4 Keys to Dealing with (Legitimate) Debt Collectors

by Jessica Sommerfield · 7 comments

debt collectorsHave 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

Just 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.

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{ read the comments below or add one }

  • RyanG says:

    Glad to know “payment for deletion” is an option. It is especially useful for financially responsible people who let a bill “slip through the cracks”.

    My family is living in Singapore, but visit our doctors & dentists when we are back in the US for holidays. One of my wife’s doctors prefers to bill her after filing with the insurance company, which is fine when we lived in the US. But, since they don’t have an on-line payment processing system, we either have to stay up late or get up early to call to make a payment over the phone OR we have to mail a physical check from Singapore.

    One of her payments was super late due to some confusion on our part as to whether we had paid the bill. They sent a nasty letter telling us that they were going to revert the bill to a collector. We caught it in time, but could have had a blemish if it had gone too far. When my wife called and made the payment, I told her to ask what year it was, and then to ask why they didn’t offer a way to pay the bill on-line consider it is 2016…

    • David @ MoneyNing.com says:

      Good to hear that everything turned out okay. Billing in the medical industry is very archaic, and adding the insurance layer makes it even more complicated.

      You may want to ask for a discount when you pay over the phone next time. Some practices offer discounts if you pay right then and there, so it’s worth asking about.

  • Mario says:

    This is great. A little bit of information goes a long way in helping to prevent the anxiety. The best collectors are successful because they’re able to convince us that they’re official. Staying calm, knowing to ask for written proof, and knowing your rights is a great defense

    • David @ MoneyNing.com says:

      Those people over the phone can definitely stress you out, but staying calm and dealing with them on your terms will give you the edge and end up saving you tons of money.

  • Cindy says:

    Try not to ignore them. Debt collectors will keep on reaching you until a debt is paid. Discover who the original creditor was, just as the first sum. Get it recorded as a hard copy. Try not to give individual subtleties via telephone. Take a stab at settling or arranging.

  • Latoya says:

    This is awesome advice for anyone facing this situation. It’s good to know your rights in situations like these because based on experience, unfortunately, many are ready to take advantage of people who are facing financial challenges.

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