What Happens in Default?

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Asset Recovery Associates
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Specializing in consumer debt management, Asset Recovery Associates builds relationships with diverse groups like multinational banks and local stores. A common type of debt that Asset Recovery Associates handles is credit card debt, which often ends up in default due to an accident or financial setback.

When credit card debt goes into default after 180 days of nonpayment, most companies that own the debt write it off as a loss and move on. This debt is then sold to an agency that specializes in debt collection, which can contact the debtor and request payment. Defaulted debt also ends up on the debtor’s credit report, which usually brings the debtor’s credit score down drastically.

Debtors have several options for working with a collections agency and should generally try to work out some type of payment arrangement rather than avoiding repayment altogether. Ignoring debts can often lead to legal battles and wage garnishment. Paying off the debt in whole is often the best option, provided the debtor can afford it. Some debtors instead choose to work with the collections agency to settle the debt, paying a portion in exchange for discharging the remainder of the debt. Filling for bankruptcy also can provide debtors with some protections from agencies that collect on debt.