The best way to start dealing with a debt collector is to understand what “debt settlement” means. Let’s say you borrow money from your friend Mary. Mary will now be known as the first debtor. Later, you know you still owe Mary, but you don’t know how much.

Then a man named Chad comes up to you and says he is getting the money you owe Mary. Chad works as a collection agency or collection agent. You’ve never met Chad before (and you don’t want him at all), why would you just give him the money he says you owe him? You probably won’t – at least not until you ask Chad a few questions.

Creditors hire debt collection agencies to collect their debts because they don’t have the time or resources to track down past due accounts. When a creditor engages a collection agency, the debt is assigned to the collection agency. If the collection agency is successful in collecting money from the account, they keep a percentage of the collection as a fee for service.

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