4 Mistakes to Avoid When Dealing With Debt Collectors

Updated on April 28, 2020
Cynthia Hoover profile image

Cynthia is a gardening enthusiast. She has a green thumb and always plants a variety of items for harvesting during gardening season.

Debt and debt collectors are something very common that a lot of people deal with day to day. There are many mistakes you could be making when attempting to deal with debt collection calls and communications. Mistakes can be costly for debtors in the long run. Learning how to avoid making costly mistakes and how to deal with bill collectors in a way that is beneficial for you can save a lot of headache in the long run.

Whether debt collectors are calling your home or sending you correspondence via mail or email, there are appropriate ways to deal with them. Arming yourself with some basic knowledge and skills for how to proceed will help aid you in handling the debt collectors.

Credit card debt is one of the most common forms of debt in the United States.
Credit card debt is one of the most common forms of debt in the United States.

1. Phone Calls From Debt Collection Agencies

All too often people avoid phone calls from debt collectors. Not only are the calls annoying, but people often are unable to pay the debt in question.

But ignoring the phone call is not a good idea. Instead, follow these important rules when talking to a debt collector on the phone.

  • Avoid agreeing to any payments
  • Do not admit to owing the debt
  • Ask for all future correspondence to be sent through the mail

In this day and age one cannot be too careful when taking phone calls regarding personal finances. Though these debts may indeed be yours, you should avoid admitting so during any phone call. The best practice is to ask that all future correspondence be sent to you on company letterhead through the USPS. This is not an uncommon request, and most debt collection agencies are happy to oblige.

2. Failing to Validate Debts

Sending a debt validation letter can save you time and money. It is absolutely possible that the debt in question does not even belong to you! In accordance with the FCRA (Fair Credit Reporting Act), you have the right to seek validation for any debt listed on your credit report. It is actually not uncommon for debt collectors to seek payment for debts that were already paid, especially medical debts.

Sending a simple, well-written debt validation letter can potentially remove the debt altogether. Or at the least. it can confirm that the debt in question is in fact yours and remains unpaid. There are some great debt validation templates available for soliciting validation from a debt collection agency. Keep in mind that all correspondence should be sent certified mail with signature confirmation.

3. Not Knowing Your State's Statute of Limitations

Each individual state has its own set of limitations regarding the length of time that debt can remain on your credit report. The statute of limitations varies state to state, and some require debt removal in as little as three years. I am not saying you should use this to not pay a debt that you do in fact owe.

Simply that if a debt is at the time limit set forth for debt collection in your state, your time can be better focused on getting that debt removed, leaving you free to focus on other debts that have a current collection status.

If a debt collector is still reporting a debt that is past the statute of limitations you have two courses of action available.

  • Send a letter to the debt collection agency and ask them to remove the debt
  • Dispute the debt collection with the three major credit bureaus for removal

You can absolutely send a letter to a debt collection agency to remove a collection from your credit report. However, since this means they will not be being paid for the debt, they will not be in a hurry to remove it. Submitting a dispute to the three major credit bureaus and including the information that the debt is past the statute of limitations should have it easily removed, without waiting on an unwilling debt collector to do it.

Never pay a debt collector without negotiating first!
Never pay a debt collector without negotiating first!

4. Failure to Negotiate a Lower Payment

Most people fail to negotiate the amount of a debt with a collection agency. Debt collection is an extremely lucrative business. Most debts are sold for pennies on the dollar. Debt collection agencies make a fortune from buying your debt from original creditors sometimes for as little as a penny on the dollar. All the while continuing to go after you for the original balance. Never agree to pay the amount in full even if the debt has been validated. Instead negotiate, through certified mail of course.

Use common sense: you do have a lot of room to negotiate, though debt collection agencies still want to make a profit at the end of the day. Do not send an extremely low ball offer. But absolutely attempt to negotiate the debt for less than the balance. In many cases a debt collector is happy to accept half the balance owed, and in some less than half. This should be comforting news for those who owe more than they can manage to pay.

When negotiating, keep in mind that you not only need to negotiate a lower payment, you need to be clear that you want an agreement in writing that once the debt is repaid it will be removed from your credit report without derogatory remarks.

If your debt has been in collections for a while, negotiate a promise that the entire account will be deleted once paid in full. Even if you repay the debt, the account it can have a negative effect on your credit score with future creditors. Most debt collection agencies will happily agree to pay for deletion. Having the promise in writing will help you to get it removed should they back out of their end of the bargain.

If you have a pay-for-deletion agreement in writing with a debt collection agency, and they fail to remove your debt after you pay, you can easily submit your agreement to the three major credit bureaus for deletion. This is why it is so important to do all corresponding with debt collectors through certified mail with signature confirmation. Never agree to pay a debt, unless they are willing to delete it from your credit reports. If you agree to do so, you have lost all leverage in getting the negative account removed from your credit report.

Credit Repair Kit For Dummies
Credit Repair Kit For Dummies
This book has been extremely valuable in repairing my credit, and dealing with debt collectors since a job loss left us unable to pay some of our debts a few years ago, unlimitedly ending with them going to collection agencies. It offers a basic understanding of credit, as well as how to pull yourself back up from many different debt situations.

Understanding Credit and Debt

In order to avoid common mistakes and the pitfalls of debt collection a basic understanding of credit is key. Knowing how credit is reported and understanding the Fair Credit Reporting Act will no doubt arm you with knowledge that can protect you from ending up in debt in the future. There are pitfalls that all too many people fall into when pursuing or attempting to build credit.

Arming yourself with knowledge now can save your credit in the future. Knowledge is absolutely power, and can save you suffering the disadvantages of poor credit choices later in life.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

Questions & Answers

  • I recently certified mailed a collection agency a letter requesting to pay towards my debt at the rate of $10 a month. I never admitted to the debt being mine, just hoping they would accept payments to avoid being sued. I plan on filing CH 7 due to this and other issues but cannot yet because of an open lawsuit concerning an auto accident. Will me writing a letter asking to make payments also be considered the admission of guilt when we go to court?

    Unfortunately, in this instance, you reached out asking for a payment plan. Even though you did not specifically state that this was your debt and that it was valid, yes, they can use this to show that you know or are aware that the debt was valid.

© 2016 Cynthia Hoover


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