Even if you have never had to deal with debt collectors, I urge you to read this post. You might be able to help a friend or family member who is going through this situation.
I remember getting calls from bill collectors back during my days as a struggling Chicago theater artist. It was extremely stressful, I had no clue how to handle them, and I pretty much did the opposite of everything I suggest in this article! I got through it, but with a little bit of knowledge things would have been so much easier.
If you are facing this situation right now – please know that you CAN get past this! Know your rights, be proactive, and don’t get discouraged. But most of all remember that debt collection is a business. You might feel embarrassed when they call, or think that they are judging you, but I assure you that they are not. To them you are just a number on a page. YOU might be judging you, but that is another story! They just want to get whatever they can get from you and move on to the next person.
So, stay calm, and read the tips below. (And contact me if you want to talk more about any of this!)
Know your rights
The Fair Debt Collection Practices Act (FDCPA) is a federal law that limits what debt collectors can do. This law doesn’t cover business debts, and typically doesn’t apply to a creditor’s own in-house debt collectors, or to federal or state agencies. However, per this law debt collection agencies:
- Cannot call you before 8:00 a.m. or after 9:00 p.m.
- Cannot call you at work, call your employer, or call you multiple times per day.
- If they call at a time when it is inconvenient for you to speak to them you can tell them that and they are required to terminate the call.
- They cannot swear at you or insult you, and they can’t make illegal or fake threats, like saying they will put you in jail.
- They can’t use social media to publicly post about a debt.
- If they contact you via email, text, or social media messaging they have to provide a way for you to opt out of that communication.
- If you are being represented by an attorney they must stop contacting you and contact the attorney instead.
- If you request it in writing, they can no longer call you at all. You still owe the debt, and they can take action against you such as suing you, but the calls will stop. The Consumer Financial Protection Bureau (a government agency) has a sample letter you can use for this.
They are also required to provide, either in a letter or an email, information about the debt, including the name and contact information of the debt collector, the name of the original creditor, a breakdown of the interest, fees and payments, and the current amount owed.
Typically this will be in their first communication with you, but if you get a call and did not receive this, they are required to send it to you within 5 days. You have 30 days to dispute the debt if you think you don’t owe it, and in this initial email or letter they must provide the end date of this 30-day period.
What to do when a debt collector calls
If you get an unexpected call from a debt collector saying that you owe them money, here are some things you can do:
- Ask for their name and phone number and say you will call back. This gives you time to collect your thoughts.
- Ask for a written statement indicating how much money you owe and who you owe it to. They are legally required to provide this within 5 days.
- It is possible that they are calling to try to locate a friend or family member who owes money, but they are not allowed to reveal that this other person owes money, so keep this in mind.
- Do not volunteer any information such as account numbers, balances, or assets.
- Make notes of everything they say, including any numbers, dates, or timelines.
- Ask for the name and title of the person you are speaking to and make a note of that.
- Do not let yourself be drawn into a conversation. This can be a way to manipulate you emotionally. Get the information and end the call.
- If you feel yourself getting emotional, end the call so you can collect yourself and deal with them rationally.
What if a debt collector is calling in error?
If you get a collection call or letter for an amount that is not correct, or for an account that you paid, or for an account you never heard of, you have 30 days to dispute the debt in writing. Once you’ve disputed the debt, the collector can’t call or contact you to collect the debt until they’ve responded with verification of the debt.
Before providing any information to the debt collector, especially anything like statements or canceled checks to prove that you paid the debt, you should verify that they are a legitimate debt collector i.e. that it is not a scam. You can ask them to provide their name, street address, telephone number and professional license number, and then verify them through your state attorney general’s office.
What if you legitimately owe the debt?
If you can pay the debt, pay it. This is the best for your credit rating and will avoid further consequences. You should be able to work out a payment plan – just make sure it is something that you can stick to. Never agree to a payment you can’t afford.
You can also try to negotiate for better terms, such as a lower interest rate, lower or waived fees, or even a lower total amount. Oftentimes collections agencies buy your debt for pennies on the dollar, so they can take a lower amount and still make a profit.
Be very wary of debt consolidation or debt settlement firms. Their services are not free and sometimes you can end up in even more debt. If you feel you need their help, make sure to look for a non-profit organization that is certified by the National Foundation for Credit Counseling.
What happens if you don’t pay?
A debt collector may decide to take you to court. If they win a judgement against you they may be able to:
- garnish (take) your wages. In Illinois they can take up to 15% of your wages;
- freeze or garnish money in your bank accounts;
- put a lien on any property you own.
It will also negatively affect your credit score, and since it takes seven years for accounts that have gone to collections to fall off your credit reports, that means for seven years you will have a hard time getting any kind of loan, and any loan you do get will likely have a higher interest rate.
Financial coaching can help!
Helping people work through debt issues is part of what I do as a financial coach. We will start by taking a clear look at your situation, and then we will come up with strategies to deal with it.
But even more than that, we will look at why the debt happened in the first place, and how to keep it from happening again. Paying off creditors doesn’t help if you end up back in more debt! Together will look at your total financial picture and come up with a plan that get you on sound financial footing once and for all.
Schedule your free 30-minute intro session and let’s talk. I offer affordable rates and I do not sell financial products. Coaching is done via video calls.
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