Rules to Follow with Debt and Debt Collectors

We all want to pay our bills on time but sometimes due to some financial crunch it is not possible to make even the minimum payments and meet due dates.  If a debt goes unpaid for an extended period of time, creditors may turn your account to a collection department or agency.  It is true that debt collectors have the right to demand payment and take legal action if necessary, but often they would rather collect a portion of the debt than have to take more drastic actions.

Before you start dealing with delinquent accounts and collection agencies, take a look at your monthly budget.  Take a real look, not a wishful peak.  If your budget is upside down or underwater it is time to address this situation.  Half the world has too much debt and is struggling; no one will look down on you because you are struggling too.  But address your budget to obtain your own financial freedom, figure out how far behind you are and then what you can fix or maybe what you cannot fix.  Stress will kill you, not the credit card bill.

If your credit is not in terrible shape already, it may be possible to reduce your other monthly expenses.  This may very well mean making hard choices or changing your lifestyle to fit your income and get your bills under control.  A little bit of pain to reduce expenses is well worth it to alleviate the stress and maintain fair to good credit.  Consider all options such as, selling a household goods, getting a part time job, taking equity out of your home, applying for a non-secured signature loan, obtaining a loan from a relative or other money raising endeavours.

Debt Collections

If the wolves are already at the door, that is the debt collectors and collection agencies, handle these debt collectors courteously and promptly.  Often, creditors are more agreeable to working with consumers who admit they are in trouble and need some help with their budget and working things out.

Before you handle what it is that is coming your way, it is important to know where you stand.  Try to understand what debts are delinquent, how much you owe and what your capacity is to pay these debts back.  This is fairly standard budgeting 101.  Unfortunately, for many consumers who are behind the eight ball the number one response to bill collectors and over indebtedness is to bury their head in the sand.  Don’t be alarmed, this is a common response.  But, try to pour an extra cup of coffee one morning and wrote down where you stand.

In the big picture, you can’t go to jail for owing money on your car or credit card or medical bill.  Relax, but spend time to review where you stand.  Delinquent debts are going to be reflected in your credit report and impact your credit score for the worse but you can rebuild and money is just money it is not love or happiness.

It is usually best to act quickly for the most effective resolution.  Heck, if you can’t settle the bill to your satisfaction you can always try again.  The faster you address the issue early on, the more likely you are to help save your credit report and credit score but equally important if you cannot reach an agreement in the early stages with the bill collector, let them stew for a while you work on plan B.

Be prepared to negotiate.  Collection agencies are almost always authorized to negotiate repayment terms that are significantly below the total amount of the debt.  If you can’t pay the full amount, but are willing to pay a percentage, tell them so.  In many cases, they will prefer to get something from you than nothing at all.  Don’t cave in too early, make them work for their money and pay as little as you can.

Make sure not to offer too much information.  Don’t give a collection agency your bank account information or credit card number.  If at any time you feel pressured, slow the conversation, out the conversation on hold or if you are really feeling overwhelmed exercise some power and hang up.  High pressure collectors should be hung up on or better yet if they are caught engaging in illegal collection activity they should be sued.

Collection agencies have had a reputation for bullying and even using threatening tactics to try to intimidate people into repaying debts.  This kind of abuse and harassment is illegal and should be reported to the FTC.

The Fair Debt Collections Practices Act is a Federal Law meant for the protection of consumers.  The Fair Debt Collections Practices Act outlines specifically what collection agencies can and cannot do when trying to collect unpaid debts.  Some of the rules they must follow such as not being allowed to call at your workplace without your approval.  If you need to or want to, you can send a letter using registered mail to the credit collection agency asking them to stop calling you.  By law, the collection agency must comply.

Obscene language or threats of violence are absolutely forbidden and a collector is not allowed to threaten you with false statements.  The law also defines the type of information a debt collector is entitled to collect from the debtors.  The FDCPA spells out the rules for legal action that can be taken against the creditors and the collection agencies for violating the Act.

You should know your rights and demand to be treated fairly and with respect when you work with debt collectors and collection agencies.

If you are having too much difficulty making ends meet and your credit is already damaged you may want to put a hold on everything by looking into a bankruptcy filing.  Consider this option if you are so far in debt that you can never repay it.  Issues regarding bankruptcy should be reviewed with an attorney or at least a credit counsellor (visit https://www.creditrepairexpert.org/companies/credit-repaircom/).  Bankruptcy can have the biggest impact on your credit profile and may be the least desirable from a credit standpoint.  But, when it is necessary, it is a viable option that should not be ignored.

In the early stages of credit collections and debt management, the goal is to try and rearrange your budget and clear up the debts and keep your credit record from too much damage.

About Tina Roth

Get to Know Me Better. Hi, I'm TINA! I am a financial planner, blogger, and freelance writer and digital marketing consultant. The idea of starting a finance blog has been hitting me for long; I took it seriously after falling into a spiral of finance debacles and recovering from it. Here I write about personal finance and money management tips.

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