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Which Types of Debt Go to Collections Most Often?

If you have debt in collections, there is good and bad news—you’re not alone.

A 2014 study from the Urban Institute found that about 77 million people had a debt in collections. The average amount owed was $5,200. The types of debt ranged from medical bills to credit cards and even parking tickets.

So what types of debt go into collections most often? And if you do have a debt in collections, how do you deal with collectors who call you?

Credit Card Debt

Some people with credit card debt just make the minimum payment, which doesn’t reduce the principal, so the debt doesn’t go away. If you fall behind because of a job loss or some other reason and stop paying the minimum payment, the bill will eventually be sent to collections. Of all the debt categories listed here, this is the only one that can sneak up on you—one purchase at a time.

Medical Bills

Medical debts are slightly different from others on this list because they usually don’t happen by choice. You choose to overspend with credit cards, but you don’t choose to have a car wreck and be hospitalized. As anyone knows, health care expenses are huge. Even with insurance, the costs can spiral out of control and leave you with big bills you have trouble paying, and those bills can end up in collections. That's why it's important to have an emergency fund.

Mortgage Payments

Trouble can happen in two forms with mortgages. The first involves the terms of the mortgage—you either borrow too much to buy an outrageous place, or you don’t have enough cash for a 20% down payment, or you take out a note for 30 years or longer. The second happens when you take out a home equity loan. That creates a second debt on your house and a second risk of defaulting on the note. Even though the mortgage company won’t start collections until you are a few months behind, it will happen if you don’t get caught up.

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Related: How to Budget for a New Home

Car Payments

Car loans are lousy because your new vehicle’s value falls quickly. If you have to sell the car for some reason, you probably won’t get enough money to cover the loan balance. That’s bad enough, but if you can’t get a loan from a credit union or small bank to pay the difference, the collectors will be looking for you.

Related: How to Buy a Used Car

Student Loans

Someone may take out a huge loan to attend a school that is too pricey or borrow extra to go to a public university and maintain a certain lifestyle. They may also see no other way to afford school but to borrow, especially if they don’t have scholarships and a part-time job won’t cover the bill. If you have trouble finding work after graduation or if you get a lower-paying job, you can’t make the payments. Things quickly go south after that.

Related: How to Pay for College Without Student Loans

How can you be prepared for collectors?

Whichever kind of debt you have in collections, the collector’s tone can differ. Occasionally they are friendly. Often they are nasty. Whatever their approach, they are all after one thing: your money.

Collectors prey on a person’s ignorance and lack of confidence. If you don’t know what’s going on, they can use bogus threats and scare you into paying. Pay what you owe, but confidently control the conversation so you don’t get abused. Here are some tips to help:

  • Be up to speed on your account status. Know what money you owe and to whom. Keep your payment records handy. Knowing the facts gives you the confidence that collectors hate.
  • Keep track of the calls and emails you get. Write down the name of the person you talk to and when they call. That makes it easier to report them if they do something to violate the federal Fair Debt Collection Practices Act. If the collector agrees to settle the debt, get it in writing or an email. Keep that document as proof in case they “forgot” they made the offer.
  • Don’t be intimidated. Explain your situation, and how you plan to pay, calmly to the caller. Do not get into a shouting match. If they curse, yell or insult you, hang up.

Related: 5 Bogus Threats From Debt Collectors

Debt troubles can make your life feel messed up. If you want to get back on track, start making a budget and attacking your debts. Doing so will eventually put you in a pretty nice group—the 242 million adults who don’t have a debt in collections.

And that’s some pretty good news.

You might have made financial mistakes in the past, but that doesn’t mean you need to put up with abuse. If you feel a collector is violating your rights in any way, visit for help.

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.

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