Dealing with Debt Collectors
6 Tips When Dealing with Debt Collectors
In today’s world, many individuals are having trouble paying their bills and are dealing with stress and anxiety. Many others are just simply overwhelmed with the entire situation and don’t know where to turn. If you’re in this stressful situation, don’t despair. Just because your unpaid debt has been turned over to debt collectors, you still have some measure of control.
Who are these debt collectors?
A debt collector is usually some third-party organization who is paid to collect debt on behalf of a creditor. The amount they get paid is based on how much money they can squeeze out of you.
By and large, they are trained and follow the guidelines of The Fair Debt Collection Practices Act (FDCPA). Be warned, however, that there are still some that are shady and may even try to collect a debt from you that isn’t yours.
The following tips will help you to maintain some control of the situation, and hopefully help you to get back on your feet. The next time you need to apply for a mortgage or maybe a new credit card, your credit score will have improved.
Be absolutely certain it’s your debt
The first and most important tip is to make absolutely sure the debt collectors are trying to collect a debt that you signed for. You need to ask for written verification so that you can be sure its yours. Under the FDCPA requirements, the collector must prove that they have your correct name, social security number, and your address. They also must show you evidence that you actually signed for the debt.
Get everything in writing from the start
No matter how nice the collector may be on the phone, or how many promises he makes, it’s meaningless. You must have all communication in writing. If you happen to get a telephone call from a creditor, ask for their current address and advise them that all communication must be by mail.
Read everything carefully
When you do get a letter from the collector, follow the tip above, and make sure that the debt is yours. Read carefully and see if the creditor reported the debt to the three major credit bureaus. You should also order free copies of your credit report to verify for yourself that your debt has not been added. You can order these free reports by clicking on this link annualcreditreport.com.
If your bad debt wasn’t reported to the credit bureaus, you have some options to negotiate. If you’re able to repay the balance of the debt in full, make that offer and request in writing that the collector agrees not to report the debt to the credit bureaus.
However, if the creditor has already reported the debt to the credit bureaus, then you need to use another tactic. In any event though, if the debt was reported and has been on your credit report for a year or more, DO NOT make any type of partial payment.
Negative information remains on your credit report for seven years and if you make a partial payment, the clock restarts for seven years again. You need to make up your mind that serious negotiation may have to be made. By that, we mean that you need to take a hard look at your financial situation,
Decide how much you are able to offer for either a lump sum payment, or maybe in six monthly payments. Sometimes an offer that is 60% or higher of the total balance is acceptable. In return for your offer, the collector must agree in writing to remove the collection from your credit reports.
At this point, the collector has to decide if it’s worthwhile to pursue collection through the courts. That involves additional cost and doesn’t always bring in any more money. The collector’s job is to get as much money as possible and going to court isn’t always the most beneficial avenue.
Don’t be afraid to ask for help
If you don’t feel that you are able to deal with debt collectors, for whatever reason, we highly recommend that you get help from a non-profit credit counselling service. They can guide you through this process of resolving the debt. They can also represent you in negotiating with creditors, and work with you in developing a plan to get your finances in proper order.
Stay cool, calm and collected
The Urban Institute conducted a study that indicated about 29% of US citizens have debt in collection. So don’t think you’re alone in having financial problems. When dealing with debt collectors, always remember to not lose your cool. A collector is allowed to make certain threats, and sometimes may use intimidation. The successful ones have their own proven method that they use to make people pay.
No matter what they say or what their letter says, you are in charge of how you respond. Think carefully before you act and don’t let them get you all worked up. It won’t help your case in any way.
The following four things may help you through your current financial problem:
- There are millions of Americans having this same problem. You are not the only one.
- If dealing with a debt collector is overwhelming for you, then contact a non-profit counselling service for help.
- Debt collections usually take a big hit on your credit score, but it won’t last forever. You can rebuild your credit score!
- This is called the school of hard knocks – good or bad, you’ll learn from it and become wiser.
Unfortunately, in the current US credit system, debt collectors are considered a necessary evil. As we mentioned earlier, some of them resort to tactics that may be predatory, or even illegal.
Never go into this process blindly. If you do, the collection agency will have the upper hand, and will dictate what you must do. Educate yourself by knowing what your rights are, and what reputable debt collectors are allowed to do, and what they can’t do. This will usually open the door for negotiation.
An accountant and tax preparer by profession, Gust’s true passion lies in his company blog titled “HBS Financial Group, Ltd.”. Through this venue, he not only tries to teach individuals about budgeting, money management, and taxation but he writes the majority of the articles as well.