Consumer Comeback Blog

Important Advice for Handling Debt in Collections

Written by Jeffrey Trull

on-phone-debt-collectionLanding in debt collection can be bad news for both your credit as well as your stress level. Debt collectors are known for repeated phone calls and their relentless pursuit to get you to pay.

Don’t let debt collectors get the upper hand and intimidate you into paying off your debt in full right away. You have rights plus the ability to bargain with them. Here’s what you can do to handle debt that’s ended up in collections.

Don’t ignore the phone calls

Ignoring the calls of debt collectors won’t help your situation and could actually make problems worse.

First off, collectors will likely keep calling and sending notices. They know you don’t like hearing from them, but they’re prepared to do what it takes to collect the money you owe. This is their profession, and dealing with difficult debtors means they’ll resort to more aggressive tactics.

If you’re still adamant about letting the calls go to voicemail, you may soon receive a notice to appear in court. Debt collectors have the legal right to sue you, and if you don’t pay up, you might find yourself in front of a judge. If it’s determined you owe money, your bank account or wages could be garnished with a court order.

Instead, take their call and hear them out, even if it’s just one time. It’s helpful to find out what claim they are making and work towards a resolution, whatever that may be.

Contest the debt

In almost all cases, you can and probably should contest the debt and request that the collector provide you with written verification that the debt is legit and. The reason: why trust the word of a debt collector? This way you know you’re not somehow being scammed into paying debt that you don’t actually owe.

Just be aware: to truly contest the debt and have the collector complete the verification, you must make your request in writing. When you do this, the debt collection process is stopped until you’re sent written verification that you do owe this money.

Keep collectors in check

Just because debt collectors keep calling doesn’t mean they can walk all over you. You have rights under the Fair Debt Collection Practices Act, which defines what debt collectors can’t do and prevents them from lying to you or making threats if you don’t pay the debt.

If debt collectors cross the line and break the law, you have right to recourse by filing a complaint with the Federal Trade Commission. You may also be entitled to damages in court.

Demand collectors cease and desist

If you’re sick of getting calls from the debt collector, the solution is simple: send the collector a cease and desist letter. Use a template like this one for your letter.

This basically tells the debt collector to stop contacting you about the debt they say they owe you. After that, the debt collection agency can contact you once more by mail to let you know if they plan to pursue the case further by taking you to court.

Negotiate to save your credit and money

If you know you owe the debt, that doesn’t mean you just have to pay the full amount you owe. Debt collectors often buy your debt at a fraction of the balance you owe, so you shouldn’t feel obligated or eager to pay them. Because of this, some debt collectors are willing to negotiate with you to get you to pay even a portion of what you really owe.

There are two terms that you want to negotiate: the amount of debt you’re repaying and how the debt appears on your credit report.

The most ideal solution is to negotiate your debt down to a lower amount than what you owe and have the entire record deleted off your credit report by the collection agency. Having a debt collection appear on your credit can be troublesome for any loan application or other event, like renting an apartment, that requires a credit check.

Sometimes you won’t be able to negotiate for both a discount on your debt and leniency with your credit. If the collector won’t budge, you’ll at least want “paid in full” or “paid and settled” to appear on your credit report next to this incident. But beware since these remarks aren’t as good as removing the record altogether as they’ll stay on your credit report for seven years.

Get everything in writing

No matter what you negotiate and agree to, make sure to get it all in writing with the debt collector before you pay anything. It’s important to understand exactly the terms of your agreement and have a written record in place. Agreeing over the phone gives debt collectors the ability to alter the deal if you can’t come up with evidence otherwise.

Consider help

Don’t forget: you don’t have to deal with debt alone. Debt consolidation and management options are available and may be helpful for dealing with debt collectors, too. Consider contacting a credit counselor to find out more and get personalized advice when dealing with debt collectors and your other debt issues.