It’s always bad news when a debt collector comes calling, but it’s even worse when you know you can’t pay. Dealing with debt collectors isn’t something anybody knows how to do instinctually, either. It’s a skill that people have to learn, but it’s worth taking the time to do so.
Whether you’re looking for guidance because a debt collector is blowing up your phone or just preparing for the worst, this guide will tell you what you need to know. Here are the most important things to keep in mind when you need to deal with debt collectors.
1. Whatever You Do, Don’t Ignore Them
The worst way to react to a debt collector is to ignore them. Pretending the problem doesn’t exist is never going to solve it, and it will almost certainly make it worse. And it can always get worse. Debt collectors are annoying from the start, but ignoring them usually just causes them to try harder. Even if they do stop attempting to make directly, they’ll only resort to more drastic strategies next. That might include:
- Calling a debtor’s friends, family, or coworkers
- Suing to take the issue to court
- Demanding arrest if a debtor fails to show up to their court date
- Garnishing a debtor’s wages or bank accounts
And the longer the issue lasts, the more time the debt has to rack up penalties and interest. The balance can only get bigger, which makes negotiating and reaching a settlement that much more difficult. So if a debt collector reaches out, don’t panic. Take a pause, then address the issue as calmly and rationally as possible.
2. Don’t Take Any Action Too Quickly
It’s a debt collector’s job to turn up the pressure. They will do their best to rush people into volunteering information that they shouldn’t, answering questions they don’t have to, and making a payment without verifying information. Unfortunately, they’re often good at their jobs. To get people to pay, they often:
- Use language designed to create fear and other emotional responses
- Make vague threats or implications about impending repercussions
- Dismiss protests or explanations and insist on receiving payment
The less time people have to stop and think, the more likely they are to make a mistake. Don’t fall for that trap. Even if the debt and the collector are legitimate, a few more hours of delinquency isn’t going to hurt much. Take the time to make an informed decision.
3. Watch Out For Signs of a Scam
Scammers may have access to private information such as a borrower’s name, address, and Social Security number. Don’t assume that just because they know those details that they’re legitimate.
Some common signs of a scam are:
- Threats of arrest and jail time, or anything else illegal
- Unprofessional behavior, poor communication skills, or unusual contact information
- Demands of immediate payment, especially if it’s limited to one form of payment like a wire transfer or prepaid debit card
Whether or not the call is from a scammer, borrowers should react the same way. Go through the steps to make sure everything checks out.
4. Verify All of The Facts
The initial stages of successfully dealing with a debt collector are about avoiding mistakes. Observe their behavior, collect their information, but don’t give them anything.
After that, it’s time to be more proactive and start working on solving the problem. Borrowers need to double-check all of the facts. Make sure that the collector is who they say they are, that the details of the debt are accurate, and that there’s an obligation to pay.
The best way to start that process is to inquire about the “verification notice.” Debt collectors have to provide debtors with a written letter that includes the following:
- The amount of the debt (including penalties, interest, and fees)
- The identity of the current credit holders
- What steps to take to dispute the debt
That letter is supposed to show up within five days of the debt collector’s first contact. Use it to dig into the debt collector’s identity and the legitimacy of the debt.
Make sure their licenses check out and cross-check any contact information. It might even be worth calling the creditor to see if they can verify the debt collector. See if there’s any way to find proof of who the debt belongs to. Make sure it’s not so old that it’s past the statute of limitations (usually between three and six years).
5. Know Your Rights And Stand Firm
Knowledge is power, especially when trying to deal with debt collectors. They’re used to talking to people who don’t know how to react to the situation or what the laws are.
Here are some of the most important things that an alleged debtor can do:
- Set the terms of communication (when a collector can call)
- Dispute any debt and halt collection attempts for 30 days
- Sue a debt collector for breaking the laws
Speaking of, here are some of the most important things to know that debt collectors can’t do:
- Threaten anything illegal like violence or arrest
- Lie about their identity or the details of the debt
- Discuss the debt with anyone but the debtor or their spouse
Debt collectors may try to create confusion, so be ready. Understand what they can and can’t do, and don’t be afraid to push back if they say something that isn’t accurate or bends the rules.
6. Treat Every Interaction Like a Court Proceeding
Consider all communications and every interaction with a debt collector to be a legal proceeding. Anything you say can and will be used against you (and vice versa), so act accordingly.
First, don’t give them any extra information or admit to anything that might cause trouble down the road. Don’t comment on recognizing the debt, who it belongs to, or that it might be affordable.
Second, pay very close attention to the things that they say. If they break the Fair Debt Collection Practices Act in any way, they open themselves up to a lawsuit.
Third, create a paper trail and be able to back up any future claims. Get everything in writing, including any promises they make. The case might very well end up in a real court someday, so be prepared.
7. Don’t Be Afraid to Negotiate A Settlement
Debt collectors specialize in getting cash out of delinquent and defaulted accounts. They know that many of those debts are going to be tough to recover completely. Usually, they just want to get the best deal possible. They’ll almost always be open to negotiation if it’s a reasonable offer.
Here are some tips to negotiate successfully with debt collectors:
- Be realistic: Don’t promise too much or too little. Don’t overextend and jeopardize other obligations. Know that debt collectors can access credit reports which give them insight into debtor’s finances.
- Try for a lump sum: Time is of the essence for debt collectors. They’d usually prefer a large lump sum to an extended payment plan that a debtor might fail to pay. Try to get them to settle for a single payment that amounts to half of the debt.
- Get it in writing: Make sure to have proof that the debt is gone after the completion of the settlement agreement. The worst possible outcome is to pay off the debt only for debt collectors to come calling about it again in the future.
It’s not easy to deal with debt collectors, but it is doable. They’re people too, and they will often listen to reason. Stay calm, approach the problem intelligently, and it will all work out.