What happens when rent is sent to collections?

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What happens when rent is sent to collections?

When it comes to rent collection, every missed rent payment puts landlords in a tight position. You’re forced to cut into your bottom line and cover expenses out of pocket, all while hoping tenants pay their past-due balance. But if they don’t, what options do you have? TurboTenant takes a clear, realistic look at rent debt collection so you can decide your next move with confidence, not frustration.

Approaching a collection agency for unpaid rent may feel like a last resort. It’s the breaking point where your patience runs out, you’ve taken legal action, and your relationship with the tenant changes. And while this scenario is common, the rental debt collection process is often misunderstood. Many landlords have questions, such as:

What actually happens when you send rent to collections?
How does it affect the tenant?
What are your chances of getting paid?
What steps should you take before involving a collection agency?

This guide answers these questions and more. Learn everything you need to know about rent collection agencies for landlords, including when to use one, what the process looks like, legal considerations, and strategies to avoid going to collections in the first place. Let’s get started.

Rent Debt Collection Key Insights

Here’s a quick overview of what all landlords should know about taking unpaid rent to a collections agency:

Landlords can send rent to collections if tenants fail to pay after making multiple collection attempts.
Tenants can dispute the debt within 30 days of an agency’s contact.
Avoid rent collection headaches with rent collection software that provides communication tools, automated late-payment reminders, and clear financial tracking.

Let’s get into the details.

Understanding Rental Debt Collection

When tenants don’t pay their rent, landlords can contact a debt collection agency for assistance. The collection agency helps landlords recoup their losses by collecting outstanding amounts from tenants. Here’s how it works.

To prompt tenants to take action, the agency typically reports the outstanding balance to the three major credit bureaus — TransUnion, Equifax, and Experian. Then, each credit bureau sends the tenants a letter notifying them about their outstanding balance. Once a debt enters collections, credit bureaus typically keep it on a tenant’s credit report for up to seven years.

The collections process helps motivate tenants to pay their outstanding debt. If the tenant pays, most agencies deduct a commission and remit the balance to the landlord. In most cases, the fee is between 25% and 50% of the balance collected.

Keep in Mind: Under the Fair Debt Collection Practices Act (FDCPA), tenants have 30 days to dispute a debt with a collection agency. To do so, they must send a written request to the agency asking them to validate the debt (15 U.S.C. § 1692g).

When tenants request validation, you must wait until the agency verifies the debt before you can reclaim the unpaid rent. If the agency can’t verify the debt, you lose your claim to collection.

At this point, you should pursue other options, such as filing a small-claims lawsuit or negotiating a payment plan directly with the tenant.

The Rent Debt Collection Process: A Step-by-Step Guide

Because reporting a tenant’s unpaid balance requires sending an official notice, rental laws apply. Each state has its own legal guidelines.

Some states, such as Washington (Wash. Rev. Code § 59.18.170) and New York (N.Y. Real Prop. Law § 238-A(2)), mandate grace periods. Other jurisdictions have specific notice requirements when tenants fail to pay rent. Here are a few examples to illustrate just how different each state legislates the process.

California: State law requires landlords to send tenants a written three-day notice to pay or quit (Cal. Civ. Code § 1161).
Florida: Landlords must give the tenant a written three-day notice to pay or quit before taking further action (Fla. Stat. § 83.56).
Texas: Landlords must provide tenants with a three-day notice to pay or quit before escalating the matter (Tex. Prop. Code § 24.005).
Illinois: State law requires landlords to send tenants a five-day notice to pay or quit (735 Ill. Comp. Stat. 5/9-209).
Ohio: Landlords must give tenants a three-day notice to pay or vacate (Ohio Rev. Code § 5321.07).
New Jersey: State law only requires landlords to provide formal notice if the tenant is in federally subsidized housing (N.J. Stat. § 2A:18-61.1).
Washington: Landlords must give tenants a 14-day notice to pay or vacate (Wash. Rev. Code § 59.12.030).
Georgia: Landlords must give them a three-day notice to pay or quit before taking legal action (Ga. Code § 44-7-50).

Always check your local rules or speak with a trusted legal professional if you have specific questions.

Pro Tip: Landlords can use property management software to access rent debt collection tools, including digital payments and automated late fees, that comply with their state’s regulations.

While each state has its own legal requirements, the following four steps cover most aspects of a compliant rent debt collection process.

Step 1: Provide a Written Notice About Past-Due Rent

Once rent is late, your first step is to document it. Send your tenant a written notice, including:

A statement that rent is past due.
The total amount they owe.
The due date.
A summary of late fees or late payment penalties outlined in your lease.

By providing written notice, you create a paper trail. If you have to escalate the issue to eviction or collections, you’ll need detailed documentation showing that you notified the tenant.

As mentioned, remember to check your state’s law on grace periods to keep your process compliant.

Step 2: Give the Tenant a Pay or Quit Notice

If tenants fail to pay by the due date, your next step is to send them a formal pay or quit notice. The official notice gives tenants a specified period to pay the rent in full or vacate the property. You’ll need to complete this step to proceed with eviction or collections later, if needed.

As outlined above, many states have laws governing this step, so check your local regulations.

Step 3: Begin the Eviction Proceedings

If you reach the pay or quit notice deadline and the tenant still hasn’t paid, you can file for eviction through your local court system.

The eviction process doesn’t guarantee you’ll recover the unpaid rent, but it does strengthen your position if you send the debt to collections. Many agencies require proof of eviction or a court judgment before accepting rent debt.

Step 4: Contact Rent Debt Collectors

At this point, you can submit the unpaid rent to a collection agency. Agencies typically try to recover the balance by reporting it to credit bureaus.

If tenants take action to resolve the issue, they usually pay the collection agency directly. The agency forwards the funds to you, minus any fees or commission for the rent debt collection process.

What Collection Agencies Expect from Landlords

Just because you submit a rent debt for a single-family home or apartment property doesn’t mean they’ll accept it.

Today’s agencies prefer to work with landlords who provide clean, well-documented files and verifiable records. In most cases, organized, accurate accounts move faster and have higher recovery rates.

To increase your chances of reclaiming your lost funds, provide the following to the collection agency:

Digital ledgers showing rent payment records and late fees.
Timestamped notices proving you formally informed the tenant about the past-due rent.
Evidence of lease compliance showing you met all of your contractual obligations.
Supporting documentation, including the signed lease agreement, eviction documents, and court records.

Meticulous recordkeeping and cloud-based software enable the agency to perform its work quickly and efficiently.

Impact of Collections on the Tenant

No tenant wants to deal with the ramifications of having a debt sent to collections, which include:

Negative impact on credit history
Lowered credit score
Reduced loan eligibility

Beyond the financial hit, the process can impact a tenant’s rental reputation. Tenant screening reports usually list debt in collections, making it difficult for renters to qualify for their next property. The record can follow them for up to seven years, which is a long time for a renter to contend with. So, many will choose to pay it to avoid the record hanging over their heads.

Rights and Protections for Tenants

The Fair Debt Collection Practices Act (FDCPA) protects tenants by governing how rent debt collectors pursue unpaid balances. Here’s what you need to know:

Collection agencies can’t misrepresent debts, threaten debtors, or use unfair practices (15 U.S.C. § 1692e-1692f).
As mentioned, tenants have the right to dispute a debt within 30 days (15 U.S.C. § 1692g). Once tenants request verification, the agency must cease all collection efforts until the situation is verified.
Federal law prohibits all forms of harassment. Tenants have the right to request specific forms of contact (such as email or phone call), and they can pursue legal remedies if the agency doesn’t comply (15 U.S.C. § 1692c-1692k).

If tenants feel the collector is violating these federal guidelines, they can contact a lawyer.

How Tenants Can Avoid Having Rent Sent to Collections

As a tenant, you can avoid the headaches of having landlords send rent debt to collections by paying on time or communicating transparently.

If you can’t make this month’s rent payment in full, reach out to your landlord in advance. They may be willing to set up a payment plan or accept a partial amount.

Remember: If your landlord refers your debt to collections but you believe it’s invalid, contact the agency and request verification. Consider consulting a legal expert for more support.

Landlord’s Perspective: Sending Rent to Collections

In a perfect world, your tenants pay rent in full and on time every month. Most tenants have valid reasons for falling behind on their payments. And you probably don’t want to go through the rent debt collection process or pay the agency’s commission fee.

But when communications fail, and they still haven’t paid, turning to collections helps you protect your investment. It’s not personal — it’s practical, and the process can help you mitigate losses and keep your business on the right track.

This story was produced by TurboTenant and reviewed and distributed by Stacker.