By  Updated on Thu Jun 12, 2014

Fear Not Those Debt Collectors

Fear Not Those Debt Collectors

Justin Maier / flickr source

Do you cringe every time the phone rings, fearing it’s another debt collector? Many people find themselves in this situation at some point in their lives for one reason or another.

Some people have excessive medical bills that are difficult to keep up with; others have high student loans, but are underemployed or unemployed after college; and some people spent more than they can afford to repay with credit cards.

Whatever the cause of your debt, debt collectors can really add to the stress of the situation.

Here are some strategies for dealing with bill collectors while you take steps to get your financial life back in order, and none of the strategies suggest hiding! Avoiding the phone and pretending the problem doesn’t exist is not going to make it go away — so be proactive in correcting the situation before it gets worse.

Work with lenders first

If at all possible, stay in contact with the lenders and original creditors and work out payment arrangements and modifications to your account terms. This should prevent the debt from being sold to a third-party bill collector who will generally use more aggressive means to collect the money you owe (within certain limits).

When you work out a payment arrangement or any modification, make sure you get the information in writing so they cannot turn around and say you failed to keep your end of the bargain.

Confirm any and all debts

When you receive debt collection calls or letters, make sure the debts and accounts they’re talking about are in fact yours. There have been many cases where consumer debts were resurrected. If you are being asked to make payments on a debt that doesn’t belong to you, there may be an issue with identity theft or a credit report error that needs to be addressed.

Don’t ignore this situation — make written requests to a debt collector within 30 days of being contacted and ask them to verify that the debt belongs to you. If they can’t verify it, they need to remove the negative notation from your credit report and stop contacting you to recover the money.

Carefully choose payment options

As you work out payment agreements with your creditors, you might want to avoid setting up electronic withdrawals or automatic payments from your bank accounts at this stage.

You might also consider making a payment with a money order instead of a check, so that the debt collector does not have access to your bank and routing number. Debt collectors can freeze your bank accounts as one of their methods for recovering a debt you owe if a court orders it, so don’t make it overly easy for them.

Safeguard government benefits

If you are currently receiving money from Social Security or disability, these income sources are protected against court-ordered debt payments. Have a separate bank account for these income sources and do not co-mingle the money with any other source of income. That way, if a court does order an account freeze, the debt collectors will be unable to freeze the account receiving Social Security and disability funds, allowing you to continue paying your living expenses from these funds even if your other accounts are inaccessible.

Protection in bankruptcy

If your situation is so dire that you have started filing for bankruptcy, but bill collectors continue to harass you, let them know you have filed bankrupt. They are required to stop debt collection efforts on all consumers who are in the middle of a bankruptcy proceeding.

Get legal support when needed

If you get a notice of a lawsuit from a bill collector, you are going to want a lawyer to represent you in court. The lawyer should be knowledgeable of consumer law. If you lose in court, you may find your wages garnished and bank accounts frozen.

A lawyer can ensure the debt has not passed the statute of limitations and that they can prove the debt is yours — or else you aren’t responsible for paying it. Your chances for having a lawsuit dismissed in court are stronger if you appear in court with a lawyer than if you skip the court date or show up without a lawyer.

Help is out there

There are credit counseling agencies and financial counselors who can help you sort through your financial situation. They’ll go over your existing debts with you, and help you create a family budget that will work for your situation. Look for credit counselors through the Association of Independent Consumer Credit Counseling Agencies and the National Foundation for Credit Counseling.

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  • http://www.facebook.com/profile.php?id=548879659 Jennifer M. Black

    My problem is telling the difference between a legitimate debt collector and a scam artist. I have federal student loans I’ve defaulted on and I have five different collectors calling me, all claiming the same debt. They can’t ALL have it, so four of them are lying. None of them will give me a company name or any information other than I owe such-and-such amount of money for my student loan. How do I find out who actually has my loans now so I can work with the right one and tell the others to bug off?

    • http://www.mybanktracker.com Simon Zhen

      While there are scammers out there, it appears your debt may have been passed from one debt collection agency to another. Sometimes collectors don’t check off that the debt was sold so they keep calling.

      In any case, you should request a written letter of validation that a particular debt collection agency actually owns your debt. The company should be able to tell you the original creditor. Also, you can track the history of this debt by checking your credit report — it’ll tell you who owned the debt.

      • pushbutton

        I’ve requested a validation a few times over, to no avail. The collection agency keeps on calling me & leaving a copy-and-paste message about the debt & collections. I finally told them to quit (in writing).

        I have also told them I was disputing the alleged debt – falls on the deaf ears.

        This whole thing is all about some court costs that date over 10 yrs back. I represented myself, and at the time no one told me that I owe anything on top of what I paid. Not only that, but I just found out there is a Judgment Lien filed in the courts back in January, yet no one notified me about this either. They’re doing all this on the pretense of sounding politically correct (and everyone’s buying it), but this is all wrong.

        Anyway, I am collect-proofing myself right now.

    • http://www.debtconsolidationcare.com/User/NathanielCopeland Nathaniel Copeland

      Given that your loan is federally sponsored, instead of wracking your brain trying to figure out which collection agency is trying to con you, there are a fewoptions you should look into:

      1. Federal student loan debts cannot be sold unlike most privately accrued debt accounts. FedEd loan debts are usually ASSIGNED to be collected on. Checking your credit report would be a good idea. The name of the collector reporting the tradeline should show up. Fair warning though, credit reports are fairly inaccurate in a lot of cases and you might find multiple collectors reporting the same tradeline.

      2. Log into NSLDS and check on your loan account. Since the loan is Federally sponsored, there has to be a record of it in there. This is the most accurate source of information you can depend on.

      3. Requesting debt validation in writing is a good option but collectors, especially in case of Federal loans can choose not reply to it and proceed with Admin garnishment in case of which wages will be garnished and if you are receiving SS benefits and tax refunds, it might be used to offset your debt.

    • bhavin patel

      Best thing is to do is contact the student loans department and ask them who has your account.

  • Terry

    Good advice! Also, spend some time studying federal consumer law, and those of your state. Knowledge is power! There is quite a bit the individual consumer can do on their own with debts they know are not theirs, and those that are suspect. Request the collector validate the debt immediately. Also, know that the big three credit bureaus are abjectly inept and apathetic at properly validating debt. Request this in writing by U.S. Registered mail. Also beware of bottom feeding third party junk debt collectors. Do not be intimidated by this scum. Do not negotiate by phone. Get EVERYTHING in writing and registered mail. Question everything, and demand proof IN WRITING. Accept only registered mail. Also, check the laws of your state for bonding. Some states require collectors to be bonded in the state they are collecting in. Know the statute of limitations in your state. Remember, “its all about the money”. Be knowledgeable, accurate, persistent, vigilant. Always question everything, and trust no one when it comes to your lively hood.

  • pushbutton

    Your retirement accounts are exempt, too. Like IRA or the like. Besides, anything you purchase with the exempt funds, is exempt just as well. Your car might be exempt too, if it’s not too expensive. A good old car some ten yrs old is exempt all the way. Besides, if you’re looking at filing for a bankruptcy, there are certain exemptions such as what they call a “wild card”, meaning a few thousand $$ are exempt. Also your trade books & tools. Google is your friend.

    Make sure that all your bank savings are either in the form of an IRA account(s) or else prepay your mortgage. Speaking of which, I just love my Home Equity Line of Credit; very versatile. Just do your homework to make yourself collection-proof, and then if a collection firm knows that they can’t collect, chances are, they’ll back off. They can’t make money on you, well, too bad.

    I would advise not to speak with the collectors over the phone, as this is pretty much a one way communication. You can leave them messages all you want, still they’d call you back & leave a copy-and-paste response about your debt & collections. Same old, same old. Google a Cease and Desist letter, type it & send by Certified Mail, Return Receipt Requested; this costs about 6 bucks but is well worth it.

    Good luck.