Home > Managing Debt > The Slacker’s Guide to Dealing With a Debt Collector

Comments 0 Comments

Are you getting collection calls and wish there was an easier way to handle the problem? Here’s a guide to dealing with a debt collector … using the least effort possible.

DON’T ignore bills, letters and threats thinking that collectors will just forget about the money, or that the firm won’t be able to find you. They won’t, and they will.

DO immediately ask a collector to prove the debt is real, and to verify the amount with documentation. Do this by filing a dispute notice using a form letter like this one from the Consumer Financial Protection Bureau.

DON’T pay a bill just because someone calls and demands money. Debt collectors may get things wrong, and you need to make sure you are A) paying the right amount, and B) truly satisfying the debt — for that, you need detailed documentation from the collector. Also, make sure you’re C) paying a legitimate collector and not a scammer.

DO pay your bills and debts you owe. It’s only fair. If you’re having trouble paying your debts, consider taking on a short-term, part-time job to pay them off.

DON’T let a collector talk you into making a small payment towards a large balance because making a payment can re-start the statute of limitations (SOL) clock. It might seem like a good idea to throw $10 or $20 at a collections caller just to get him or her to hang up but it can actually work against you. Don’t make a payment until you’re certain you owe the debt, and that you can work out a payment plan – in writing – that works within your budget.

DO know what the statute of limitations is in your state. They range wildly — here’s a list — but debt older than the SOL, also called “time-barred debt” does not need to be paid. It’s important to note that aged debt can still impact your credit score, however. And debt collectors may still try to collect it, so it’s important to know your rights.

DON’T take harassment lying down. If you are called late at night, early in the morning, or at work, or after you’ve demanded the calls stop, or you learn that co-workers or neighbors are being told about your debt, send a cease and desist letter. Consider consulting a lawyer who specializes in Fair Debt Collection Practices Act lawsuits.

DO keep records of everything. Use a desktop scanner to make a digital copy of every letter — digital copies can be easier to find. Keep a folder on your desk of hard copies. Organization is the first step to cleaning up a financial mess.

DON’T pay an upfront fee to a company to negotiate debt settlements on your behalf. Even though new rules make it illegal for settlement companies to collect upfront fees, some still try it. Even without upfront fees, debt settlement can still be a risky strategy. You may want to consider other options – consolidation, counseling and bankruptcy – before working with a debt settlement company.

DO contact a credit counselor if you really need help. The nonprofit National Foundation for Credit Counseling offers a list of experts who will offer free help, and potentially be able to reduce interest rates and fees. Counselors can’t help if you don’t make a plan and stick to it, however.

DON’T wait too long to file for bankruptcy, or be ashamed about it. Guilt-ridden consumers spend their precious last financial resources — such as their retirement money — doing all they can to avoid bankruptcy, and ultimately file anyway. That puts them in an even worse position than they need to be (retirement funds can often be spared in bankruptcy).

DO expect to pay taxes on debts that are forgiven. If a creditor or collector writes off $600 or more in unpaid balances, the IRS requires them to send you a 1099-C reporting that forgiven debt as “income” to you. You may be able to avoid paying taxes on that amount if you qualify, but the time to figure that out is when you are settling the debt, not in April when you are scrambling to file your taxes. (For help, click here.)

And finally, DO be an active participant in your credit/debt profile. Be a defensive driver on your financial road. Little mistakes can turn into big problems over time. A $70 disagreement over a bill can turn into a four-year battle. A typo can make you miss out on a home purchase because of a credit report error.

Don’t wait until debt collectors start harassing you to find out someone thinks you owe them money. Check your credit report regularly, as well as your credit scores. (You can get your credit reports for free every year, and you can get your credit scores for free, updated every 14 days, on Credit.com.) When you close an account, make sure you have a copy of a bill showing a $0 balance. Expect the worst from corporations with flawed computer systems. Live your financial life alert to the fact that potholes can appear anywhere, and anticipate them, even when the road seems smooth. That might not sound fair, but it is reality.

More on Managing Debt:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team