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.

  1. Review the debt validation letter carefully and make sure the collector owns the debt.
  2. Check your records to make sure you haven’t already paid or settled the debt.
  3. Assess your budget to see what you can afford to pay.
  4. Then start negotiating, always in writing. Do not negotiate over the phone.
  5. 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.
  6. 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.

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Article last modified on July 28, 2020. Published by Debt.com, LLC