Have you ever found yourself in this scenario?
A third-party debt collector calls and alerts you to a bill that’s been handed over to them. You might already be aware of the bill’s delinquency, or it might be news to you. Perhaps it’s:
- A bill, however small, that was forgotten or missed and it’s now been sent to collections.
- A one-time expense like a trip to the hospital that wasn’t covered by your insurance. The amount is enormous and it overwhelmed your budget so much that you are just unable to pay it off.
These situations aren’t always a sign of poor financial management, as they happen to the frugal and financially responsible too. There are two extreme responses to this situation: people who fight debt collectors tooth and nail regardless of whether they owe the money, and people who cave to manipulative collection tactics and end up in even worse financial straits. The keys to dealing with legitimate debt collection lie between these two, though.
Key #1: Know Your Rights
Key #1: Know Your RightsJust because a debt is legitimate doesn’t mean you’re at the mercy of a collector’s shady efforts to retrieve payment and collect a commission. The Fair Debt Collection Practices Act provides federal guidelines for what debt collectors can and can’t do to get paid. Familiarize yourself with its important points, including:
- Restrictions on when and how a debt collector can contact you.
- Who they’re allowed to talk to, and what they can and can’t say.
- Your right to a written statement within 5 days of contact, and another 30 days to request written proof of the original creditor and debt amount.
If you need further help understanding the act’s implications for your situation, contact a consumer law or bankruptcy attorney.
Secondly, become familiar with your state’s statute of limitations — the period of time in which debt collectors are legally allowed to sue, garnish your wages, or place a lien on your bank account. The length of time can range from 3 to 15 years, so it’s best to look up the details for your state if you get the dreaded collections call.
Key #2: Don’t Get Emotional
Even when they’re using legal tactics, debt collectors are skilled at making honest people feel guilty. Getting calls or letters about a delinquent debt is stressful and might make you panic and agree to compromise your finances just to make the issue go away. On the other hand, the feeling of being attacked might anger you and lead to rash behavior. Remember that this is just a business transaction. The more calm and professional you are throughout the process, the easier it will be resolved to your advantage. Keep conversations brief and to the point — you’ll be less likely to get emotional and you’ll likely give collectors less leverage.
Key #3: Take Control
Many people find that taking the initiative to call the collection agency helps them feel calm and in control of the situation. This also throws collectors, who aren’t used to people willingly confronting their responsibilities, off their game. In other words, they’re more likely to cut the crap and negotiate fairly.
Key #4: Always Negotiate
…no matter how hopeless it looks. You’re not just depending on a collector’s generosity. You’re appealing to their bottom line. The truth is that taking you to court is a last resort because it means forfeiting their commission. Any money they can collect from you is better than nothing. Financial experts recommend starting out by offering to pay 10 to 15% of the total amount. In the end, you’ll probably pay between 30 to 50%, but that’s way better than 100%! In your written statement, get the collector to agree they won’t just pass the debt on to another collector. And don’t forget that you’ll owe taxes on any forgiven debt.
Another option is to ask for “payment for deletion.” This means you agree to pay the entire amount in exchange for the blemish being wiped from your credit report. It might sound shady, but it’s a valid and legal negotiation to request.
These four keys can help you get rid of debt collectors the right way and end up in a better financial situation. At the same time, you’ll satisfy your conscience by dealing honestly with your financial responsibilities.