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.
1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.