Dealing with Debt Collectors

Getting a call from a debt collection agency can be a nerve-wracking experience. When you're nervous or scared of what they might say, it can make it even more difficult to think clearly or respond appropriately. Understanding how debt collectors operate, as well as your rights in the debt collection process, can help you prepare for interactions with them.

Here are six steps to deal with collection agencies.

1. Be Willing to Communicate

Communicating with debt collectors can make it easier to resolve your debt. This means picking up the phone when they call, calling them first, or responding to their letters. If you move, send them an updated mailing address. Being proactive, rather than ingnoring your debt, will make debt collectors more inclined to work with you. The Consumer Financial Protection Bureau has created a series of sample letters borrowers may use to communicate with debt collectors.

2. Organize Your Information

Before you decide on a course of action, you should organize every piece of information you have regarding the debt. If debt collectors try to collect a debt that isn't yours, you'll want to have the correct information and correspondence to dispute it.

3. Know Your Rights

The Fair Debt Collection Practices Act established a set of guidelines that dictates what debt collectors are and aren't allowed to do. Debt collection agencies aren't allowed to harass you, your family, or your employer. They may threaten to call your boss, but they can only verify employment. They can't publish your debt publicly or repossess belongings unrelated to the debt. Knowing your rights should instill you with the confidence you need to effectively navigate your interactions with these companies.

4. Know the Statute of Limitations

One of the most common mistakes you can make is paying a debt that is already past its statute of limitations, which is often 3–10 years after the last payment, depending on your state. Once the statute has exceeded its limit, you're under no legal obligation to pay your debt.

5. Go to Court

If a debt collector sues you, it's vital that you respond immediately to the court summons. Many people lose lawsuits to debt collectors because they don't take the time to respond or show up at court. Once the matter has been taken to court, consumers can face wage garnishments, property liens, and more. There are consumer agencies and groups designed to help borrowers during this time so they don't have to go to court alone.

6. Settle the Debt

If you wish to settle the debt, you can try offering the debt collector a sum that is lower than the original debt. Debt collectors are usually willing to negotiate since they bought the debt for much lower than its original value. They might also be willing to set up a payment plan so you don't have to pay the full amount right away. Just make sure you know whether there is interest on the debt before you agree to any payment plan.

Once you've come to an agreement with a debt collector, ask for the settlement amount or payment plan in writing and make copies of any paperwork they send you. Debts sent to collections will fall off a credit report after seven years, but consumers may have to call credit bureaus directly and ask them to remove the accounts manually.