8 Ways to Deal with Debt Collectors
Problems with debt collectors are among the leading consumer complaints to the CFPB every year. Whether you have a debt that falls into collections or get mistaken for someone who does, collections are a huge hassle and constant source of stress. Even collections you thought were done and gone can come back to haunt you.
Here are eight ways to deal with debt collectors. None of them involve hiding and some don’t even require you to pay.
1. Validate and verify
Within five days of contacting you, a collector must send a written debt validation notice that states who and what you owe. If you haven’t received it, tell them not to contact you until they send it.
Once you receive it, if you have any doubt that you owe the debt or the collector has the legal right to collect, you have 30 days to ask them for verification. They must provide details about the original creditor and their contract with that creditor, as well the age of the debt.
Until they provide they do, they cannot pursue any collection action, including putting the account on your credit report.
2. Dispute it
If you receive the debt validation letter and don’t believe you owe the debt, you can dispute it. Instead of asking for verification, you can send a written letter disputing the debt within 30 days.
If you dispute the debt, the collector also can’t pursue any collection actions, including suing you, until they fully verify the debt. They must also report the collection account as disputed to the credit bureaus.
3. Send a cease and desist
If at any time you no longer wish to be contacted by a creditor, you can write a letter to tell them to stop. The Fair Debt Collections Practices Act (FDCPA), says that collectors must stop all contact if a consumer sends a written cease and desist letter.
You can do this if you’re getting hassled about a debt that’s not yours or a debt you don’t think you need to pay. In fact, you don’t even need a reason. The FDCPA doesn’t require you to give a reason. You just tell them to stop.
Just be aware if you do this, the collector’s only legal measure left is to sue you in civil court.
4. Check the statute of limitations
Collectors can’t hound you forever. They only have a set amount of time where they have a legal right to sue you in civil court. This is known as the statute of limitations and it’s set by the state where you live.
If a debt is past the statute of limitations in your state, then a collector can’t take you to court. In this case, send that cease and desist letter and the matter should be done.
5. File complaints
If a collector is outright harassing you, then you need to file complaints against them. You can file a complaint with the Consumer Financial Protection Bureau (CFPB), as well as your State Attorney General’s office.
This option can be particularly useful for cases of mistaken identity, where the collector has you confused for someone else. Or a collector may be contacting you about a debt you already paid or settled. If so, file a complaint with the CFPB and they’ll help you get a resolution.
6. Double-check your health insurance
Medical bills make up a significant percentage of the debts in collections in America. In some cases, the bills should have been paid by the consumer’s insurance. Before you start negotiating with a medical collector, check with your insurance.
This is particularly important if you have gap insurance. Check with your gap provider to see if all or part of a procedure that wasn’t covered by your primary insurance was covered by gap.
It’s worth noting if a medical bill goes to collections and then gets paid by your insurance, the collection account can be removed from your credit report. No waiting seven years.
7. Reach out to the original provider
If during validation you find that the debt is still owned by the original creditor or service provider, there’s nothing that requires you to work with the collector. You can contact the owner of the debt and work something out directly with them. You may work out a payment plan or even a settlement.
This can work for medical bills, bills for services, and even credit cards. If the original credit card company still owns the debt, contact them directly.
In fact, don’t make any agreement for payment unless the owner signs off on it. If you settle with a collector and they don’t own the debt, the owner can come after you for the remaining balance.
8. Contact a lawyer or legal aid
If a collector either won’t leave you alone or decides to take you to court, you should seek legal counsel immediately. If you can’t afford a lawyer, find a legal aid society in your area. You can receive free legal counsel about your situation.
Keep in mind that you have the legal right to sue a collector for harassment. If they violate your rights under the FDCPA, continue to contact after a cease and desist, or go to extremes to scare or humiliate you, it may be time to consider fighting back.
Also, don’t ignore a court summons. Ignoring a collector isn’t against the law. Ignoring a court order to appear is, and the collector will win a deficiency judgment against you.
If you decide to pay…
Of course, another way to deal with a debt collector is to just pay them. If you have funds available to set up a payment plan or have a lump-sum of cashing coming in from something like a tax refund, it might be worth it to get the collector off your back.
But even if you decide to pay, make sure you go about it the right way.
- Review the debt validation letter carefully and make sure the collector owns the debt.
- Check your records to make sure you haven’t already paid or settled the debt.
- Assess your budget to see what you can afford to pay.
- Then start negotiating, always in writing. Do not negotiate over the phone.
- Get a signed agreement before you pay anything. If the collector does not own the debt, then the original creditor must sign any settlement agreement.
- Avoid ACH direct debit because you never want to give a collector access to your bank account.
Keep in mind that paying a collection account off in full will not remove the account from your credit report. It will still be there for seven years from the date the account first became delinquent. In this sense, it may be beneficial to try and arrange a settlement because you don’t really get any credit for paying the full amount owed. So, it may be in your best interest to settle so you can save a little money.
How to deal with debt collectors when you can’t afford to pay
If you simply can’t afford to pay a collector, then here are some tips that can help you either get by or get out from under the debt.
Ask for verification
Once you receive the debt validation letter from the collector, asking for verification can buy you some time. This is especially true for debts that have been bought by a third-party collector. It can take time for them to get the information together to fully verify the debt, particularly if it’s been bought and sold by several debt buyers or collection agencies.
In some cases, the collector may never get back to you. In others, it may take months or even years for them to respond will full verification. During that time, they can’t pursue any collection actions. So, you buy yourself some time until your situation hopefully improves.
Consider filing for bankruptcy
If you simply don’t have the means to pay off collection accounts, it may be time to pull the trigger and declare bankruptcy. During bankruptcy, the court will assess what you can reasonably afford to pay back, either by liquidating assets that don’t qualify for an exemption (Chapter 7) or through a repayment plan based on your income and expenses (Chapter 13).
If you really can’t afford to pay anything and either don’t have assets or have assets that qualify for exemptions, then it makes sense to go ahead and file. It will eliminate the stress of dealing with collectors and get you out from under the burden of your debt.
What’s the downside of waiting it out?
There is one last way to deal with a collector and that’s to simply ignore their calls and dodge them as much as possible. The problem is the level of hassle and financial stress that this can create. The collector will use every means necessary to contact you. They may contact your employer to verify your identity. Collectors can be highly persistent and a constant source of stress in your life if you’re dealing with one.
Still, the benefit of waiting it out really depends on the age of the debt and the statute of limitations for collections in your state. Many states place the statute of limitations at six years, although it can be up to ten in others. If a debt is six months away from reaching the statute of limitations, then it may make sense just to wait it out. After six months when the debt is too old for the collector to sue you, send a cease and desist.
On the other hand, if the debt became delinquent within the past year, that’s a long time to hide from collection calls. You also have the risk that a collector may sue you in civil court. Dealing with legal stress on top of financial stress isn’t good for you. So, in this case, it may be worth finding a way to deal with the collector. You may want to consider credit counseling, debt settlement, or even filing for bankruptcy if you have a number of challenges with debt and collections that you’re facing.
Article last modified on July 28, 2020. Published by Debt.com, LLC