have the money and your debt just recently went to collections, you may want to pay it and get on with your life.

You shouldn't just roll over and pay, though. Contact the collection agency and ask them to write you a letter discharging the debt in return for payment. Then, have them send this debt to a credit reporting agency. This is the best way to get past a debt collection agency with your credit relatively unscathed.

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Paying your debt will also eliminate the possibility of a lawsuit. If you thought the penalty to your credit was bad, a lawsuit is infinitely worse. Lawsuits involve court appearances and piles of paperwork. If the collector wins, they have a variety of options available to recover their money. They can even take money directly out of your paycheck!

Let’s look at another example.

Example: Derek is being sued by a debt collector for a credit card debt that he failed to pay off. After almost a year of missed payments, the credit card company sold the debt account to the collection agency, and when Derek failed to respond to the debt collectors’ calls, they filed suit against him. Not sure what to do, Derek used SoloSuit to draft and file an Answer to the lawsuit. This helped him avoid losing automatically by a default judgment and gave him time to set up a payment plan with the collection agency. The case got dismissed, and Derek was able to pay off the debt over a period of time.


Is it better to pay the original creditor or collection agency?

The answer is yes—and no.

It really depends on your financial situation. If the original creditor hasn’t sold your debt to a collection agency yet, they may be willing to work with you and restructure the debt so you can afford to pay it off. This may look like a lump-sum payment or a monthly payment arrangement, depending on your circumstances.

If the debt has already been sold to a collection agency, do not pay the original creditor. They no longer have ownership of the debt, so paying them would not satisfy your new obligations to the collectors.

If your debt recently entered collections, you probably have a lot of emotions. You may be stressed, confused, and unsure of how to proceed. Stop and take a deep breath. Try to negotiate with your original creditor. If that's not possible, try to settle things with the collector. Above all, remember to keep your chin up. You'll get through this!

What is SoloSuit?

SoloSuit makes it easy to fight debt collectors.

You can use SoloSuit to respond to a debt lawsuit, to send letters to collectors, and even to settle a debt.

SoloSuit's Answer service is a step-by-step web-app that asks you all the necessary questions to complete your Answer. Upon completion, we'll have an attorney review your document and we'll file it for you.

>>Read the FastCompany article: Debt Lawsuits Are Complicated: This Website Makes Them Simpler To Navigate

>>Read the NPR story on SoloSuit. (We can help you in all 50 states.)

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