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Three Things to Do After You Pay a Debt Collection


Sending payment to a collection agency isn’t the end of your relationship with that debt collector. After you pay the debt collection, there are a few more things you should do to make sure the collection is completely finished.

Make sure the payment cleared your bank.

Check your bank records to be sure your payment was processed. Keep a copy of your cleared payment. If you paid with a check, get a front and back copy of the cleared check. Or, if you paid by credit or debt card, keep a copy of the bank statement showing the payment cleared. You may need this proof of payment in the future if there's ever a question about whether you actually paid the collection. For example, dishonest debt collectors may sell the debt to another collection agency or junk debt buyer who could attempt to collection from you again.

Check your credit report.

Wait a few weeks, and then check your credit report to confirm the collection is reported as paid. Use the credit report dispute process if the collection is being reported as unpaid. Send copies of your proof of payment to help support your claim.

If you negotiated a pay for delete, the collection account should be completely removed from your credit report after your payment is cleared. Contact the collection agency if this doesn't happen.

Save a copy of your settlement agreement.

Some unfortunate debtors have settled debts with collectors only to be contacted for the remaining balance by another collection agency. If you negotiate a settlement, make sure you get a signed agreement and keep a copy of it on file. Unless you negotiated a pay for delete, your credit report should be updated to show that the account was settled.

Be aware that the IRS requires you to  report any debt cancellation of $600 or more. For example, if you owed $1,000 and settled the debt for $400, then $600 was cancelled. The collection agency should send a 1099-C form that lists the cancellation amount. Be sure to give this form to your accountant or tax preparer.

Once you’ve paid a collection, hopefully that’s the last you’ll hear about that particular debt. However, there have been cases where paid collections are sold to other collection agencies. Keep proof of your payment on hand so you can easily prove the debt’s been paid.

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