You owe money, you’re late on your credit card payments, and you feel like you’re walking around with a permanent stress-induced headache. What’s more, you have debt collectors calling you about the unpaid credit card debt, past-due student loans, and medical bills. It’s enough to make anyone spiral into an anxiety-filled black hole.
How does someone even begin to deal with the debt collectors – especially when they seem to be ever-present, following you around like a shadow? Our first piece of advice is to avoid debt collectors all-together. If you know that you’re making your way into troubled waters with your debt, it’s best to try to work out a deal with the original creditor before letting a third-party get involved.
Below are some tips to help you navigate these murky waters.
First Off, What Are the Types of Debt Collectors?
To understand how to deal with debt collectors, you must first know the different kinds that exist. Here are the types of debt collectors you may deal with:
- Internal Debt Collectors:
- These are the collectors that work for the company you owe money to.
- They don’t collect debts from others.
- These “first-party” debt collectors do not follow the same rules as others.
- Working your debt out with them can prevent your debt from being given to the credit bureaus, which would ultimately hurt your credit score.
- Collection Agency:
- A collection agency gets involved when your lender cannot work a deal out with you.
- Collection agencies charge the lenders a fee to collect any unpaid debts.
- Collection agencies will be relentless when it comes to collecting your money because they get paid based on the amount of money they collect.
- Collection agencies have to follow stricter rules when it comes to collecting money from you.
- Debt Buyers:
- Lenders that have failed to collect a debt will cut their losses and sell the debt to a debt buyer.
- Debts are bought up for pennies on the dollar.
- A little amount is paid because they know that they will not be able to collect most of the debts that they purchase.
Now that we’ve delved into the different kinds of debt collectors, let’s review how to deal with debt collectors.
The Seven Steps for How to Handle Debt Collections
It’s Important to Know Your Rights
In the midst of your panic, you may not realize that just because you owe a debt, does not mean you don’t have rights. The Fair Debt Collection Practices Act provides a detailed outline of your rights, including how a debt collector can and cannot interact with you. No matter what, harassing phone calls and threats, as well as abusive language, are all considered illegal.
What can a debt collector do? They can:
- Reach out to you at your home. They must clearly state that they are a debt collector.
- A debt collector can charge you interest.
- Unfortunately, they can take you to court.
- They can seek payment for any old debts that you may have long forgotten about.
What can a debt collector not do? They cannot:
- Debt collectors cannot keep you in the dark.
- They cannot simply contact you anywhere or anytime.
- Debt collectors actually cannot keep contacting you if you wrote to them telling them to stop. Don’t be harassed by debt collectors!
- They also cannot pester relatives of yours.
- A debt collector cannot pretend to be someone else.
Don’t Ignore Debt Collectors
When you do not have the financial means to pay back owed funds, it may seem easier to simply bury your head in the sand and ignore the calls and letters altogether. This is not something that is going to go away simply because you don’t want it to be real. By law, the consumer is allowed to send a written request for debt verification within thirty days of a debt collector contacting them.
If you continue to ignore them, debt collectors can provide negative intel to consumer credit reporting companies, like Experian or Equifax, which can remain on your credit report for up to seven years.
Know the Facts
You want to be well-informed, that’s how you avoid being taken advantage of.
Here are some facts you should be aware of:
- The original creditor may sell your debt to a third party and then resell the debt again. When this happens, errors can occur.
- Not that you will be shocked by this next statement, but debt collection practices are actually the largest source of complaints to the Consumer Financial Protection Bureau. What is one of the biggest reasons? Being asked to pay debts that person doesn’t actually owe.
- If you do not receive a validation letter within five business days of first being contacted by a debt collector, request one.
Don’t Let Them Pressure You
It’s easy to feel intimidated by debt collectors. You virtually think it’s the end of the world. Just because you owe money, does not mean you should succumb to the pressure.
- Don’t rush to make a payment just because a debt collector contacts you.
- You need to take time to think about your options before you jump into a contract.
- When speaking with a debt collector, do not pay or promise to pay at that time. Also, do not give payment information to them.
- If you make a single payment, that is enough to get you in trouble with a debt collector.
Have a Written Agreement
Do not do anything before having everything confirmed in writing. Furthermore, have a representative of the debt collector sign said contract before any payments are made. You want to avoid misunderstandings.
Communicate via Certified Mail
It is suggested that any correspondence that you have with a debt collector be done by certified mail. It is even suggested that you request a return receipt so that you have proof that your letter was actually received. You don’t want anything that can be used against you. Remember the point we made before – you have rights.
Look into Hiring a Debt Management Company
As you approach this journey of dealing with a debt collector, you should consider finding an accredited counseling agency. This agency will work out a payment plan for your budget that does not have you scraping by and unable to put food on your table due to debt.
We know that no one wants to deal with debt collectors. It’s not a fun time and it’s a source of immense stress. It’s easy to simply advise not to go into debt. But we know with rising medical costs, ungodly student loans, and credit card costs that were needed at the time of emergencies get in the way. If you find yourself in a situation dealing with debt collectors, there is a light at the end of the tunnel.
You can get back on your feet, you just have to take it one step at a time.