How to Deal With Debt Collectors, According to Experts

Dealing with debt collectors can be intimidating. It is important to understand the rights of both debtors and collectors in order to effectively handle any collection attempts or communication from debt collectors. Knowing how to protect yourself and what you need to do if contacted by a collector can go a long way towards alleviating the stress and anxiety that can come with dealing with debt collectors.

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The Fair Debt Collection Practices Act (FDCPA) prohibits any harassing, deceptive, or abusive behavior on the part of collectors and mandates that they furnish accurate information regarding the debt says Finance Executive and Founder of Fluent in Finance, Andrew Lokenauth. Debtors also have the right to dispute a debt if deemed inaccurate.

Related: Mistakes to Avoid When Paying Off Debt

It is illegal for a debt collector to threaten violence or other criminal activity to your person, property, or your reputation. They also cannot speak in threatening ways such as using profanity. 

Related: Smart Tactics for Getting Out of Debt

It is important to know how to properly communicate with debt collectors. “When a collector calls, make sure you keep a record of what they say. Make sure you avoid confirming that the debt is yours and avoid volunteering any information,” says Collen Clark, trial lawyer and the founder of Schmidt & Clark, LLP. “Any information about the debt in question should come from the collector, not you. This is a legal requirement they have to follow,” Clark continues. 

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Clark recommends asking the following questions:

• Who is the original creditor? 
• How much is owed? 
• How much was the original amount?

Remember, don’t use “I” or “my” in these questions, especially if the debt is several years old. Admitting to it will reset the statute of limitations on an old debt, Clark says.

Another important way to deal with debt collectors is to keep a paper trail. Asking for things on the phone is a start. However, to protect yourself, it is best to send written follow-ups via certified mail for all interactions and keep copies of correspondence including the date they were sent.

After contacting you, debt collectors are required to give written notice within five days. According to the FDCPA, this notice must include the following information:

1. The amount of the debt.
2. The name of the creditor you owe. 
3. A statement of validity. Once received you have 30 days to dispute the validity. 
4. If requested by you, verification of the debt must be provided in writing within 30 days. 
5. The name and address of the current creditor if it is different from the original creditor (this is likely to happen if another creditor has purchased your debts).

The Federal Trade Commission recommends contacting your lender directly, says Loretta Kilday, spokesperson for Debt Consolidation Care which offers free debt counseling and assistance. “This provides an opportunity for you and the creditor to reach a mutually agreeable solution before the debt goes into collection status.”

“If possible, let the lender know when you'll be able to catch up on the payments and see if you can work out a payment plan for the past-due amount,” recommends Kilday. By proactively addressing the debt, you can show the lender your willingness to resolve the issue and potentially put an end to collection calls.

The state you live in can impact the statute of limitations. For most states, it is around three to six years but could be as long as 15 years according to Debt.com. If you are contacted about an expired debt, you can call the Consumer Financial Protection Bureau to report the issue. The debt collector can then be fined for violating the statute of limitations. “It’s important to know this because there are aggressive collectors that may threaten you with a lawsuit for a debt that’s way past its statute of limitations,” says Clark.

The FDCPA has rules regarding when and where a debt collector can call you. They aren’t allowed to call you before 8 a.m. or after 9 p.m. If they call you at work, you can request they no longer do so and they aren’t allowed to continue. Debt collectors also can’t call your employer except as needed for identity verification. Repeated and continuous calls by debt collectors are also prohibited by the FDCPA. According to Jackson White Law, a debt collector cannot call you more than once a day for each debt, and calling more than this is considered harassment.

If repeated phone calls are stressing you out, you can’t ignore the debt, but you can ask the debt collector to stop calling you. To do this, Jackson White Law says you can “send them a letter by certified mail requesting that they no longer contact you this way.” Sending your letter by certified mail gives you proof they received your letter.

According to Clark, debt collectors are not allowed to tell other people about your debt, especially your family, friends, neighbors, and employer.

First-party debt collectors derive their income by collecting a fraction of the debt they recover, says Lokenauth. Consequently, a higher recovery rate incentivizes them to negotiate with the debtor, as this directly impacts their pay.

Debt collectors can be amenable to negotiation, as their primary goal is to collect a portion of the debt owed by the borrower says Kilday. She goes on to say however, that the level of amicability will depend on various factors, including the specific debt collector, the amount of the debt owed, and the borrower's financial situation.

Sometimes, debt collectors may be more willing to negotiate with borrowers with a good track record of making payments or demonstrating their ability to repay the debt, says Kilday. On the other hand, debt collectors may be less willing to negotiate with borrowers who have a history of defaulting on loans or who cannot demonstrate their ability to repay the debt.

It's important to keep in mind that debt collectors are not required to negotiate with you, and they may be less willing to do so if you have a history of defaulting on loans or have a low credit score says Kilday.

Hiring a professional before negotiating with debt collectors may save a lot of stress and money. Plus, these professionals can provide a personalized plan for your situation. If you can’t afford to hiresomeone, working with a nonprofit such as the National Foundation for Credit Counseling (NFCC) and the American Consumer Credit Counseling (ACCC) may be possible, says Jonathan Merry, CEO of Moneyzine.

Negotiation may involve paying a lower amount, setting up a payment plan, or paying the debt off with a more favorable interest rate says Jon Morgan, CEO of Venture Smarter.

Debt collectors are prohibited from asking you to pay more than you owe. Further, the interest and fees you are obligated to pay are determined by the original agreement, not the debt collector.

Ignoring debt collectors is never a good idea. It may seem scary to talk to them, especially if you don’t have the means to pay, but ignoring the problem can be even worse. In certain cases, debt collectors can obtain a court order to garnish your wages from your paycheck or bank account if you continue to ignore them or refuse payment of legitimate debts.

To prepare for negotiations, the debtor must be thoroughly informed of their financial standing. To achieve this, one must gather all relevant documentation, such as bills, statements, and receipts pertaining to the debt in question. Armed with a comprehensive understanding of their financial situation, the debtor can negotiate from a position of strength says Lokenauth.

When communicating with debt collectors, Lokenauth encourages debtors to adopt a polite but assertive tone. He says it is crucial to emphasize one's knowledge of their rights and the expectation of fair and professional conduct. Negotiations should only be pursued if the terms align with the debtor's comfort level. In certain cases, seeking legal counsel or credit counseling services may be advisable.

Ultimately, the best way to deal with debt collectors is to pay the debt as soon as possible says Jake Hill, CEO of DebtHammer. This may not always be possible. However, if you can eliminate the debt, even if it involves getting a second job, cutting expenses, or selling things you don’t need, you’ll be better off in the long run.

According to Sean Fox, president of debt solutions at Achieve, “If you are having difficulty making even minimum payments — and if you’ve had a significant financial hardship like major medical expenses, loss of your job, divorce, or death of a family member, debt resolution might be an option.” Debt resolution is regulated by the Federal Trade Commission (FTC) and works to lower principal balances but not accrued interest or fees.

If you're unable to pay the debt, look into financial assistance programs that may help cover your medical expenses says Kilday. “For example, Medicaid provides health coverage for low-income individuals and families, and many hospitals have charity care programs to help patients who are unable to pay their medical bills.”

Having a debt sent to collections will negatively affect your credit score. Chartered Financial Analyst Tom Koesternen recommends checking your credit score once you receive a call from a debt collector. “If it has not been reported to the credit bureaus, you can pay them before the adverse remark surfaces in the report. “The idea is to avoid the debt’s entry in your credit report because it remains for seven years even after paying off the debt,” says Koesternen. This could negatively impact your borrowing ability in the future.

If you have a delinquent auto loan, the lender can, in some states, repossess your car as soon as you default on the loan or lease, says Kilday. Additionally, if you have a car title loan, the lender may take your car if you fail to repay the debt. The car is collateral for the loan, and when you take out a title loan, you give the lender the title in exchange for money.

According to the Federal Trade Commission (FTC), when a lender seeks to repossess your car, they must not breach the peace. This term can vary, but it may mean that the lender must not use physical force or threaten to do so, or remove the vehicle from a closed garage without your consent says Kilday.

If you can’t make your house payments, it is possible that you could experience foreclosure. Typically, lenders will attempt to collect the payment before proceeding to foreclosure. So if you are contacted about late payments on your house, it is critical you pay them as soon as possible if you can. If you can’t make to payments call your lender to see if you can refinance, develop a repayment plan, go into forbearance, or modify your loan.

“Debt collection scams happen frequently. I suggest you verify the debt properly and find its genuineness before committing to repay it,” recommends Koesternen.

It is imperative to recognize that debt collectors are not necessarily adversaries Lokenauth says. “Many merely perform their job and earn a livelihood. By approaching the situation with equanimity and an awareness of one's rights and obligations, the debtor can effectively manage their debt and negotiate a resolution that serves their best interests.”