How To Deal With Debt Collection
Debt collectors are the people whose job it is to collect your unpaid debts. They might call you, visit your home, or put you under pressure in various ways to repay what you owe. That’s why dealing with debt collectors is so stressful for so many people.In this guide we’ll highlight how to deal with debt collectors. We’ll explore who they are, what powers they have, how you know if your debts have been passed to a debt collection agency, and what you should do if a debt collector calls you or pays you a visit.
Is It Legal For Debt Collectors To Call Family Members
They are not allowed to speak to anyone about your debt besides you, your attorney, and in some cases, your spouse. However, they can call your friends or relatives in an attempt to find out where you live to get contact information so that they can phone or write you.
In most instances, they are only permitted to contact your friends or family members one time and may not continue to make harassing phone calls.
True Or False: You Must Handle Debt Collectors On Your Own
Very False. Debt can weigh heavily and can start to make you feel alone. This is why its important to talk to close friends and family about what youre going through. And if you need more help or perspective, you can always meet with an LIT.
If you need support to negotiate with a debt collector or youre looking for some help managing your debt, reach out to a BDO LIT for a free consultation.
You May Like: How Does Bankruptcy Affect My Partner Australia
Figure Out What You Can Afford To Pay
Paying off your debt is important, particularly if it’s keeping you from improving your credit or getting approved for other credit cards and loans.
Before you offer a payment to the debt collector, consider your other financial obligations. Take a look at your budgeted income and expenses to figure out what you can afford to pay toward the debt.
Consider whether you can pay it all in a single lump sum or break it into a few payments. Keep in mind, debt collectors will want to collect as much as they can as quickly as they can, so spreading your payments over more than a few months likely won’t be an option.
You may, for example, offer to pay a lump sum of $3,000 on a $5,000 debt. You’ll ask that the debt collector honor your payment as full satisfaction of the debt, which means the collector cancels the remaining $2,000. Or, you might offer to make four monthly payments of $1,250 to completely pay off the debt.
Make sure you can afford to pay what you’ve offered. Once the debt collector accepts, you may only have a small window to make the payment. This process is known as debt settlement.
What Powers Do Debt Collectors Have
Debt collectors are limited by debt collection laws that apply in Ontario, known as the Collection and Debt Settlement Services Act. Below are some of the most common tactics that you could be confronted with when collection agents call.
Debt collectors can visit your home or workplace. But they have to respect reasonable times for visiting and must leave if you ask them to.
They may not harass, abuse or threaten you. And they must respect your privacy. For example, they may only talk to people at home who are 18 years of age or older about your debt.
Threat of wage garnishment
Wage garnishment means the person or company you owe money to can take some of your wages.
Debt collectors may threaten you with wage garnishment for unpaid debts, but they will not be able to follow this through without first getting a court judgment against you.
Once a judgement is obtained, they will also need a court order to garnish wages, and you will be notified in writing before any money is taken from your paycheck.
Threat of legal action
Debt collection agencies commonly use the threat of legal action to try and encourage repayment, however legal action is expensive. The company pursuing you will have to hire a lawyer and cover their legal costs.
Don’t Miss: Does Bankruptcy Fall Off After 7 Years
What Debt Collectors Cant Do
- Lie or try to hide who they are or how much you really owe.
- Tag you publicly on social media.
- Keep calling/texting/emailing/sending letters if youve asked them to stop by writing a certified letter.
- Talk to anyone else more than once about your debt to try to shame you.
- Garnish your wages without taking you to courtunless its a student loan or an IRS debt.
- Harass or threaten you with foul language or jail time.
If a debt collector continues to harass, lie or threaten you, it may be time to hire a lawyer for a small fee to send a certified letter asking them to stop contacting you. You can also report them to the Federal Trade Commission.3
S To Take When You Receive A Notice That Your Debt Is Transferred To A Collection Agency
If you receive a notice that your creditor will transfer your debt to a collection agency, contact your creditor as soon as possible.
You may be able to:
- pay a portion of the amount or the full amount owed to avoid having the debt transferred to collections
- make alternate arrangements with your creditor to pay back your debt
You May Like: Debt Per Person In Us
Dealing With Debt Collectors My Story
My collection account came as a big surprise, it was from past college tuition that was never paid off.
I transferred to a new college in Hawaii and thought I had successfully received the student loan for the semester.
Turns out I was wrong.
There was one document that needed to be signed before the tuition/loan could be dispersed, but I completely missed it.
Since the document wasnt signed, I never received the student loan. Unfortunately, the entire amount was sent to collections.
After one semester of school in Hawaii, I transferred back to my school in Utah. One year later, I started getting calls from a debt collector.
They told me that I had a collection account because I didnt pay my tuition.
Both my wife and I didnt believe it at all and thought it was a scam at first. Both of us thought there was no way I didnt pay my tuition, so we just ignored it.
If You Decide To Talk To The Collector Keep A Record
A collections log is a written record that you make of the date and time that a collector calls, the person you speak with, and what the collector says to you. Your log doesn’t have to be anything fancywriting it on a notepad or spare piece of paper is fine, or keeping a log using your computer or phone works too. A collections log will help you straighten out who’s calling you from where, and what debt each collector is calling about. It will also help you keep track of how often a particular collector calls and document inconsistencies in what collectors say to you from one call to the next.
If the collector sends texts or leaves voicemails with abusive language, keep the messages. These records can be useful if you decide to sue the collector in court or if you decide to try to settle the debt.
What Do You Do When A Debt Collector Calls
You missed your chance to work with your creditor directly. Your account and debt have moved onto a collection agency. After the initial notice, you will begin to receive calls from debt collectors. Do not send payments without confirming some details. Work towards removing collections from your credit report.
Know How Your Payment Will Affect You
Be aware of what your offer means for you. Your payment will be reported to the credit bureaus if the debt is still within the credit reporting time limit, which is seven years for most debts. Paying in full typically looks better than settling your debt, but a payment looks better than non-payment.
Any payment on the debt will restart the statute of limitations on the debt giving the debt collector more time to sue you. It’s important that you make an agreement what will satisfy the debt and eliminate the risk of being sued in the future.
Settling your debt may have tax implications. If more than $600 of your debt is canceled, the collector has to report the canceled amount to the IRS. You’ll be sent a 1099-C Form to include the canceled debt as income on your next tax return.
Recommended Reading: Can Dismissed Bankruptcy Be Removed From Credit Report
Who A Debt Collector Can Contact
A debt collector can only contact your friends, employer, relatives or neighbours to get your telephone number or address.
This does not apply in the following cases:
- the person being contacted has guaranteed your loan
- your employer is contacted to confirm your employment
- you’ve given your consent to the financial institution that they can contact the person
If you gave consent orally to your financial institution, you must receive written confirmation of your consent either on paper or electronically.
Ask For Identity Letter Of Assignment And Debt Collector Certification
If you have received the arrival well, then ask for the identity, letter of assignment, and official certification of the debt collector. Debt collectors who are officially on duty have an official letter of assignment from the Financial Institution or Agency where they work. In addition, a debt collector is also required to have a Financing Collection Professional Certification . Also, ask them about the ownership of the certification. If they are not able to show the official letter of assignment and certification, then just ignore it.
Read Also: What Is Chapter 7 Bankruptcy For Business
How To Deal With Convergent Outsourcing
At Convergent Outsourcing, our goal is to make paying off your debt easy and to be helpful throughout the process. We understand that it can be a confusing and frustrating process, and so we provide options over the phone, via mail and online so that you may contact us in a variety of ways.
We want to know your communication preferences and keep your information up-to-date so we can ensure were contacting you in the most convenient way possible. Please use our quick online form or give us a call today at to let us know how best to contact you.
We also provide online FAQs about our company to help consumers get answers to common questions about our company, like what to do if the amount in your collections letter seems incorrect or how to resolve your debt online. Browse our FAQs and contact us with any questions not answered there.
You Can Request A Callback Number
Just like any other legitimate business, a debt collection agency should be able to provide you with company information, including a number to call them back. When they contact you, write down as much information about the company as possible, including its name and address. This is important to see if they are legally operating in your state.
Also Check: Does Bankruptcy Wipe Out Student Loans
What Is Debt Settlement
Debt settlement refers to resolving debt by paying less than you owe. You can negotiate with creditors on your own, and there are also companies that settle with creditors on your behalf. Working with a debt settlement requires stopping payments on your debt and sending money to the settlement company instead. This will significantly lower your credit score until the settlement company starts settling your debt. Interest and fees also accumulate while the company settles the debt. Debt settlement companies also charge fees.
Work Out What You Can Afford To Pay
Use our budget planner to work out what you can afford to pay. Calculate your income and expenses to work out how much, if anything, is left over.
If you can’t afford to pay anything, call the National Debt Helpline on 1800 007 007 for free, confidential advice about what to do. The helpline is open Monday to Friday, 9:30am to 4:30pm.
Also Check: What Does Bankruptcy Do To Your Debt
Make Sure It’s Your Debt
Don’t take for granted that a debt collector who contacts you is pursuing a legitimate debt. Debt collectors have been known to pursue bogus debts or even attempt to collect on debts that have already been paid. Approach all debt collections with a healthy dose of skepticism.
Within five days of contacting you, the collectors must send you a debt validation notice. This notice lists how much money you owe, names the entity to which you owe it, and details steps you can take if you believe there’s been a mistake.
You have 30 days from receiving this notice to request, in writing, that the debt collector send you proof of the debt. Once the collector receives your debt verification request, they can’t continue collecting from you until they’ve sent the proof you asked for.
Once the collector sends the proof and you’re satisfied the debt is legitimate, you can proceed with the rest of the negotiations. Otherwise, if the collector doesn’t send sufficient proof, send the collector a cease and desist letter asking they stop contacting you and dispute the debt with the credit bureaus.
Ethics In Billing By Debt Collector
Some of the points below can be used as a reference to see how the task of debt collectors is to collect debtors’ debts correctly and according to procedures.
- Has a Professional Certification of Financing Collection which is an official requirement in billing activities and is regulated in POJK Number 35/POJK.05/2018.
- Comply with the regulations of the Company where the Debt Collector works.
- In carrying out their duties, debt collectors always dress neatly and wear shoes. Do not use jeans, T-shirts or jackets.
- Do not say harsh or obscene words to the debtor and the debtor’s family.
- Avoiding physical contact with the debtor and the debtor’s family.
- Do not accept any form of money or gifts from debtors for their collection activities.
- Do not threaten the debtor and the debtor’s family.
- Always carry a photocopy of the Power of Attorney legalized by the external agency office, Official Assignment Letter and Collector Agency professional Identity which is accompanied by a professional collector agency photo.
- Do not use fake Official Receipts/Receipts.
- Prioritizing persuasive, professional attitude, and negotiating well without intimidation towards debtors.
- Do not provide debtor data either to other professional agencies or to other external agency companies.
- Not providing wrong information to debtors regarding total arrears and fines for late payment of debtors.
You May Like: How Many Times Can Bankruptcy Be Filed
What If I Do Get A Home Visit From A Debt Collector
This is usually uncommon but remember that theyre not allowed inside your home unless you give them permission to do so. You dont even have to answer the door if you dont feel comfortable doing so and they are legally required to leave if you ask them to.
Bailiffs and debt collectors are very different. Debt collectors have no legal power and they are not allowed to take things from your home – they are only allowed to talk about the repayment of your debts with you.
Do not pay any money to a debt collector unless you have received a copy of your original credit agreement and you know the company and the debt you owe is legitimate.
If they are rude or abusive to you in any way or you are not happy with the way you are being treated, you can make a complaint to your creditor.
What Arent Debt Collectors Allowed To Do
- First, debt collectors are not allowed to attempt to collect your debts from others. Only co-signers can pay for your debts.
- They arent allowed to call excessively, as this is usually harassment.
- Collectors cant threaten, intimidate, or use abusive language.
- They arent allowed to excessively pressure any debtor to pay.
- Debt collectors cannot lie or provide misleading information.
- They cant call your cell phone unless youve given the number for that purpose.
- Lastly, they cant add collection fees.
Don’t Miss: How Does A Bankruptcy Affect My Credit Score
Consider Filing For Bankruptcy
If you simply dont 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 dont qualify for an exemption or through a repayment plan based on your income and expenses .
If you really cant afford to pay anything and either dont 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 Percentage Should I Offer To Settle Debt
If you plan on going it alone, start your negotiation by making it clear youre unable to pay the full amount, then offer a lower price than what you expect to pay. A general rule is to offer 30% of your total debt. It may seem optimistic, but it gives you plenty of room for counter offers.
If they come back with a counteroffer, you can either take it, or try to negotiate somewhere between your offer and theirs. They can also set you up on a monthly payment plan if it helps you pay the amount youre asking for. Once you reach a deal, make sure you agree that, upon payment, your debt will be cleared, and you wont hear from them again.
Always get the final settlement in writing from the collection agency. Do not settle for a verbal agreement from the collection agent. Sometimes a collection agency will accept a verbal agreement and then rescind the offer later on.
If youre not comfortable negotiating on your own with a collection agency, a Licensed Insolvency Trustee can help. An LIT can help you figure out what you can afford and can also help you negotiate with your creditors , as its what theyre trained and legally authorized to do.
Recommended Reading: How Many Times Has President Trump Filed Bankruptcy