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5 Tips for Dealing With Debt Collectors

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Dealing with debt collectors can be stressful

Don't let debt collectors take advantage

Image source: Phroogal.com

There are few things more stressful than getting calls from debt collectors about bills you can't afford to pay. And if you've got one bill you don't have the money to pay, you've likely got several. That means even more phone calls, threatening letters and ultimatums about what will happen if they don't get what you owe. Fees and interest pile on and soon your debts can feel insurmountable. What we hear from many of our clients is that once the collections avalanche begins, they don't know where to turn and are often paralyzed by fear and indecision. This doesn't help. Instead, consider these five tips for dealing with debt collectors.

#1 Don't be influenced by the squeaky wheel

You know the old saying about squeaky wheels getting the grease. Debt collectors know this and you will notice that some are more demanding than others – calling more frequently and making increasingly outrageous demands and threats. You may be tempted to pay the most obnoxious collectors first, but this may not be the best strategy for you.

Instead, consider which debts have the highest interest rates and which are most likely to impact your credit report. Late payments on credit cards will impact your credit soon. Medical bills will typically not hit your report until much later in the collections process. Payday loans likewise won't be reflected on your credit report. Necessities such as rent and utilities should come first and then your disposable income should be prioritized toward paying your highest interest debt that impacts your credit report first.

#2 Stay in control of communications

If a particular debt collector is aggressive about calling you at work and dialing your cell phone all day long, you may be tempted to pay them just to get the phone to stop ringing. Put an immediate end to calls at work by telling the collector you are not allowed to receive personal calls on the job. Legally, they must stop. If they don't, report them to the Consumer Financial Protection Bureau (CFPB).

If the collector calls you repeatedly on your cell, tell them they can't call during hours you are at work. Legally, they may also not call before 8 am and after 9 pm. If you prefer mail, you can request that they communicate strictly via US Mail. If they call more than once or twice per day, tell the collector they are harassing you and that if they continue to call more than once a day, you'll report them to the CFPB.

#3 Circumvent the collections firm

There are two situations where creditors turn to debt collectors. One is if the bill is late and they outsource their collections. Second is if a third party debt collector buys your debt from the creditor. In the second instance, you'll have to deal with the debt collection firm. However, if your debt isn't too past due, you likely can go back to the original creditor to work out a payment arrangement.

Tell them you want to pay and if the debt collector is harassing you in violation of collection law, tell them that as well. Original creditors are often more flexible in working out arrangements than collectors are because collections agents get a percentage of what they collect so they will always push for the maximum they can wring out of you. If you pay the creditor directly, the collector is out of luck.

#4 Be careful how you make payments

You know the disclaimer at the beginning of a call with a debt collector? “This is an attempt to collect a debt. Any information gathered will be used for this purpose...” Those are words to pay close attention to – they mean it. They will use any information they can to get the money they're after. When you do send in payments, it's best to use a third party service to protect your bank and card information.

If you allow them to auto debit for a payment, they'll have your bank information which makes pursuing a garnishment easier. If you pay via credit card, they may attempt to charge the card repeatedly. Paying through Western Union or a money order (not a certified check from your bank) will protect your financial information from the debt collectors.

#5 Keep documentation

You should keep a call log of your interactions with debt collectors if you are being harassed so you can substantiate any complaints you may have to make to the CFPB. Keep note of who called, what time, which debt the call related to and any threats made. You should also request written documentation if the debt collector makes a settlement offer.

For instance, if they tell you they can write off a $1,000 debt for $500 up-front that sounds like a good deal but only if they are authorized to make the offer and it sticks. Ask for the settlement offer in writing and hold firm on not paying until you get it. Once you get it, you should call the company back to check that the offer is legit and checking with the original creditor is also recommended.

If your debts have reached epic proportions and you're not reducing your balances because you can't afford to pay at all or your payments are only covering (or not even covering) the interest on what you owe, you need a more permanent solution. Chapter 7 bankruptcy can alleviate unsecured debts including credit cards and medical bills once and for all, but it should be a measure of last resort. If you can make payment arrangements, pursue that first, but if your debts are just too much to handle, contact the law offices of John T Orcutt for a free consultation on how bankruptcy can help you.

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