Delinquent on Debt? Here's What It Means and How to Get Out

Delinquent on Debt? Here's What It Means and How to Get Out

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Do you jump out of your skin every time the phone rings? Do the words “student loans” or “car payment” strike fear into your heart? It sounds like you might be struggling with debt.

Having an unmanageable amount of debt is something no one wants to face. No one is immune to being delinquent on debt. The high costs of student loans, homes and other life expenses can be difficult to manage. For debt to be considered delinquent, you have to have missed a payment. The process happens quickly, debt is considered delinquent the day after you’ve missed your first payment.

But debt is common among Americans. According to a study from Northwestern Mutual, the average American has about $38,000 in personal debt. And as of 2018, all household debt totaled $13.54 trillion, according to the Center for Microeconomic Data.

If you’re delinquent on debt or feel you are at risk of becoming delinquent on debt, here is what you need to know.

Debt delinquency: A timeline

Debt is considered delinquent the day after you miss a payment. Be careful not to confuse delinquency with defaulting. A default occurs when the borrower does not pay back their debt according to the initial agreement they had with their lender. Generally, that means successive payments have been missed over an extended period of time. Most lenders or loan providers make allowances and provide opportunities for borrowers to make up for missed payments before they are penalized. That time period that occurs between the first missed payment and going into default is considered delinquency.

According to Nancy Bistritz-Balkan, vice president, Communications & Consumer Education of Equifax in Atlanta, the first thing you should when you have a delinquent account is contact your creditor or lender. But what if you don't have the income to make full payments? Bistritz-Balkan advised to explain your circumstances to your lender. Depending on the situation, it may be possible for the lender to make special concessions, accommodations or arrangements.

If you do not make arrangements to pay off your delinquent account, the following timeline of events is likely to unfold:

1 to 30 days past due: First missed payment

Your lender will work with you to try to receive payment. While you may be charged a late fee, now is the time to ask your lender for help if you need it.

30 to 90 days past due: Collection calls begin; impact on credit score and credit report

During this period, the lender will attempt to collect the money you owe. You will be charged late fees. At 60 days, you will likely see your credit score begin to drop. Once you’ve missed two payment cycles, creditors can flag you in their systems as a high-risk borrower which may cause your interest rates to raise.

90 to 120 days past due: Creditor requests full balance owed

Now is when the creditor turns the collection over to its internal recovery department who will attempt to collect your payment. The creditor will request a payment of the balance in full for the debt.

120 to 180 days past due: Debt collection from third-party agency may begin

After payment is 120 days past due, it may be sent to a third-party debt collection agency. The collection agency will then attempt to contact you and collect on the debt.

How your credit score is affected

If you’ve fallen behind on your debts, like a credit card payment, your credit score may be affected. But not at first. After you missed your first payment, your debt is considered delinquent. The first 30 days after missing a payment are more likely to incur a late fee than affect your credit score. During the first 30 days, the company will remind you of your overdue payment and will be more likely to help you with an extension or new payment plan.

After 30 days of being delinquent on debt, you’ll see your credit score begin to drop. Once your debt is 120 days past due, keep an eye on your credit report carefully, because at that point it is likely that the debt will be sent to a third-party collection agency.

Your scores will recover over time once your delinquent account is brought up to speed again and you make all your payments on time going forward. Your credit history will eventually stabilize.

How to deal with debt collectors

If you can’t pay a debt that is in collections, then you may be contacted by the debt collector until you do. However, there are laws that protect you against harassment by debt collectors, such as when and even if they can contact you at all.

Bruce McClary, vice president of Public Relations and Communications at the National Foundation for Credit Counseling in Washington D.C. understands consumers’ frustrations with being contacted repeatedly.

“The first instinct is to do something to make it stop,” McClary says. But he advises against closing off all contact with debt collectors. “But the problem that creates is that you’re cutting off the flow of communication and the collection agency or creditor is going to be doing things without you knowing what their next steps are,” McClary warns.

He recommends keeping a channel of communication open just for the purpose of knowing what the debt collector is up to. “You don’t have to shut it all can request that they limit their communication to a certain channel,” says McClary.

If you don’t pay debt collectors, you do run the risk of being sued by the collector. There is no guarantee a collector will sue you for the money you owe and they have a limited amount of years in which they can do so. Every state has a statute of limitations on how many years a collector can sue for debt. After the statute of limitations expires, legally a lender can’t take action any longer.

Getting out of debt when you’re delinquent

In an ideal world, it would be simple to make more money or spend less until you pay off your debt, but life isn’t that simple. Here are a few ways you can work toward getting out of debt.

Create a budget to make room for debt repayment: If you have delinquent debt, you’ll want to create a monthly budget that not only covers your living expenses, but debt repayment too. If you don’t have a budget, start by reviewing all of your monthly expenses (bills, food, transportation) and see how much money you’d have left each month after paying those expenses. If your budget allows room for it, calculate how much you can afford to put toward your debt each month.

When your debt is in delinquency, the more you can afford to put toward paying off the debt, the better. When creating your budget, see where you can cut back on spending to avoid building more debt in the future.

Consider working with a credit counseling agency: Credit counseling agencies — if they are reputable — can give you advice on managing your debt. They may offer educational resources, help you learn to budget or create a repayment plan for your debt.

To find a credit counselor that you can trust, you should only consider nonprofits with low fees. Many of whom will offer services through local offices or even online or over the phone. You may be able to find non-profit credit counseling programs through:

  • Credit unions
  • Universities
  • Military bases
  • U.S. Cooperative Extension Service branches

Research debt consolidation loans: You may be able to lower your monthly debt payments by taking out a debt consolidation loan. By taking out new debt, you can combine your old debts into one, preferably with a lower interest rate. If you’re struggling with high monthly payments, you could choose a longer repayment term on a consolidation loan in order to lower your monthly payments.

You can consolidate debt with a few different loan products, such as:

  • Personal loan
  • Home equity line of credit
  • Balance transfer credit card: Consider transferring your debt to a credit card with a promotional 0% APR. Usually balance transfers offer promotional rates for a limited time period. Do be cautious. If you don’t pay off the balances you transferred before that promotional period ends, you will be faced with a higher interest rate to pay.
Be cautious when taking out consolidation loans that require your home as collateral. If you end up not being able to make your loan payments you are at risk of losing your home. You should also be aware that if you’re already delinquent on debt, you may struggle to qualify for a low interest rate loan. This can mean that a consolidation loan may cost too much in interest in the end to make it a worthwhile option.

What about debt settlement?

If you’ve been contacted by a debt collector and you can afford to pay off the debt, you might be able to negotiate a debt settlement with the collector.

To prepare to negotiate a settlement or repayment agreement with a debt collector, you should consider the following steps:

1. Learn about your debt: By law, any debt collector you’re contacted by, in regards to your debt, must supply you with certain information. They must provide the following information either when they first contact you or in writing within five days after contacting you:

  • The name of the creditor
  • The amount owed on the debt
  • Information about how you have the right to dispute the debt or request the name and address of the original creditor

2. Plan a repayment or settlement proposal: Now is the time to sit down and do the math regarding your repayment or settlement options.

  • How much can you afford to pay each month towards your debt without causing more financial issues?
  • Look at your monthly take-home pay and your month expenses. Leave room in your budget for unexpected expenses.
  • Determine how much you are willing to pay to settle the debt, either in one lump sum or in a payment plan. You shouldn’t pay more than you can comfortably afford.

3. Negotiate with the debt collector: Debt collectors are usually more flexible when it comes to settling debt than the original creditor may have been.

  • Try negotiating before paying the original amount owed for the debt. When you talk to the debt collector, explain your financial situation.
  • Record your agreement to make sure that nothing in your conversation with a collector gets lost in translation. That way you’ll have proof of the new repayment or settlement plan or any other promises made by the collector.

A word of caution on debt settlement: Be cautious if working with any companies that promise to settle your debt for you with a collector. Especially ones who charge money in advance to settle your debts for you. Some of these companies promise more than they can deliver and creditors may refuse to work with a settlement company.

McClary strongly advises caution when working with a for-profit debt settlement company. “The worst thing you can do is to fall into the hands of some of these for-profit debt settlement companies that are offering some really really bad advice,” says McClary.

If the settlement company you’re working with can’t come to an agreement to settle your debts, the time they spent trying to negotiate on your behalf may result in you owing more money in late fees or interest. While a company is negotiating your debt settlement, you still have to make your payments.

If a debt settlement program encourages you to stop sending payments directly to your creditor, they are required to tell you that your actions may have a negative impact on your credit report or result in penalties. You would also be at risk of being sued for repayment.

Even if they are negotiating a settlement on your behalf, these rules and penalties can still affect you. At the end of your settlement, any savings you get from using a debt settlement program may be considered taxable income.


Having delinquent debt is challenging, but one of the best things you can do is face your debt head on. Being honest with your lenders and communicating with collectors can go a long way towards helping you manage your debt.

Jacqueline DeMarco is a writer and editor based in Southern California. She has written on everything from finance to travel for publications including The Everygirl, Apartment Therapy, and LearnVest, among others. She shares all of her work on her personal website

The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.