Lisa Whitley — Whether because of an event that was outside of your control, or perhaps just a series of unwise decisions, you may find yourself dealing with debt collectors.

First, breathe.

Having debt handed over to a collection agency is undeniably a stressful situation and as we know, we do not always make the best decisions when we are feeling pressured or even frightened. Reclaim your equilibrium by understanding your rights and taking proactive action.

As a start, you will want to be very sure that the company that is contacting you is legitimate. The Consumer Financial Protection Bureau has an excellent resource that details the steps to take to when contacted by a debt collector.

Do not give personal or financial information to any caller until you have verified that they are legitimate. 

Do you even owe this money? Laws vary by state and type of debt, but in short, after a period of years some debts become uncollectable; this is sometimes referred to as “time-barred” debt. This means that you no longer have the legal obligation to repay the debt. You cannot be taken to court and compelled to pay. However, this does not mean that a debt collector cannot ask you to repay it, nor does it mean that you may not want to resolve the debt. If you are being contacted about a very old debt, the first question to the debt collection company should be “Is this debt legally collectable?” They are obligated to tell you. At that point, you will have to decide how you want to proceed.

Under the Fair Debt Collection Practices Act (FDCPA), collection agencies cannot harass you in all manner of ways. They cannot call you in the dead of night, hound you at work, use threats or obscenities, or make false statements about the debt you owe. You do have power. You can stop a debt collector from contacting you by phone by sending a “cease letter.” Federal law requires that collectors end contact with you after receiving such a letter, except to inform you of a specific action such as a lawsuit. If you have been treated inappropriately by a bill collector, report the company to relevant authorities (such as your state Attorney General) as well as the original creditor. You can learn more about your rights under the FDCPA here.

You should also understand that typically a debt collection agency buys your debt from the creditor for pennies on the dollar. That is, while you may owe $5000, the debt collector will still make a profit by collecting far less than that amount from you. If you have the financial ability to make an immediate payment, you can be aggressive in negotiating to settle the debt for a lesser amount. (Penalties and fees will likely still need to be paid.) To be clear, debt settlement is not without consequence; it will be recorded as such on your credit report and this will negatively impact your credit score. There may be tax consequences as well, as the difference between the amount that you paid and the original amount owed is considered income.

Finally, you may find it helpful to approach your engagement with a debt collection agency as a purely business transaction; that is certainly how they are viewing it. Try to take your emotion out of the conversation. In the heat of the moment, do not agree to terms that you cannot meet just to get off the phone. Understand that while you do have a responsibility for this debt, you also have rights that must be respected and leverage to negotiate an outcome that works for you.

 

 

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