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When you have defaulted on a payment for a debt such as a credit card, store card, loan or utility bill, most creditors will give you a grace period of 30 days or more to pay, after which the debt will be reported to either one or all major credit bureaus -
After reporting you to credit bureaus, the creditor may still continue trying to collect the debt from you for up to 180 days. If these efforts prove futile, the debt will most likely be turned over to a recovery agency. However, some creditors may not wait up to 180 days and may pass over the debt to a recovery agency sooner.
The passing of the debt to a recovery agency can happen in two ways. First, the recovery agency can be contracted to collect the debt on behalf of the creditor. Here, the creditor still owns the debt while the agency will receive a fee or commission if it manages to recover the debt. Second, the debt can be sold to a recovery agency, meaning that the agency now owns the debt and will keep everything that is recovered. In this scenario, you no longer owe the creditor but instead owe the recovery agency.