

Debt Collection Answers:

How to Use Debt Collection Laws to Protect Your Rights

Gerri Detweiler and Mary Reed

Copyright © 2015 Gerri Detweiler and Mary Reed

Published by Ultimate Credit Solutions Inc. at Smashwords

No part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording, or otherwise), without the prior written permission of the copyright owner and the authors.

The scanning, uploading and distribution of this book via the internet or via any other means without the permission of the author is illegal and punishable by law. Please purchase only authorized electronic editions, and do not participate in or encourage electronic piracy of copyrighted materials. Your support of the authors' rights is appreciated.

Important: Although the author have strived to provide information that consumers may find helpful, this information is not intended to and does not provide or constitute legal or other professional advice. You should not use the general information provided in this book as a substitute for the advice of a competent professional. For questions about your individual situation you should consult an attorney, tax or financial advisor. Furthermore, the authors make no representations or warranties with respect to the accuracy and completeness of the contents of this book.

Ultimate Credit Solutions Inc., the publisher of this book, has marketing relationships with some of the services listed in this book. We've worked hard to find services we believe will be helpful to our readers and hope you find them useful. Choosing a law firm or a company to help you with your debts is an important decision, however, and we urge you to do your own research.

NEW EDITION COMING SOON: FREE OFFER

Over the past few years, we have answered literally thousands of questions from consumers who are dealing with debt collection problems. We are really concerned about the many people who are experiencing financial struggles despite an "improving" economy. The consumers we hear from aren't trying to get out paying their debts; in fact, just the opposite is true. Many will pay collection accounts at the expense of other essential bills.

The questions we've fielded have helped us better understand the kinds of debt collection problems consumers most commonly face. As a result, we have been working on a new and much expanded version of this book based on those questions. In addition, new governmental regulations affecting the collection industry are expected to come out in the next few months, and we want to make sure we include that information in that next edition as well.

In the meantime, we have decided to offer this current edition of our book for free. Don't worry, this edition is not out of date. We just have lots more to say!

We know we can't answer every question you may have about collection accounts within these pages, but we hope this book will help you understand the rights you have when it comes to dealing with debt collectors, and tell you how to use those rights to resolve your debts and get your life back!

How to Get a Free Copy of the New Edition

When we release the new version, it will be offered for free for a limited time to everyone who received this and previous versions. If you want to be notified when this new version is available for free, please go to DebtCollectionAnswers.com/free to sign up for our email alerts. We will occasionally send you sample chapters to review, breaking news about new debt collection protections, and we will let you know when the new edition is available.

Again, sign up for our free email alerts at:

DebtCollectionAnswers.com/free

## Table of Contents

Chapter 1: Your Debt Collection Rights

The Fair Debt Collection Practices Act

Some Debt Collectors Aren't Covered By the FDCPA

Attorneys Who Collect Debts

State Debt Collection Laws

The Federal Trade Commission and the Consumer Financial Protection Bureau

Keeping Good Records Is Essential

How Long Can a Debt Collector Try to Collect a Debt?

What Debt Collectors Cannot Do to Collect a Debt

How, When and Where a Debt Collector Can Contact You

Your Right to Privacy

When a Debt Collector Contacts You for the First Time

When You Talk With a Debt Collector

The Risks of Saying Too Much

If A Collector Breaks The Law

File a Complaint With the Consumer Financial Protection Bureau

File a Complaint With Your State

Sue the Debt Collector

Watch Out for Scammers

Option #1: Pay the Debt

How to Pay a Debt Collector

Option #2: Ask the Debt Collector to Verify the Debt

What Does "Verification" Mean?

Option #3: Tell the Collector to Stop Contacting You

Option #4: Offer to Settle Your Debt

How to Settle Your Debt for Less Than You Owe

Option #5: File for Bankruptcy

Prioritizing Your Debts: What to Pay When You Can't Pay Everything

What Can a Debt Collector Really Do if You Don't Pay a Debt?

Judgments

Are You "Judgment-Proof?"

Chapter 3: Collection Accounts and Credit Reports

Credit Reporting Agencies – A Brief Background

Important Background Information About Collection Accounts

One Past Due Account Can Equal Two Negatives (Sometimes)

How Long Can a Collection Account Be Reported?

Special Rules for Reporting Tax Liens and Student Loans

Getting Collection Accounts Removed from Your Credit Reports

Should You Hire a Credit Repair Company?

Become Your Own Credit Expert!

If You Can't Get a Collection Account Removed

Recording Your Phone Conversations with Collectors

When You're Responsible for Someone Else's Debt

Past Due Debt and Social Security Income

Managing Your Unpaid Medical Debts

If You Have No Health Insurance

If Your Insurer Refuses to Pay Your Medical Bills

Your Options for Dealing With Medical Debts

Resources: More Help For Debt Collection Problems

Collector Contact Worksheet

Sample Letters

#1: Sample Letter To Request Verification Of A Debt

#2: Sample Letter To Dispute A Debt

#3: Sample Letter To Stop A Debt Collector From Contacting You Again About A Debt

#4: Sample Letter To Stop A Debt Collector From Continuing To Communicate With You About A Debt You Are Disputing

#5: Sample Letter Asking Collector Not To Contact You Again When You Cannot Afford To Pay Debt

#6: Sample Letter When You Receive Social Security Income

Interview with a Former Debt Collector

About the Authors

Gerri Detweiler

Mary Reed

## What's in This Book

Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights is packed full of useful, easy-to-understand information that educates you about your debt collection rights and tells you what to do when you are contacted by a debt collector. Among other things, it:

  * Tells you what debt collectors can and cannot do to collect money from you.

  * Explains how debt collectors get paid and how that may affect how much you pay.

  * Outlines your options for responding to a debt collector's demands.

  * Explains why keeping good records is one of the most important things you can do when you are dealing with a debt collector.

  * Tells you when you need the help of a consumer law attorney, and how to find one that will help you for free or at low cost.

  * Highlights your options when a debt collector violates your legal rights.

This book also offers helpful tips and warnings, sample letters to write and forms to use, as well as information about other resources that may be of help when you have too much debt and/or are having problems with a debt collector.

We recommend that you read the entire book, even if you think parts of it don't apply to you. You may find out about important legal rights you didn't know you have.

Tip: You will learn a lot about the laws that relate to debt collection in this book. If you think that a debt collector has violated your legal rights, call a consumer law attorney right away. The attorney will warn you against saying or doing anything that could create additional problems for you with the debt collector or that could weaken your case against the collector should you sue him. The attorney may also tell you about actions you can take now in case you later decide to pursue a lawsuit against the debt collector. Knowing that you have an attorney on your side can help reduce the amount of anxiety and stress you may be feeling too.

How to Get Free Legal Help

If a debt collector has broken the law, a consumer law attorney may represent you for free. That's because in the case of a violation, the debt collector must pay the attorney's fees. If you are successful, you will be entitled to $1000 in statutory damages, and you may be entitled to punitive damages as well. (Damages refer to the money a judge may decide you are entitled to because of actions the collector took that harmed or "damaged" you in some way.) You can find a consumer law attorney who specializes in cases involving debt collectors by visiting DebtCollectionAnswers.com/legal.

Keep in mind that you may only have one year to sue a debt collector who breaks the law. While a year may seem like a long time, it can go by very quickly. So don't procrastinate if you think you need to talk with an attorney!

Chapter 1

## Your Debt Collection Rights

In this first section of Debt Collection Answers, we introduce you to some of the key provisions of the federal Fair Debt Collection Practices Act (FDCPA), which Congress passed to protect consumers when debt collectors contact them. We also provide information about state debt collection laws, tell you about the Federal Trade Commission, the federal agency that enforces the FDCPA, and we explain the importance of maintaining good records when a debt collector gets in touch with you. You'll learn more about dealing with debt collectors and protecting your rights in other sections of this book.

The Fair Debt Collection Practices Act

Congress passed the federal Fair Debt Collection Practices Act (FDCPA), which is part of the federal Consumer Credit Protection Act, to protect consumers from unfair and abusive debt collectors. Although the FDCPA became law in 1978 it continues to be an important and much needed consumer law. For example, according to the FTC, in 2006 it received 69,204 complaints from consumers about third-party debt collectors. Furthermore, it's likely that many more people had problems with debt collectors but didn't complain to the FTC.

Given that debt collectors continue to be a problem for consumers today, the opening statement in the FDCPA is as relevant now as it was when the law was passed:

" _There is abundant evidence to the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of privacy."_

The FDCPA mainly applies to personal, family, and household debts, including credit card debts, mortgages, car loans, and student loans. It also applies to bounced checks, medical and insurance debts, unpaid utility bills, unpaid condo fees, and outstanding legal judgments.

Warning: If you are a business owner and you are running your business as a sole proprietorship, your business debts are your personal debts. Therefore, a debt collector is legally entitled to come after your personal assets in order to collect any past due debts your business may owe. However, if this happens to you, you will not be protected by the FDCPA because the law only applies to debts that are exclusively personal debts, not your business debts. For example, the law won't apply if you owe a credit card company for items you purchased for your business or if you can't pay the personal loan you got from your bank to help finance your business.

Some Debt Collectors Aren't Covered By the FDCPA

The FDCPA does not apply to all debt collectors. It does apply to debt collectors who are collecting debts for creditors and to attorneys who are hired by creditors to handle their consumer account collections. However, when creditors (such as credit card companies or mortgage lenders) use their own in-house employees to collect past due consumer debts, those debt collectors usually are not covered by the FDCPA. Also, the law does not apply to federal and state government officers who collect debts for a government agency and it does not apply to non-profit credit counseling organizations either.

**Attorneys Who Collect Debts**

Don't panic if you receive a letter from an attorney about a debt that you owe! Attorneys often help creditors and debt collectors collect consumer debts by writing collection letters for them. Attorneys who regularly collect consumer debts are considered debt collectors under the FDCPA, and that means they must abide by the requirements of the FDCPA.

The FDCPA says that collection letters from attorneys must accurately describe the attorneys' role in collecting a debt and must be truthful about what the attorneys will do if the consumer receiving the letter does not pay up. Attorneys who do not include this information in their debt collection letters or who provide misleading or false information in those letters violate the FDCPA. Some consumers have successfully sued attorneys who did not include the required information, misled them by making it sound as if the attorneys had reviewed their particular case when they had not, or threatened to sue the consumers when the attorneys had little intention of doing so.

**State Debt Collection Laws**

Your state may have its own debt collection law and that law may provide stronger protections for you and stiffer penalties for debt collectors who violate your rights than the FDCPA does. Also, your state's law may apply to in-house debt collectors as well as to outside or third-party debt collectors, unlike the FDCPA. In the Appendix of this book you will find a list of the states with their own debt collection laws, together with a phone number for the office of the attorney general in each state. These offices typically enforce their state's debt collection laws and can provide you with specific information about the law in your state. However, if you don't see your state on the list, check with your attorney general's office or with a consumer law attorney. It's possible that your state passed its own law after we wrote this book.

**The Federal Trade Commission and the Consumer Financial Protection Bureau**

The Federal Trade Commission (FTC) is the federal government regulatory agency originally responsible for enforcing a number of consumer protection laws, including the FDCPA. In more recent years, the Consumer Financial Protection Bureau (CFPB) has also been handling consumer complaints about debt collectors and enforcing the law. For many years, the FTC reported to Congress about its activities and about the number of complaints it received from consumers during the previous year, including the number of complaints it received about abusive debt collectors. The CFPB now publishes that report.

Later in this book, we tell you how to file your own complaint against a debt collector. If these agencies receive enough complaints from consumers about a particular debt collection agency to establish a pattern of abuse, they will take action. For example, in July 2005 the FTC won a $10.2 million judgment against the debt collection firm National Check Control and its principals. The judgment was the largest for violations of the FDCPA in the FTC's history. In addition, a federal district court judge permanently banned the defendants from continuing to engage in debt collection activities.

_Speak up!_ If you believe a debt collector is being abusive or misleading, or if you think your rights may have been violated, file a complaint with the CFPB! Your complaint may help change the way that debt collectors operate and may cause abusive debt collectors to be punished for their actions. To file a complaint online, go to ConsumerFinance.gov.

**Keeping Good Records Is Essential**

One of the most important pieces of advice we can give you when you're dealing with debt collectors is to keep good records! Not only can they be helpful if you file a complaint against a debt collector with a government agency, but also, if you decide to sue a debt collector for abusing your rights, your records can provide evidence of exactly how your legal rights were violated and can help your attorney make a strong case for why the collector should be required to pay you damages — money that the court will award to you if you win your lawsuit. Your records should include copies of:

  * Each and every piece of correspondence you receive from a debt collector, including the envelopes that the debt collector's correspondence comes in. Staple each letter to its envelope.

  * Every letter you send related to the debt that a debt collector is trying to collect from you.

  * Cancelled checks, account statements, and receipts relating to the debt.

  * Copies of any of your credit reports that list a collection account(s).

  * Receipts for doctor visits and/or prescriptions for medication if a debt collector's actions have caused you to become depressed, to develop insomnia, stomach troubles, or to experience other physical or emotional problems.

You should also save any notices or statements you may receive from a creditor indicating that the interest rate on your account has been raised or that you've been denied additional credit because of information in your credit reports. In addition, save any notices from other creditors denying you new credit as well as any letters you may receive denying you insurance, the new job you may have applied for, or a place to rent. You may receive such communications after one of your debts is sent to collections because that fact will probably appear in your credit reports and will lower your credit scores. Creditors, insurance companies, employers, landlords, and rental agents will learn about the collection account if they review your credit histories as a result of an application you made. We will discuss credit reports in more detail in Chapter Three.

Whenever you communicate with a debt collector by telephone, be sure to fill out a copy of the "Collector Contact Worksheet" that you will find in this book's Appendix and make the completed form part of your records too. Additional copies are available at DebtCollectionAnswers.com. The worksheet provides places to record information that may be important if you decide to file a complaint against a debt collector or to sue the debt collector.

Keep some blank work sheets near each of your telephones so that you can begin filling out the form as soon as you are contacted by a debt collector. Store your completed worksheets with the rest of your debt collection records.

If you talk to a debt collector while you are at work, on your cell phone when you are away from home, or in some other situation that makes it impossible for you to fill out a "Collector Contact Worksheet" immediately after your conversation is over, complete the form as soon as you can while the conversation is still fresh in your mind. If you can't remember every detail of the conversation, write down as much as you can recall. You may find that you can piece together the information you need to complete the form by reviewing your phone records and any correspondence you may have that relates to the debt and by tapping the memory of a friend or relative you may have told about the conversation.

Tip: Don't worry about including too much information about a debt in your records. It's better to err on the side of too much rather than too little information.

**How Long Can a Debt Collector Try to Collect a Debt?**

A debt collector can contact you about a debt that you owe years after it becomes past due. However, in every state there are "statutes of limitations" for various types of debts. If the creditor or collector sues you after that time period has elapsed, you can raise the statute of limitations as a defense against the lawsuit and they would lose their case. In some cases, it is illegal for a collector to even attempt to sue you for a debt when the statute of limitations has expired.

Usually the statute of limitations for a debt will begin on the date you last made a payment on the debt. It is based on state law, not federal. You can find a summary of the statute of limitations by type of debt in all fifty states and the District of Columbia at Credit.com/debt/statutes-of-limitations/

State legislatures occasionally change the statute of limitations for a type of debt. So please don't rely just on online information if you want to know what the statute of limitations is for a past due debt that you owe. Instead, contact your state attorney general's office or check with a consumer law attorney for the most up-to-date information. If the statute of limitations on a debt that a debt collector is trying to collect from you has not run out, you'll find out about your options for dealing with him later on in this book.

If the statute of limitations on your debt has run out, you can:

  * Send the debt collector who is trying to collect the debt a "Cease Contact Letter" (see Appendix) noting that you believe the statute of limitations on that debt has expired; or

  * Contact a consumer law attorney to find out what you should do. (This is especially important if they try to collect after you've told them not to contact you again.)

It's very important that you know whether the statute of limitations on a past due debt has or has not expired. This is because if it has and you acknowledge to the debt collector that you owe the debt, or if you offer to make a payment on the debt, you may cause the statute of limitations on the debt to begin all over again. If that should happen, the debt collector could sue you.

Tip: State statutes of limitation do not address how long a debt can be reported on your credit report. The federal Fair Credit Reporting Act (FCRA) covers that, and it says that collection accounts may be reported for seven and a half years. Therefore, although a debt collector may tell you that a debt will stay in your credit histories forever if you don't pay it, this is simply not true. We talk more about debts and credit reports in Chapter Three.

Warning: Debts that never seem to die are a growing problem. These "zombie debts" are very old debts that collection agencies purchase cheaply from creditors (often for pennies on the dollar) and then try to pressure consumers into paying. However, a debt collector who does this may be breaking the law since it's illegal for a debt collector to misrepresent the status of a debt. Therefore, if a collector contacts you about a debt that is several years old, do not acknowledge that you owe it or agree to pay anything on it until you find out whether or not the statute of limitations on that debt has expired.

**What Debt Collectors Cannot Do to Collect a Debt**

The FDCPA says that debt collectors who want to collect a debt from you cannot:

  * Threaten you with violence or use violence in order to get you to pay a debt.

  * Threaten to harm your reputation.

  * Use obscene, profane or abusive language when communicating with you. Racial slurs are also prohibited.

  * Include your name on a list of debtors and provide that list to an individual or business, although it can provide it to a credit reporting agency and to any other business or individual who is legally authorized to receive your consumer credit record information under the FCRA.

  * Call you repeatedly with the intent of annoying, abusing, or harassing you. The law doesn't specify how many calls are "too many," but calling several times a day or a week or calling you over and over again within a relatively short period of time — during the morning or afternoon, for example — would probably be viewed as a violation of the FDCPA.

  * Send you a letter or a notice that appears to come from an attorney when it does not.

  * Threaten to ruin your credit forever.

  * Falsely imply that a document they have sent to you is a legal document or that they've taken legal action against you when they have not. For example, a debt collector cannot try to scare you into paying a debt by mailing you a document that looks like a court summons when it is not.

  * Falsely claim that they are affiliated with a credit bureau by using the words "credit bureau" on their letterhead and/or on the envelopes they use to communicate with you about a debt.

  * Threaten to tell your employer about your debt.

  * Debt collectors can't pretend to be law enforcement officers and cannot use letterhead, envelopes, or a company name that makes it appear as though their correspondence has come from the federal government, a state government, or from a law enforcement agency if they are not working for that agency.

  * Represent or imply that they are attorneys unless they are. Also, debt collectors cannot contact you on an attorney's letterhead if the attorney has not reviewed information related to your debt.

  * Misrepresent the "character, amount, or legal status" of a debt that you owe. For example, a debt collector cannot exaggerate the amount of money that you owe or try to collect a debt that you discharged (or wiped out) through a Chapter 7 liquidation bankruptcy.

  * Sue you to collect a debt after the statute of limitations on the debt has expired.

  * Put pressure on your parents or another relative to pay your debt for you or to get you to pay your debt yourself, unless that person/s co-signed the debt.

  * Put you at a legal disadvantage by sending you a notice or legal document related to a debt that you owe and leading you to believe that you do not need to respond to the notice/document. For example, let's assume that a debt collector sends you a summons — an official notice telling you that you have been sued and when you must appear in court for your trial. After you receive the summons, you call the debt collector who agrees to let you settle your debt for less than what you owe on it. During your conversation, the debt collector leads you to believe that because you've settled the debt he will cancel your trial. However, the debt collector does not do so and because the trial goes forward without you, the judge automatically awards the debt collector a default judgment against you. (We talk about judgments later in the book.)

  * Use false, deceptive, or misleading means to pressure you into paying a debt. This means that a debt collector cannot threaten you with dire consequences if you don't pay a debt, unless the collector has the means and the legal authority to follow through on the threat and intends to do so. For example, a debt collector cannot threaten to sue you, put you in jail, garnish your wages without a court order, seize and sell your property, repossess your home, put a lien on an asset that you own, cause you to lose your job, etc., unless the debt collector is legally entitled to do so and intends to do so. We discuss this in more detail later.

If a debt collector takes any of the actions on the preceding list, contact a consumer law attorney right away. You should also file a complaint against the debt collector with the CFPB and with your state attorney general's office if your state has its own consumer debt collection law and if the debt collector's action is prohibited by that law.

**How, When and Where a Debt Collector Can Contact You**

The FCDPA is very specific about how and when a debt collector can contact you about a debt and also places strict limits on where you can be contacted. For example, the law says that a debt collector can contact you about a debt using the phone or the mail but cannot use a postcard or an envelope that in any way indicates that a debt collector sent it.

Also, according to the FDCPA, debt collectors cannot contact you "at any unusual time or place or a time or place known or which should be known to be inconvenient." Ordinarily, this means that a debt collector can only call you between 8 a.m. your time and 9 p.m. your time. However, if you let the debt collector know that being called during that time period is not convenient for you and if you tell him a better time to call, the debt collector must limit his calls to that other time. If the debt collector does not, he has violated the FDCPA.

For example, suppose you work a night shift and sleep each day until 3 p.m., so you don't want to be called in the morning or early afternoon. If you explain your schedule to the debt collector and ask him to call you between 3:30 p.m. and midnight, but he continues to call you while you are sleeping, he is breaking the law.

A Florida court ordered a debt collection company to pay a consumer $2,500 in actual damages, $1,000 in statutory damages and $50,000 in punitive damages for calling the consumer late at night, threatening the consumer with arrest and for illegally contacting a third party about the consumer's debt.

The FDCPA also says that a debt collector cannot call you at your place of work if he knows, or has reason to know, that your employer does not want you contacted there during working hours. Therefore, if you tell a debt collector, "My employer doesn't want you to call me when I am at work," the collector should not call you there again. If you tell the debt collector not to call you at work and he does anyway, he is violating the law.

Tip: If you want a debt collector to stop calling you at work, or to stop contacting you at an inconvenient time, put your request in writing and keep a copy of the letter for your records. Send your letter via certified mail, return receipt requested, so that you will have proof that the debt collector received it.

If a debt collector ignores your request to not contact you at work or at an inconvenient time, make note of that fact on your "Collector Contact Worksheet" and get in touch with a consumer law attorney right away.

**Your Right to Privacy**

If a debt collector does not know how to get in touch with you, the FDCPA says that he can contact your employer, a neighbor, a relative, or someone else – but only to find out how to reach you. If the debt collector already has your contact information, he is violating the FDCPA if he contacts other people about your debt (unless they cosigned for that debt).

When a debt collector contacts a third party, he must identify himself and explain that he is trying to get in touch with you; but cannot say why he wants to reach you. Also, the debt collector cannot indicate the name of the company he works for unless he is asked and cannot ask for any information about you besides your contact information.

In addition, a debt collector cannot:

  * Call a third party more than once to obtain your contact information, unless the person who is called asks the debt collector to call back or unless the debt collector has reason to believe that the person gave him incorrect information.

  * Contact someone else about you using a postcard or an envelope that indicates it was sent by a debt collector.

  * Use deceptive means to try to locate you. For example, a debt collector cannot send you a notice that gives you the impression that you have won a prize along with instructions for how to verify your address in order to claim the prize.

Warning: Generally, a debt collector is allowed talk with your current spouse about one of your past due debts even if your spouse did not cosign for the debt or is not a joint account holder. It can be difficult to hide past due debts from your husband or wife!

**When a Debt Collector Contacts You for the First Time**

A debt collector may contact you for the first time about a past due debt by letter or by phone. If a debt collector uses a letter, the FDCPA requires that the letter include the following:

  * The amount of money that the debt collector says you owe.

  * To whom you owe the debt.

  * Your right to dispute all or part of the debt in writing within 30 days of the debt collector's initial contact.

  * Your right to receive written verification of the debt or a copy of any court judgment against you that is related to the debt. However, in order to receive written verification you must notify the debt collector in writing within 30 days of his first contact that you dispute the validity of the debt or that you disagree with the amount of the debt.

  * Your right to request the name and address of the original creditor related to the debt if that creditor is not the current collector of the debt. Again, you must request this information in writing within 30 days of the date that the debt collector first contacts you.

Tip: Lawsuits related to the FDCPA have established that a debt collector must provide you with the collection agency's address, so if it is not on the collector's initial letter, ask for it. The same is true if the debt collector contacts you for the first time by phone and does not offer his address. You will need the address if you want to request that the debt collector provide you with written verification of the debt, if you want to dispute the debt, or if the debt collector violates your legal rights and you want to file a complaint against the debt collector and/or sue the debt collector.

If a debt collector uses the telephone to contact you for the first time about a debt, the law says that he must:

  * Tell you that he is attempting to collect a debt that he believes you owe.

  * Tell you that he may use any information you share with him to collect the debt.

  * Give you his name, the name and address of his employer, his work number, and the name of the creditor for whom he is collecting the debt. Also, the debt collector must send this same information to you in writing within five days of his phone call. Even so, you should also request the information during your first conversation with the debt collector assuming you've not already received it by mail. Again, you will need this information if you want to dispute the debt, or if the debt collector violates your legal rights and you want to file a complaint or sue.

**When You Talk With a Debt Collector**

The information in this section is some of the most important in this book, so read it carefully!

The FDCPA does not require you to give a debt collector any information about yourself or your finances. Therefore, no matter how much a debt collector may insist, you are under absolutely no obligation to answer any questions a debt collector may ask you about:

  * Your credit accounts. The debt collector may ask you about any open credit accounts or credit lines you have and then try to pressure you into using your available credit to pay your debt.

  * Your income, bank accounts, or any other assets you may own, including the amount of equity you have in your home. The debt collector may try to pressure you into borrowing against or selling one of these assets so you can pay your debt or may threaten to take one of the assets if you don't pay up.

In order to protect yourself when you are talking to a debt collector, always keep the conversation brief and to the point, even if the debt collector seems very friendly and tries to engage you in small talk. Also, you do not need to provide the debt collector with any explanations or excuses for why you have not paid the debt he is trying to collect.

**The Risks of Saying Too Much**

If you are not careful about what you say to a debt collector:

  * You may unintentionally give the debt collector information that he can use against you to collect the money that you owe.

  * The debt collector may use your conversation as an opportunity to scare you, to make you feel guilty about the money you owe, or to pressure you into paying your debt even though you really can't afford to do so.

  * The debt collector may pressure you into paying a debt that is relatively unimportant debt compared to your other debts. If you pay that debt, you may be unable to keep up with your most important financial obligations, which could create new financial problems in your life.

  * You may unintentionally reactivate the statute of limitations on an old debt. Remember, as we've already discussed in this book, ordinarily once the statute of limitations runs out on a debt, you can prevent a debt collector from getting a court judgment against you by raising the statute of limitations as a defense if the collector tries to sue you. However, if you agree to make a payment on that debt, no matter how small, you may reactivate the statute of limitations on it, which would then allow the collector to sue you.

For all of these reasons, if a debt collector tries to initiate a conversation with you or asks you about your personal or work lives, finances, etc., politely end the conversation and hang up the phone. You can do that simply by saying something like, "I am sorry, but I need you to put your question(s) in writing. Goodbye."

Warning: Beware of debt collectors who act extremely friendly on the phone or who try to get you upset. They are hoping that you will let your guard down and share information about yourself or agree to pay your debt, even if you cannot afford to do so.

**If A Collector Breaks The Law**

If you believe that a debt collector has broken the law, you have several options each of which we describe in this section of the book. The most appropriate option for you will depend on whether the debt collector violated the FDCPA or your state's debt collection law and on the seriousness of the violation, among other considerations. If you are not sure which option you should pursue, talk with a consumer law attorney who has specific experience helping consumers resolve their debt collection problems. Visit the DebtCollctionAnswers.com/legal page.

**File a Complaint With the Consumer Financial Protection Bureau**

You can file a complaint against the debt collector by visiting the CFPB website at ConsumerFinance.gov.

When you make a complaint, be as specific — yet brief — as possible about what the debt collector did or didn't do and why you believe the debt collector's behavior is a violation of your FDCPA rights. Sometimes the CFPB will contact the company in question on your behalf. In other instances, they will initiate an enforcement action if they notice a pattern in complaints about practices that are abusive or illegal. When it does, the CFPB may require a debt collection agency to pay fines and reimburse the consumers who were harmed by its illegal behavior.

**File a Complaint With Your State**

Depending on your state, you will file your complaint either with your state attorney general's office (www.naag.org) or with your state's consumer protection agency (www.consumeraction.gov/state.html). This option is appropriate if you think that the debt collector violated your state's debt collection law. Although your state is not likely to take action just on your behalf if you file a complaint, if the agency believes that there is a pattern of abuse on the part of the debt collector, it may file a lawsuit against that collector and/or ask the legislature in your state to amend your state's debt collection law in order to make it stronger. This, in turn, could benefit you. For example, in several states judgments resulting from illegal debt collection lawsuits have been vacated (cancelled) and/or consumers have been reimbursed for some of the money they paid the collection agencies that filed the illegal lawsuits.

**Sue the Debt Collector**

The FDCPA says that you can sue a debt collector for statutory damages, actual damages, as well as punitive damages. If you sue for statutory damages and win your case, the court will award you what the statute (law) says you are entitled to, which is up to $1,000. If you sue for actual damages however, you will be asking the court to order the debt collector to compensate you (reimburse you) for the harm the debt collector's actions have done to you. That harm might include lost wages, out-of-pocket costs, and pain and suffering.

If you sue for actual damages however, you will be asking the court to order the debt collector to compensate you (reimburse you) for the harm its actions caused you. That harm might include lost wages, out-of-pocket costs, as well as pain and suffering.

If you sue for punitive damages, you will be asking the court to fine the debt collector. If you are awarded punitive damages, the amount of that award will be as high as the jury or the judge thinks is necessary in order to punish the collection agency for its actions and discourage it from repeating them.

Warning: We caution you against trying to handle your own lawsuit against a debt collector. If you do, you'll be at a serious disadvantage since the collector will no doubt be represented by an attorney. We recommend you get the help of a consumer law attorney who has experience handling debt collection-related lawsuits. Among other things, an experienced consumer law attorney can also assess the strength of your case and tell you whether or not you have a good chance of winning. Also if you do not want to hire an attorney to handle your lawsuit from start to finish, some consumer law attorneys will, for a reasonable fee, help you prepare a defense so you can represent yourself in court. Or you may be eligible for free help from a legal aid office.

For more information on how to find free or low-cost legal help for your debt collection problems, visit DebtCollectionAnswers.com/legal.

**Watch Out for Scammers**

An alarming number of collection calls come from scammers who have bought (or sometimes stolen) personal information about consumers, and then use that information to try to pressure consumers into paying debts they may not even owe.

Here are 7 red flags that the collector who is calling you is one of these scammers. Any of these should be a warning sign that you need to do some more research before you pay the collector:

\- You are told that if you don't pay immediately you will be served with a lawsuit, arrested or prosecuted for fraud;

\- They insist you must wire them money or mail them a prepaid card right away or you'll be sued;

\- The collector says he is with the FBI, some kind of court, or a law enforcement agency;

\- You're told your employer will be notified about your debt and you'll lose your job;

\- They ask you information about where you work or when you'll be home so they can serve you with legal papers (in reality, process servers rarely tip off consumers ahead of time if they plan to deliver legal paperwork);

\- The collector refuses to send you verification of the debt by mail as required under the Fair Debt Collection Practices Act;

\- The collector calls your relatives, coworkers or neighbors (who are not cosigners) and discusses the debt with them.

All of these actions are almost always illegal, but collectors count on being able to intimidate and scare consumers who don't know their rights. They can be very persistent and threatening.

Also be leery when talking with collectors who have very heavy foreign accents. They may be part of fraud rings based overseas. They use technology called "spoofing" to make it appear as if they are calling from the United States (they may even use phone numbers that make it appear they are calling from local numbers or a legitimate bank or government agency).

Warning: Just because the caller knows personal details about you (your Social Security number, employment information, where you have your bank accounts, etc), it does not mean they are a legitimate collection agency. Personal information is widely available for sale on the internet, and consumers who have applied for payday loans online are particularly vulnerable because information about those debts is often bought and sold.

Always insist the collector send you written verification of the debt by mail. If they refuse, tell them you will not pay a debt you can't verify and that you will file a complaint with the CFPB if they continue to try to contact you.

If you believe you are being hounded by a scammer, report them to the Consumer Financial Protection Bureau.

Chapter 2

## Responding to A Debt Collector

In this section you'll learn about your options for responding to a debt collector.

If you're like a lot of people, your first reaction when a debt collector contacts you may be to assume that you need to come up with the money the debt collector is asking for right away. However, doing that may or may not be a good idea depending on several factors, like whether:

  * The debt is relatively unimportant compared to your other debts

  * You do not believe that you really owe the debt

  * You don't think that the amount of the debt the collector says you owe is accurate

  * You can't afford to pay the debt

**Option #1: Pay the Debt**

It makes sense to pay a debt when you know that you owe it, you believe the amount the collector is asking you to pay is correct, and when paying it will not create a financial hardship for you and your family -- make it difficult to pay your rent or mortgage, stay current on your car payments, pay your utility bills or buy groceries, for example. If you can't afford to pay the debt in one lump sum, find out if the debt collector will agree to let you to pay it in installments. In other words, do not pay a debt just because a debt collector demands that you do. For guidance about what to pay when you can't afford to pay all of your debts and living expenses, read "Prioritizing Your Debts" later in this book.

**How to Pay a Debt Collector**

It's not unusual for a debt collector to pressure a consumer into paying a debt in a way that works best for the collector, but not for the consumer. Avoid paying a debt collector with:

  * A money order. When you purchase a money order you do not get a receipt showing the amount of your payment, but having a receipt is important should there be any question after you've paid a collector about the exact amount of your payment. (If you have no other option, make a copy of the money order before you mail it and keep it with your records and send it via certified mail with a return receipt requested. Put the return receipt in your files too.)

  * A personal check. Using a check to pay a debt collector is risky because the check includes your bank account information – information a dishonest collector might use to access the funds in your account without your permission. Also, if you write a check and it bounces, you will have created more problems for yourself.

  * A post-dated check. A post-dated check is a check that has a future date on it, not the date that you actually write the check. They are a bad idea. Even though a collector is not supposed to cash a post-dated check early, if they do you may wind overdrawing your account and incurring expensive overdraft fees.

  * Your debit card. As with personal checks, a debt collector may use your account information to access more money than you agreed to pay (and can afford to pay). Furthermore, should that happen and you take legal action against the debt collector, it will be your word against his.

  * A direct withdrawal from your financial accounts. Never let a debt collector withdraw payments directly from your bank account! We've heard too many horror stories from consumers who did this and discovered that the collector double-charged them or took more money out of their account than they had authorized. Even if the collector is honest, this arrangement can cause problems. What happens if one month you have an unexpected large expense and can't pay the debt collector? It may be difficult to get them to agree not to process a scheduled withdrawal, or they may take the money out before you have a chance to cancel it.

The best way to pay a debt collector is with a bank certified check. A second option is to open a bank account where you deposit enough money to pay the collector, and use that account for paying debts. A third option is to get a reloadable prepaid card and load the funds you need on the card, then give the collector that card number. But, never send a collector the prepaid card itself. Scammers often pressure consumers to mail them a prepaid card because it provides them with untraceable funds. In other words, if you send a collector a prepaid card, you will have no record of your payment.

Tip: No matter how you pay a debt collector, always keep a record of your payments, including date and amount of payment. We have heard from many people who made payments for years only to discover they still owed more than when they started, or who paid a debt but years later were contacted about it by another collection agency! Without good payment records, it will be difficult if not impossible to prove that you paid a debt.

**Option #2: Ask the Debt Collector to Verify the Debt**

After you receive an initial collection notice from a collector regarding a particular debt, the FDCPA gives you 30 days to dispute all or part of that debt and to ask the collector to provide you with written verification that you owe it. This is a very important consumer right! If a debt collector does not respond, he has broken the law.

You may want to ask for a debt to be verified in writing because:

  * You are not sure that you owe the money.

  * You know that the debt is yours, but you believe that amount the debt collector claims you owe is incorrect.

  * You want to buy yourself some time to figure out what to do about the debt.

Always put your verification request in writing and send the letter to the debt collector via certified mail, return receipt requested. Keep a copy of the letter and the return receipt in your files.

If you ask for verification of a debt by phone, follow it up by putting your request in writing so that you will have proof that you made it. In case you are not sure how to write this kind of letter, we've provided a sample letter in the Appendix of this book.

If you request that a debt be verified because you don't think you owe it or because you disagree with the amount of money that the debt collector says you must pay, attach to your letter copies of any correspondence, receipts, etc. you may have that bolster your argument. After reviewing your documentation, the collector may stop trying to collect from you.

Tip: Even if you don't have any documentation that helps prove that you don't owe a debt or don't owe the amount that a collector is trying to collect from you, you can still request verification.

After receiving your verification request, the collector is legally obligated to respond in writing. His response should state the amount of the debt he believes you owe and the amount of any debt-related expenses he wants you to pay, like interest on the debt, collection fees, attorney's fees, and so on.

Tip: In many states, interest and/or collection costs can be charged on debts. But some states also have laws that limit the kinds of debt-related expenses a debt collector can try to collect. To find out if your state has such a law, contact the office of your state attorney general or a consumer law attorney in your area. If your state has a law that limits what the collector can collect from you and the collector violates that law, you may have the basis for a lawsuit.

**What Does "Verification" Mean?**

Unfortunately, the FDCPA does not spell out exactly what a debt collector must include in his response when you ask that a debt be verified. Although it would be great if the collector responded by sending you a copy of your original credit application, your contract with the original creditor (the company that turned your account over to the debt collector) related to the debt, and detailed statements itemizing all the charges the collector claims you owe, that rarely happens. (That may change, however, when new federal rules come out. If you want to know if this happens, go to DebtCollectionAnswers.com/free to sign up for our email alerts.) Instead, it's likely that all you will receive in response to your verification request is a statement indicating the amount of the debt the collector wants you to pay and the name of your original creditor. As a result, it is entirely possible that after the debt has been "verified," you will be as much in the dark about it as you were before!

Because the FDCPA is so vague about what a collector must provide when a consumer asks for verification, the courts have had to interpret the law on this point and they have taken various positions on the matter. Our best advice therefore is that if you don't understand the verification information you receive from a debt collector, contact him again in writing and insist on a clearer accounting. As you did with your first verification request, send your second letter via certified mail with a request for a return receipt. While it's best to put this in writing, if you decide to follow up over the phone, be sure to record the date you did so and the details of your conversation on your Collector Contact Worksheet, which is located in the Appendix of this book.

If the debt collector does not respond to your request or if the information that he sends the second time does not clear up your confusion, get in touch with a consumer law attorney right away.

You should also contact a consumer law attorney if you conclude that the information the debt collector sent to you fails to prove that you owe the debt, or if the collector does not respond to your verification request.

**Option #3: Tell the Collector to Stop Contacting You**

Telling a debt collector not to contact you again about a debt can be a good option if you cannot afford to pay the money or if the debt collector has been especially difficult to deal with and you simply don't want to speak with him again.

You can use the phone to tell the debt collector not to call you again. For example, calmly and firmly you might say, "I can't afford to pay the debt you are calling me about and I am not going to answer any of your questions. Please do not call me again." Then hang up. If you make this request by phone however, be sure to follow up by putting your request in writing so that you will have written proof of what you told the debt collector in the event that he continues contacting you. Make a copy of the letter for your files and then send the original via certified letter with a return receipt requested.

Once you tell a collector to stop contacting you they are only allowed to acknowledge your instructions or notify you that they are taking legal action against you. Any other contact is likely a violation of the FDCPA.

If the debt collector respects your request not to contact you again about a debt, your life should become less stressful especially if the collector has been harassing you and/or verbally abusive. However, it's important to understand that telling a debt collector not to contact you again does not mean that you no longer owe the money. For that reason, it's also a good idea to schedule an appointment with a consumer law attorney to discuss your situation and to get advice about what to do next about your debt.

Warning: There are some disadvantages associated with telling a debt collector not to contact you again. First, you eliminate the possibility of trying to negotiate a settlement agreement. When you settle a debt the collector lets you pay off the debt for less than what you owe on it. Eliminating the option of negotiating a settlement agreement now however, does not mean that you can't try to do it later, maybe in an effort to satisfy a court judgment against you related to the debt or to improve your credit scores. We discuss settlement agreements later in this book. Second, if the collector cannot communicate with you, he may take other steps to try to collect the money you owe -- sue you, for example. However, it's also possible that the collector may decide not to continue trying to collect from you, especially if the amount of your debt is relatively small and he decides to focus on larger debts or debts he thinks will be easier to collect.

Second, if the collector cannot communicate with you, he may take other steps to try to collect the money you owe -- sue you, for example.

But it's also possible that the collector may decide not to continue trying to collect from you. That's especially true if the debt is relatively small, and he decides to focus on larger debts or debts he thinks will be easier to collect.

**Option #4: Offer to Settle Your Debt**

If you agree that you owe the money that the debt collector wants to collect from you and you want to pay it, but you cannot afford to pay it all, trying to settle the debt may be a good option. A settlement means you resolve the debt for less than what you owe on it. For example, you owe $1000, but the collector agrees to accept $500 as payment in full if you pay that amount right away.

If settlement is something you think you want to pursue, don't share that fact with the debt collector the first time that the two of you talk! Instead, when the debt collector asks you to pay up, tell him that you need time to think about what you want to do about the debt and suggest a day and time when he should call you back, or when you will call him to discuss what you owe. This will give you time to think about how much you can realistically afford to pay on the debt and whether you can pay that amount in a lump sum or whether you will need to pay it in installments. It also gives you time to decide if you will ask the collector for any additional concessions in return for settling. We provide advice for negotiating a settlement later in this book.

Tip: If the debt collector won't negotiate with you or if the two of you can't agree on the terms of a settlement, you may want to contact the creditor who sent your debt to collections (the original creditor) to see if it is willing to settle with you. Some creditors will negotiate settlements with consumers even after they've sent their debts to collections. This is especially true when a consumer has proof that the collector the creditor it hired has violated state or federal debt collection laws. However, an original creditor will not be willing to negotiate a settlement if it sold a debt to the collector, which happens more and more often these days. Debt collection agencies that buy past due debts and then try to collect on them are commonly referred to as "debt buyers."

Warning: If a collector or a creditor agrees to let you settle a debt for less than the full amount, the IRS will consider the amount debt that is "forgiven" (or wiped out) as taxable income – even if the forgiven amount includes interest and/or penalties. This means that when you are doing your federal taxes and tallying up your income for the year in which you and the creditor reached the settlement agreement, you may have to include the amount that was forgiven in your total gross income, and you may owe more in taxes as a result. In fact, lenders and debt collectors are required to report "cancellation of indebtedness income" (or CODI) of $600 or more on IRS Form 1099-C. (This requirement also applies to debt collectors who settle debts.)

You may be able to avoid including the amount of cancelled debt in your income if you can show the IRS you are "insolvent" or if you discharged the debt in bankruptcy. You'll find instructions for figuring out whether you can avoid paying taxes on CODI, along with the insolvency worksheet, in IRS Publication 4681. ZipDebt.com also offers an insolvency calculator that can be helpful if you find the IRS forms confusing.

**How to Settle Your Debt for Less Than You Owe**

The idea of negotiating with a debt collector to try to settle your debt for less than what you owe may rank right up there with getting a root canal. We understand! However, making that call can be worth the effort because collectors have been known to settle debts for as little as ten cents on the dollar assuming the consumer could pay the settlement amount in a lump sum immediately. (If you need to pay the settlement amount over time, you probably won't end up with as attractive a deal.) Depending on the total amount that a debt collector wants to collect from you and how much you settle it for, you could save a couple hundred dollars or even thousands of dollars on your debt.

Generally, the older a debt, the more motivated a debt collector will be to settle and the better a deal you are apt to be able to negotiate. This is because the collector probably believes it's better to get something for the debt than nothing at all.

If you don't feel comfortable trying to settle your own debts, get help from a consumer law attorney or from a reputable debt settlement firm. Go to DebtCollectionAnswers.com/settle for more information about debt settlement. If you decide to negotiate on your own, here is some important step-by-step advice for what to do:

1. Verify the amount of the debt first. We told you how to do this in the "Ask the Debt Collector to Verify the Debt in Writing" section of this chapter. Don't forget however, you must request that a debt be verified within 30 days of the date the debt collector contacts you about it for the first time!

2. Start low. Offer something less than what you can actually afford to pay when you make your first settlement offer. That way, if the debt collector counters with a higher amount, you can increase your offer without breaking your bank. And when you do increase your offer the collector will probably see you as someone who is reasonable and willing to give-and-take, which could work in your favor during the rest of the negotiation process.

3. Keep quiet! Make your offer. Then say nothing else and wait for the collector to respond. If you keep talking, you run the risk that you will say something that will make him believe that you can afford to pay more. And if that happens, we guarantee you that the collector will pressure you to increase your offer before he will agree to settle with you.

4. Haggle. If the debt collector responds to your initial offer with a higher settlement amount, simply repeat the amount he has suggested and make no other comments. For example, if he says something like, "You could settle your debt today if you would agree to pay $400 on it." You should say something like, "$400? Hhhmmmm." If the debt collector asks you whether or not you will pay the $400, just say, "I need to think about it," — but only if you think that the amount that the debt collector has suggested is reasonable and you can afford to pay it. If the amount is more than you can afford, tell him, "I can't afford to pay that much, and I won't agree to pay something that I can't afford. I guess we can't settle this right now."

If you can afford to pay more and are willing to do so, keep reading for our advice on getting extra concessions from the collector.

If you cannot afford to pay more, and the collector won't budge, then the two of you have reached a stalemate. At that point, politely let the debt collector know that as long as he continues to insist on your paying more than you can afford, there is no reason for the two of you to continue your conversation, and hang up the phone.

Warning: Don't give in to the debt collector's demands even if he threatens you with a lawsuit or with something else. Agreeing to pay more than you can afford will only create additional financial problems in your life. Some debt collectors may warn you that if you don't pay what they want they will put you down for "refusal to pay." This is not a legal term. It means nothing. It should not scare you into agreeing to payments you can't afford.

Tip: If you offer to settle a debt for less than what you owe on it and the debt collector says that your offer is unacceptable, it is a good idea to put your offer in writing anyway and to mail it to the debt collector via certified mail with a return receipt. That way, if he decides to sue you, your letter will provide the judge with tangible proof that you wanted to pay what you could and made a good faith effort to do so.

5. Ask for additional concessions. If you and the debt collector reach an agreement on a settlement amount, you may want to ask the debt collector for some additional concessions. After all, the worst the collector can say is No! Some examples of concessions to ask for include that he agree to:

  * Tell the credit bureaus to remove permanently the past due debt from their records once you have paid the agreed-upon settlement amount. (We talk more about this in Chapter Three.)

  * Remove from your credit histories all reference to the fact that your debt was turned over to a debt collection agency.

To learn more about how to remove information from your credit histories, read Chapter Three "How to Get Collection Accounts Off Your Credit Reports" in this book.

6. Get it in writing. If you and the debt collector reach a settlement agreement, do not pay the collector any money until he provides you with a written agreement that clearly spells out all of the terms and conditions that the two of you agreed on. It's essential that everything be in writing should any questions or problems related to the settled debt arise later.

At a minimum, the agreement should state:

  * The exact amount of the settlement and the fact that it represents full payment on your debt.

  * Whether you are paying the settlement amount in a lump sum or in installments. If you are paying it in installments, the agreement should indicate the amount of each payment.

  * When your payment/s is due.

  * Interest and/or fees that will be charged if you are making payments. (If no interest will be charged the agreement must state that.)

  * The details of any other terms and conditions that you and the debt collector may have agreed upon. For example, if the debt collector has agreed to any of the concessions spelled out in #5, they should be explicitly stated in the agreement.

If the written agreement you receive from the debt collector does not include all of this information, let him know and ask that he modify the agreement appropriately. Also, do not sign the agreement if it includes anything you do not understand.

Once you have a final, signed agreement, file it with the rest of your information related to the settled debt. You may need it later if the debt collector reneges on some aspect of the agreement or if there is any confusion about exactly what you agreed to.

Warning: Some debt collectors won't put the terms of a settlement agreement in writing. Working with them is risky business because it will be your word against theirs if you run into problems. It is crucial that you get the collector to send you a written settlement agreement. But if you ignore our advice and decide to move forward anyway, try to protect yourself by preparing your own written agreement. When you do, make sure that it indicates the date that you and the debt collector reached your agreement, the name of the collector, and everything the two of you agreed to. Then, make a copy of the agreement for your files and send the original to the debt collector together with the amount of the payment you agreed to make. Send the agreement via certified mail with a return receipt requested.

Keep your copy of the agreement and the return receipt in your files indefinitely. We've heard from consumers who settled a debt and then years later were contacted by a different collection agency who wanted to collect the settled amount!

Tip: If you simply don't feel up to this task, or if you have multiple debts and are having trouble negotiating settlements with more than one creditor or collector, you may want to work with a debt settlement company. Recent consumer protection rules do not allow them to charge consumers until services have been performed. This change alone has weeded out a significant number of the "bad actors" in this industry. More information about debt settlement is available at DebtCollectionAnswers.com/settle or see the Resources section at the end of this book.

**Option #5: File for Bankruptcy**

Bankruptcy is a good option when you cannot afford to pay back the money you owe in a reasonable amount of time. It can also be helpful if the debt is secured by an asset you do not want to lose — your home or car, for example. When you file for bankruptcy all collection actions, with a few exceptions, must stop immediately. Unfortunately, it's been our experience that many people wait too long to consult a bankruptcy attorney, and as a result they make expensive mistakes such as raiding their retirement funds to pay debts.

You will file either a Chapter 13 reorganization bankruptcy or a Chapter 7 liquidation bankruptcy. A Chapter 13 gives you up to 5 years to pay off most of your debts and helps you hold on to your assets. A Chapter 7 wipes out (discharges) most, but not all of your debts (depending on the types of debt that you owe). In exchange for a discharge of the debt, however, you may lose assets. For more information about filing for consumer bankruptcy, check out The Bankruptcy Handbook by John Ventura (Kaplan Publishing, 2008).

Tip: For more information about bankruptcy and collection accounts, as well as information on how to get a free consultation with a bankruptcy attorney, visit DebtCollectionAnswers.com/legal.

**Prioritizing Your Debts: What to Pay When You Can't Pay Everything**

It's just not always possible to pay your debts plus all of your essential living expenses, like housing, utilities, food and transportation. If you are in this situation, it's important to figure out which expenses and debts are most important and then make paying them a priority. If a relatively unimportant debt is in collections, your best option may be to do nothing about it regardless of how persistent the debt collector may be.

Tip: The old adage "The squeaky wheel gets the grease" certainly applies to debt collectors. They know that if they are very persistent, they are more apt to collect a debt than if they take a relaxed and low-key approach toward it. However, the collector who calls you the most and insists the hardest that you should pay a particular debt may not be who you should send your money to when you are having difficulty keeping up with all of your financial obligations.

So which financial obligations are so important that you should pay them every month? Certainly, your home mortgage, car loan, home equity loan, and other debts that are secured by assets you do not want to lose belong at the top of your To Be Paid pile. So do your rent, utilities, groceries, and insurance payments. In other words, you should view these as your high priority financial obligations – the things you should pay before you pay anything else when you cannot afford to pay everything,

On the other hand, credit card debt and other unsecured debts (debts that aren't secured by one of your assets) may have to move to the bottom of your "To Be Paid" pile. If a debt collector wants you to pay one these kinds of debts and paying it will make keeping up with your high priority financial obligations difficult if not impossible, you may simple not be able to pay that debt no matter how much pressure a debt collector puts on you. You may have to politely tell him that you do not have the money to pay the debt right now and end your conversation. Also, remember that the FDCPA gives you the right at any time to tell the collector that you do not want him to contact you again.

Tip: If you have fallen behind on a secured debt (your car loan or home mortgage, for example) and you do not have the money to get caught up on it, get in touch with a consumer law attorney immediately! He may be able to help you hold on to the asset that secures the debt by negotiating a new payment arrangement with your creditor, or he may refer you to a bankruptcy attorney. The consumer law attorney's advice will depend on the status of the debt and on the overall state of your finances. If you do nothing about the past due secured debt, you'll lose the asset that secures it eventually.

Your answers to the following questions will help you determine which debts to pay when you can't pay them all:

Are any of my debts secured by assets that I do not want to lose — my home or car, for example? If your answer is "Yes," put those debts at the top of your "To Be Paid" pile.

Has the statute of limitations run out on any of my unsecured debts? A debt with an expired statute of limitations belongs at the bottom of your "To Be Paid" pile.

What are the interest rates that apply to each of my debts? If all other factors are equal, it makes sense to pay higher interest debts before lower interest debts because the ones with higher rates are costing you more.

How much do I owe on each debt? Most debt collectors give less priority to small debts because they won't make as much money from collecting them as they will from going after larger debts. As a rule of thumb therefore, large debts deserve higher priority than small debts because you're more likely to be sued over the big ones.

**What Can a Debt Collector Really Do if You Don't Pay a Debt?**

When you are deciding which debts to deal with first when you are contacted by debt collectors, one of your most important considerations should be what the collectors are most likely to do if you don't pay what you owe. This is an especially important consideration if any of the collectors are threatening you with dire consequences – the loss of your assets or lawsuits, for example.

Despite all of their bluster and threats, more often than not, debt collectors have just two basic options when you don't pay what you owe. They can:

1. Stop trying to collect from you and move on to greener pastures. This is most likely to happen if the amount of the debt is relatively small. As we've explained earlier, most collectors get paid based on the amount of money they collect for a creditor. Therefore, if a collector believes that he will have to spend a lot of time trying to collect a relatively small amount of money from you, he may conclude that his time would be better spent focusing on debts that will put more cash in his pocket faster.

Warning: Even if a debt collector stops trying to collect from you, his collection efforts may resume at any time. Or he may sell your debt to another collection agency, and the process starts all over again.

2. Sue you. If you are sued, you will be formally notified of the lawsuit via a legal summons. The summons will tell you what you are being sued for, who has sued you, and when you must appear in court.

Contact a consumer law attorney as soon as you learn that you have been sued. When you are looking for a consumer law attorney, it's best to hire one with specific experience defending consumers in debt collection lawsuits because the attorney will be an expert at finding weaknesses in the collector's lawsuit. For example, the attorney may challenge defective pleadings, proof that a debt is owed, or the statute of limitations on a debt has expired, among other things. Consumer law attorneys understand that most consumers in these situations don't have a lot of money to spend on legal fees, and they can often find a way to work with clients if they think they have a good defense against the lawsuit. Ultimately the goal is to save you the expense and hassles you'll experience if the creditor or collector gets a judgment against you. If you need help finding an attorney with this kind of experience, visit DebtCollectionAnswers.com/legal.

Warning: If the amount that you are sued for is small enough, your debt collection case may be heard in small claims court, and depending on your state, you may be prohibited from having an attorney represent you in this court. If that's your situation, it's a very good idea to meet with a consumer law attorney before your day in court to get advice about how best to deal with the lawsuit.

**Judgments**

If a creditor or debt collector who sues you wins his lawsuit, the court will award it a judgment against you. A judgment is the amount of money that you must pay the collector or that the collector is legally entitled to try to collect from you by using various collection methods.

For example, if the debt collector gets a judgment against you for an unsecured debt you owe, he may try to collect the money by asking the court for permission to:

Garnish your wages. If a debt collector gets permission to garnish your wages, the court will order your employer to take a certain amount of money out of your paychecks for a set period of time. That money will be applied to your debt. Your state will limit how much can be taken each pay period. By the way, Pennsylvania, South Carolina and Texas do not allow wage garnishment.

Seize one or more of your non-exempt assets. A non-exempt asset is an asset that a creditor or debt collector can take from you. Exempt assets cannot be taken. Federal and state laws determine which assets are exempt and which are not. For information on the specific exemptions that apply to bankruptcy, visit Debtcollectionanswers.com/Bankruptcy-Exemptions.html

The most common non-exempt assets judgment creditors go after are bank accounts. If this were to happen to you, you could literally find your bank account drained by a creditor or collector who has a judgment against you. (Warning - this may include joint accounts where your spouse, partner or some else deposits their paycheck!) If a judgment creditor seizes other none-exempt assets that you own, the collector (or creditor) will sell them at a public sale or auction and the sale proceeds will be applied to the amount of the judgment against you. If the proceeds do not cover the full amount of the judgment, you will owe the "deficiency," which is the difference between the judgment amount and the sale proceeds. If you do not pay it, the debt collector can try to collect the deficiency from you.

Place a judgment lien on a non-exempt asset you own. Once there is a judgment lien on the asset, you won't be able to borrow against it without paying the amount of the lien, which will be the amount of the judgment against you. Also, if you decide to sell the asset, the collector will be in line to get some of the sale proceeds because of the lien.

Exactly which of these remedies is available to the debt collector will depend on the laws in your state. But needless to say, if a debt collector has obtained a judgment against you, it is really important to talk with a bankruptcy attorney to find out what they can and cannot do to collect from you.

Not sure if there is a judgment against you? Check your free annual credit reports as suggested in the next chapter. Judgments resulting from consumer debts typically appear on credit reports.

Are You "Judgment-Proof?"

If a debt collector sues you and wins a money judgment against you, the court orders you to pay the amount of that judgment. However, if you are "judgment-proof" there may not be much they can do to collect. (This isn't a legal term, but one that is used sometimes to describe someone who doesn't have any assets that lenders can go after.)

You may be judgment-proof it:

  * You own nothing of value that the collector could take to collect on the judgment.

  * All of your assets are exempt under your state's property law, which means that the collector cannot take them.

  * Your state does not permit wage garnishment. In most states, a collector that wins a judgment against a consumer can get permission to collect the amount of the judgment over time by having money taken out of that person's paychecks. But a few states prohibit this.

  * You earn very little or live on a fixed income that is safe from garnishment – Social Security income, for example.

In other words, if you are judgment-proof, there is really nothing a collector (or a creditor) can take from you if he wins a lawsuit against you.

The best way to find out whether you are judgment proof is to talk with a consumer bankruptcy attorney. To find one that offers a free consultation, visit DebtCollectionAnswers.com/legal.

Chapter 3

## Collection Accounts and Credit Reports

The information in your credit reports is used to generate your "credit scores" – three-digit numbers that represent how much of a credit risk you are compared to other consumers. The lower your credit scores, the riskier you are perceived to be, which means it will be more difficult for you to get credit and you will be charged more for the credit you do get. The most widely used credit score is the FICO® score. Many creditors use FICO scores to make credit decisions about consumers rather than looking at their actual credit reports. Lenders also use Vantage Score credit scores, and some use proprietary scores developed by the credit reporting agencies.

If you are like most people who are contacted by a debt collector about a past due debt, you are probably worried about how having the debt in collections will affect your credit reports and credit scores. There are good reasons to be concerned. For example:

  * The collection account will seriously damage your credit history and lower your credit scores. A single collection account – regardless of the amount of the debt – can lower your credit scores by 40 – 100 points or more.

  * Some credit card issuers will monitor your credit reports and when they learn that one of your accounts has been sent to collections, they will raise the interest rate on your current credit cards.

  * Having a collection account in your credit reports may make it difficult for you to purchase the insurance you need, to get the new job you've applied for, and even to rent a place to live.

In this chapter, you'll learn what your options are if you have collection accounts in your credit reports.

Warning: In our experience, some collection agencies are careless about complying with the requirements of the FCRA. For example, they don't always report accurate information about the debts they are trying to collect to the credit bureaus nor do they always follow the law when consumers dispute inaccurate or out-of-date information related to the collection accounts in their credit histories. In fact, some collection agencies use the fact that they can report collection accounts to the credit bureaus as a way to pressure consumers into paying debts that the consumers don't believe they owe.

**Credit Reporting Agencies – A Brief Background**

There are three national credit reporting agencies (also called "credit bureaus"): Equifax, Experian and TransUnion. They are independent of one another and generally do not share information with each another. These companies collect information about how consumers manage their credit accounts and compile it into what is referred to as a consumer's credit history or credit report. These reports are used by lenders, insurance companies and employers.

The companies' activities are governed by a federal law, the federal Fair Credit Reporting Act (FCRA), which also gives you specific rights in regard to your credit record information. Among other things, the law limits how long collection accounts can be reported to the credit reporting agencies and establishes what you can do if any of the information in one of your credit reports is wrong. The FTC and the CFPB enforce the FCRA.

Creditors and collection agencies are not required to report consumer information to the credit bureaus, but most of them do. They may report their data to one, two, or all three of them. Therefore, it's important that you review your credit history with each of the major credit bureaus periodically to find out if any of the histories show that a past due debt has been sent to collections.

Federal law entitles you to one free credit report from each of the three national credit-reporting agencies every year. The official website for ordering your free reports is

www.annualcreditreport.com. You can also order them by mail or phone. The advantage of ordering your credit reports online is that you'll have immediate access to them on your computer.

You can get two free credit scores updated monthly at Credit.com. When you do, you will also get a free action plan for your credit. This is truly free; it is not a trial offer.

Tip: When a debt collector is trying to collect a debt from you, the FCRA gives him the right to review your credit history without getting your permission first. However, he cannot access your credit history in an effort to gain information that might help him collect someone else's debt— a debt owed by your former spouse, a family member, someone with a name similar to yours, and so on. If a debt collector does this, file a complaint with the CFPB or contact a consumer law attorney.

**Important Background Information About Collection Accounts**

Before we tell you about your options for dealing with any collection accounts that are in your credit reports, there are some things we want you to know about those kinds of accounts. For example, you should know why the same collection account may show up twice in your credit reports and you should understand how long a collection account can be reported.

One Past Due Account Can Equal Two Negatives (Sometimes)

When one of your past due accounts is sent to collections, you will probably end up with two separate negative listings in your credit history for that same account. Each listing will show up in a different section of your report and both listings may be completely legal.

The first listing will be what the original creditor reported about your past due debt. The first listing will be the account reported by the original creditor related to the debt. The creditor will have reported the debt as a charge-off, or bad debt (or as a repossession in the case of a repossessed vehicle or a foreclosure if you've lost your home). Creditors usually write off bad debts before they turn them over to debt collectors.

A charged-off debt will show up in the Accounts or Negative Accounts section of your credit reports. It will be very damaging to your credit scores.

The second listing will be what the collection agency that is trying to get you to pay the past due debt has reported. This information will usually show up in the Negative Accounts or Public Records section of your credit histories as a collection account. It too will be harmful to your credit scores.

Warning: When you review your credit histories, you may find that two different collection agencies have reported the same debt. This happens when one collection agency gives up trying to collect a debt and sells it to another collection agency. However, there should be only one collection account listed for the debt, and it should be what has been reported by the most recent collection agency. Therefore, if you find that the same debt appears more than once in one or more of your credit files, dispute the first collection item (the oldest item) with which ever credit reporting agency/ies is listing the debt twice.

**How Long Can a Collection Account Be Reported?**

Some debt collectors may try to scare you into paying a collection account by threatening that if you don't, your credit history will be ruined forever. Wrong! Truth is, although having an account in collections will definitely hurt your credit scores, it won't ruin your credit forever because the FCRA says that negative information can be reported to the credit bureaus for a limited period of time. Specifically, a collection account can be reported for no more than seven years and six months from the date that the account first became delinquent with the original creditor.

Let's assume for example, that the payment on your credit card was due on January 1, 2012, and that you were not able to make that payment because you lost your job. Let's also assume that you couldn't pay on the account in subsequent months and so in June of 2012 the credit card company gave up trying to get you to pay what you owed and charged off your account as a bad debt. Later, the company turned that debt over to a collection agency and after trying without success to collect it from you, the agency sold the debt to yet another collection agency.

No matter how long it may have taken for your original creditor to send your debt to the collection agency and no matter how many times the debt may have been bought and sold by various collection agencies, the FCRA says that the debt can be reported for just seven and a half years from the date on which it first became past due. In the case of the credit card debt in this example, the debt can only be reported for seven years and 180 days after January 1, 2012 - or basically through June, 2019. After that, it cannot be reported even if it remains unpaid. (New York residents please note: Under New York State law, paid collection accounts must be removed after just five years.)

Tip: The longer negative information is in your credit reports, the less important it becomes, especially, if the more recent credit account information that has been added to your reports is primarily positive.

You should also know that if a debt collector claims that a collection account will ruin your credit history forever, he may have violated two different federal laws. First, by making a false statement about your debt he may have violated the FDCPA. Second, if the collector has intentionally reported the information to the credit bureaus longer than it should be reported, he has also violated the FCRA. Furthermore, the collector may also have violated the FDCPA if he tells you that paying a collection account will improve your credit scores. If a debt collector tells you any of these things, write down what you were told on your Collector Contact Worksheet and contact a consumer law attorney or file a complaint with the CFPB.

When a collection agency reports a collection account to a credit bureau, the FCRA says that it must report the first date that the account became delinquent. However, this is another requirement that collection agencies don't always abide by. Therefore, when you review your credit reports, always check to be sure that the original date that a collection account became past due (again, with the original creditor) is listed. If you find that it's missing, dispute the account and ask the credit reporting agencies to add the missing information.

**Special Rules for Reporting Tax Liens and Student Loans**

If you don't pay your taxes, the taxing authority may put a lien on one of your assets. As a result, you won't be able to sell that asset or borrow against it until you pay what you owe and get the lien released. Information about a tax lien can remain on your credit record for seven years after you pay the debt or for the applicable statute of limitations, whichever is longer. However, under the IRS Fresh Start Program, in many cases you can request that the IRS remove a tax lien that has been paid, or for which you are making payments under an installment plan. Use IRS Form 12277 to make this request.

Student loans can generally be reported for the same amount of time as other debts. But, if one of your federal student loans is in default and you rehabilitate the loan by catching up on the payments you owe and by keeping up with your future loan payments for nine to twelve consecutive months (depending on the type of federal loan), the lender must delete the default notation from your credit reports. Also, the lender may be willing to delete all the negative information related to the loan from your credit reports, but it's not required to do so.

**Getting Collection Accounts Removed from Your Credit Reports**

The negative information in your credit records related to a collection account will not go away just because you pay the account, which also means that your credit scores won't likely go up either. The information will stay there for as long as the FCRA says it can be reported – paid or unpaid. Either way, the information is very negative.

But if you are able to get a collection account removed from your credit records, it will not affect your credit scores at all. As a result your credit scores may be higher and you may find it easier to qualify for a mortgage, credit cards and other types of loans. Here are some of the ways that you may be able to get the account removed. (Note, success with these methods is not guaranteed):

Strategy 1: Ask the collection agency if it will remove the information if you pay the full balance due on the account in a lump sum. It may even agree to do so if you pay a substantial portion of the balance due in one lump sum.

When you make this request, there is no magic language you can use that will increase the likelihood that the agency will agree to what you are asking for. Therefore, just be honest and direct about what you would like it to happen. However, as we already cautioned you about in the settlement section of this book, don't say anything more than you absolutely have to because you might unintentionally say something that the agency could use against you.

If the agency agrees to your request, get the terms of your agreement in writing before you pay it any money. Don't rely on the agency's verbal promise that it will get rid of the account information once it has received your money! If you do and the debt collector does not live up to your agreement, you'll have no way of legally enforcing the deal. We've seen this happen to consumers more than once.

If your state allows you to tape record your conversation with a collection agency when you are discussing the terms of an agreement, you can use the recording as proof of what you agreed to. Even so, we also recommend you get everything written down clearly in black in white. Go to this site to find out about the law regarding recording conversations in your state: www.callcorder.com/phone-recording-law-america.htm.

Warning: Even if a collection agency agrees to remove information about a collection account from your credit reports, it cannot remove negative information about the account that the original creditor reported to the credit bureaus. For example, if the issuer of your Visa card charged off your account and then turned it over to a collection agency, the collection agency can't do anything about the information that the credit card company reported. The agency can only remove the negative information it reported. By the way, it's usually very difficult – although not impossible – to get a creditor to remove or change the negative information it's reported to a credit bureau.

Strategy 2: Dispute the information with the credit bureau that is reporting the information. Doing this is a good idea when you know that the amount of the debt is inaccurate or when you do not think that you owe the debt. Note that if the same account appears on more than one of your credit reports, you will need to dispute it with each credit bureau.

Once a credit reporting agency receives your dispute, the FCRA says that it must conduct an investigation and notify you of the results within thirty days. However, a credit reporting agency's investigation isn't as thorough as the word may lead you to believe. Basically, the reporting agency will contact the furnisher of the information you're disputing — the collection agency, for example — to ask that it confirm whether or not the information you're disputing is correct. If the furnisher says that it is, the collection account information will have been confirmed and so it will continue to show up in your credit report. On the other hand, if the furnisher doesn't respond, or if it agrees that the collection account information is not correct, the credit reporting agency must either remove it from your credit history or correct it (depending on the nature of your dispute).

Warning: If one of your accounts is in collections and it's been a while since a debt collector has contacted you about it, keep in mind that disputing the debt could cause the collector to resume his efforts to get you to pay what you owe. So, before you dispute a collection account and risk stirring things up with the debt collector, you may want to find out whether the statute of limitations on the debt has expired. If it has, then the debt collector is limited in its ability to sue you for the debt (you can raise the statute of limitations as a defense) and therefore, you are safe to pursue a dispute.

By the way, you can also dispute collection account information directly with the collection agency that is reporting it. If the agency confirms that the information is wrong, it must correct its records and share the correction with all of the credit reporting agencies to which it furnished the erroneous information.

Strategy 3: File a lawsuit. If you can't get inaccurate or incomplete collection account information in your credit files corrected or removed using the dispute process, you may want to consider suing the credit reporting agency and/or the collection agency. If you do, we recommend that you hire a consumer law attorney with specific experience handling such cases. For a referral to an attorney in your area who can help you, get in touch with the National Association of Consumer Advocates at www.naca.net. Your initial consultation with the attorney will probably be free.

Warning: Some consumers purchase legal plans that offer them basic services on an as-needed basis. Although such a plan can help you with routine legal matters, if you believe that your rights have been violated by a debt collector, you should consult with a consumer law attorney who is familiar with the FDCPA and/or FCRA rather than with one of the lawyers who participates in your legal plan. Think of it as the difference between going to your family practice doctor rather than to a cardiologist if you have a heart condition. Although both kinds of doctors may have excellent credentials and experience, you are much more likely to get the best outcome if you work with the doctor who has specialized knowledge about and experience dealing with heart problems.

**Should You Hire a Credit Repair Company?**

You may be tempted to hire a credit repair company to clean up your credit reports. This may not be your best strategy if you are trying to settle your debts, because the money you would pay the credit repair company could go toward resolving your debts instead. However, if you have collection accounts on your credit reports that are outside the statute of limitations, you need to rebuild your credit before they are scheduled to drop off the reports, and if you are unable to get them removed yourself, you may want to consider credit repair. If you decide to go this route however, be sure to:

  * Get familiar with your rights under the federal Credit Repair Organizations Act first. Among other things, the law says that a credit repair firm cannot ask you to pay for its services in advance. In other words, it gets paid only after it's performed the services it promised you.

  * Make sure you can afford the fees without jeopardizing your finances.

  * Check out the company you are considering hiring with the Better Business Bureau.

Also don't hire a credit repair firm when what you really need is a consumer law attorney. By that we mean that if a credit reporting agency and/or collection agency refuses to correct information related to a collection account that you are sure is wrong, you should talk with an attorney. You may be able to sue for credit damage and depending on the outcome of the lawsuit, the credit reporting agency or collection agency could be ordered to pay you damages.

You can find more information about credit repair at DebtCollectionAnswers.com/credit-repair.html.

**Become Your Own Credit Expert!**

Here are additional books you can read to educate yourself about how credit reports and scores work:

  * Your Credit Score (FT Press, 4th edition) by Liz Weston

  * The Credit Repair Handbook (Kaplan Publishing 2007) by John Ventura

  * The Smart Consumer's Guide to Good Credit (2012) by John Ulzheimer

You will also find a wealth of free information about credit reports and scores at Credit.com.

**If You Can't Get a Collection Account Removed**

What if you can't get a collection account removed from your credit report? Are you stuck with bad credit? Not necessarily.

First, as we have already explained, negative information can be reported for only a limited period of time and when that time is up, it's against the law to continue to report it. In other words, if you wait long enough, the collection account information you want to go away will automatically "drop off" of your credit reports. Also, even before that happens, the collection account information will becomes less and less important over time, especially if you've managed your credit responsibly since an account was sent to collections and if new, positive information has been added to your credit files as a result. Therefore, the older a collection account, the less impact it will have on your credit reports and your credit scores. By the way, negative information that has been reported within the past two years will harm your credit reports and scores the most.

Second, if you are unable to get negative information removed, the FCRA gives you the right to prepare a written statement that explains why the information is incorrect and to have it added to your credit reports. Quite honestly however, doing this is usually a waste of time because when you apply for new or additional credit, many creditors will evaluate your credit worthiness on the basis of your credit scores and so they will never look at the actual information in your credit reports, which means that they will not see your written statement.

Chapter 4

## Special Situations

So far, we've provided you with basic information about how debt collectors work and your debt collection rights, we've also explained your options for getting collection accounts removed from your credit reports. However, there is a lot more that you should know about debt and debt collectors. This chapter provides information on a wide range of subjects, including the dangers of writing post-dated checks, why cosigning for someone else's debt is never a good idea, and the impact of past due medical bills, among other subjects.

**Recording Your Phone Conversations with Collectors**

If you talk with a debt collector by phone, you may want to ask a trusted friend or relative to listen in on your next conversation using another phone on the same line as the one you'll be talking on. Or, you may want to tape record the conversation

Before you ask someone to listen in on the conversation, or before you tape it, find out if your state has an eavesdropping law. If it does, make sure that you understand the law's requirements. For example, it may require that you tell the debt collector up-front that you are going to have someone listen in on your conversation or that you would like to tape the conversation. If your state has such a law and you do not abide by it, you will be breaking the law. To learn if your state has an eavesdropping law, go to www.rcfp.org/taping or to www.callcorder.com/phone-recording-law-america.htm.

**When You're Responsible for Someone Else's Debt**

Under certain circumstances, a debt collector may have the right to look to you for payment of a debt he is trying to collect even if you did not incur the debt or if someone else agreed to pay it. Here are some examples of when this may be true:

  * If you live in a community property state (AZ, CA, ID, LA, NM, NV, TX, WA or WI), and your spouse does not pay debts that he or she incurred during your marriage, then creditors and debt collectors can try to collect them from your non-exempt community property assets – the assets acquired during your marriage.

  * If you co-sign a debt for someone else, you are responsible for the entire debt as well as any collection costs if that "someone else" fails to pay it.

  * If you and your spouse get divorced and your divorce agreement says that your spouse will pay off some of the debts that the two of you acquired during your marriage (your joint debts), but your ex does not live up to the agreement, creditors and debt collectors can look to you to pay those debts regardless of the terms of your divorce agreement. A divorce decree does not let you off the hook for joint debts.

Warning: It's not unusual for debt collectors to try to pressure family members into paying debts that they are not responsible for. For example, if your father dies owing money, the creditor or collector may try to pressure you into paying the debt. However, unless the debt is a joint debt between you and your father or unless you co-signed for one of his debts, you are not obligated to pay it. However, the creditor or collector could try to collect the debt from your father's estate (the assets he owned at the time of his death) if there is one.

If a debt collector wants you to pay a debt that you do not think you are responsible for, send him a certified letter (return receipt requested) asking for proof that you are legally obligated to pay it or contact a consumer law attorney.

Note: in some states you may be responsible for certain debts incurred for necessary expenses – such as medical debts - by your minor child or spouse.

**Past Due Debt and Social Security Income**

Many seniors rely on their Social Security income to pay for their housing, food, medicine, etc. For the most part, the Social Security Act protects this income from collection actions such as garnishment or seizure. It probably won't surprise you however, to learn that some unscrupulous creditors or collection agencies have told seniors that they will take that income in order to collect on their past due debts. Such threats are illegal however.

If you are a senior and a debt collector threatens you in this way, or if you know a senior who has been threatened with the loss of their Social Security income, contact a consumer law attorney immediately. Also, you can use the sample letter in the Appendix to alert the collector that your Social Security income is protected and to tell him not to contact you again.

Tip: If you receive other income besides Social Security payments, you may want to keep that income in a bank or credit union account that is separate from the account into which your Social Security checks are deposited. Doing so insures that it will be obvious which income is protected from collection actions.

**Managing Your Unpaid Medical Debts**

A serious illness or even a relatively brief stay in a hospital can leave you with a pile of medical bills that you cannot afford to pay, even if you have health insurance. If you don't pay them, or if you don't pay them quickly enough, your debts may be turned over to collection agencies.

Tip: Studies show that a high percentage of hospital bills — as high as 90% according to some sources — contain errors that often result in patients being overcharged for the services they've received. If you owe a hospital or medical provider a large sum of money, it's a good idea to have your bill audited by a company that specializes in auditing consumers' hospital bills. Typically, these companies will either charge you by the hour or take a percentage of whatever money they are able to save you.

Many medical providers are feeling financially pinched by our country's broken health care system. As a result, a growing number of them have become aggressive about collecting patients' unpaid medical debts. If you are one of those patients, they won't care if you have few financial resources, if you are still sick, if you can't work anymore, and so on. They just want to get paid. Hospitals, individual doctors, and the debt collectors they hire may use one or more of the following tactics to get you to pay up:

  * Sue you for the money that they are owed. If they win their lawsuits, they may ask the court for permission to garnish your wages, assuming wage garnishment is legal in your state. Wage garnishment is legal in all states except Pennsylvania, Texas and North and South Carolina, where it is generally limited to certain types of debt such as child support, taxes, federally-guaranteed debts and court-ordered fines. If you live in a state where it's legal, there is a law limiting how much money can be taken out of your paycheck each pay period.

  * Ask the court for permission to seize one of your assets so that the asset can be sold and the sale proceeds can be applied to your medical debt. However, state property exemption laws limit the kinds of assets that can be seized. If you want to find out about your state's law, get in touch with a consumer law attorney or a bankruptcy attorney. (See DebtCollectionAnswers.com/legal). Note however: Your assets usually cannot be seized unless you are sued first and you lose the lawsuit.

  * Put a judgment lien on your home, assuming your state's property exemption law does not exempt your home. When there is a lien on your home, you will not be able to sell it or borrow against it without paying the amount of the lien first. In order to put a lien on your home, the medical provider will typically have to sue you and win its lawsuit.

  * Threaten to ruin your credit by reporting your past due medical debt to one or more of the credit reporting agencies. Having even a small medical debt reported as past due or in collections can seriously damage your credit history.

Some medical providers may try to pressure you into paying your debt by refusing to provide you (or one of your family members) with additional medical care until you do. Some of them may do this even if you are paying off your debt to them through an installment plan. Others may have a policy that as long as you owe them money, you must pay up-front for all future medical services they provide to you.

Warning: Aggressive medical providers can be a special problem for seniors living on fixed incomes when their spouses have been hospitalized or have accumulated a large outstanding bill with one or more providers. If you or your family member is in this situation, a consumer bankruptcy attorney can help you understand what they can and cannot do to collect from you.

**If You Have No Health Insurance**

If you have no medical insurance, your income is limited, and you own few if any assets, find out if you qualify for charity care. Do the same if one of your family members is very ill or hospitalized. To qualify for charity care, you may have to prove that you were denied Medicaid coverage for the services you received. Medicaid is a federal-state program that helps pay the costs of medical care for people with low incomes and few assets.

Tip: Some doctors and hospitals provide charity care to their low-income patients. Also, some doctors and hospitals offer discounts to uninsured patients even if the patients are not low-income.

Warning: If you cannot afford to pay the cost of the medical care you or someone else in your family needs some medical providers may refer you to a creditor who will finance the cost of the care and charge you a high interest rate. The creditors may be a finance company or a credit card company, for example. Other medical providers may encourage you come up with the money you need by refinancing your home and getting cash out or by borrowing against the equity in your home. Both options can be risky because if you can't keep up with your new mortgage or with the home equity loan, you could lose your home.

If you are not already enrolled in Medicaid, find out if you qualify for the program. If you do, Medicaid will pay the medical debt that you've already incurred, assuming that the debt was for care and services normally covered by Medicaid and that it's not more than three months old.

**If Your Insurer Refuses to Pay Your Medical Bills**

It's not unusual for health insurers to deny coverage for specific kinds of medical care and services. If that happens to you and you believe that the care or service should be covered, or if your insurer pays some, but not all, of a medical bill and you believe it should pay the entire bill, here are some suggestions:

  * Review your health insurance policy for an explanation of why the insurance company reached the decision it did.

  * If you don't find a good explanation in your policy, call the company's customer service office. If you are unhappy with its explanation, contact your insurance agent or your health plan administrator if you receive your health insurance through your employer.

  * If your agent or the plan administrator can't help you with your claim, appeal the decision of your health insurance company. Your agent or plan administrator can tell you how to do that. At the same time, you may want to file a complaint against your insurance company with your state's insurance commission or department, which may have a complaint resolution process. You can find contact information for your state's insurance commission or department by going to www.naic.org/state_web_map.htm. Sometimes, filing this kind of complaint will make an insurance company rethink its decision about a claim because it wants to avoid a problem with the state commission or department that regulates it.

  * Contact a consumer law attorney if none of the actions you take get you the results you hoped for. Simply receiving a letter from an attorney may get your insurance company to reverse its decision. It's also possible that getting action may require that you file a lawsuit against the company. However, an attorney will not take your case unless he or she thinks that you have a strong basis for a lawsuit and a good chance of winning. If the attorney does agree to represent you, he or she may take your case on a contingent fee basis, which means that you won't have to pay the attorney any money up-front. Instead, the attorney will get paid by taking a share of whatever money he or she may win for you.

**Your Options for Dealing With Medical Debts**

If you pursue all of the options we've already outlined for dealing with your medical debts and have no success, here are some other options you may want to consider:

Contact churches and social services organizations in your area to find out if they can help you pay your medical bills.

Get in touch with your local and county governments. They may have programs that can assist you or they may be aware of a non-profit program that can be of help.

Find out if you can do volunteer work for your medical provider in order to help reduce the size of your debt.

Request a payment plan so that you can pay off your debt over time. However, don't agree to a specific monthly payment amount until you've reviewed your household budget to determine what you can afford.

Also, never sign a payment plan agreement unless you are clear about the interest rate you will be charged and all of its other terms. For example, if you default on your payment plan, will the medical provider refuse to provide you (and your loved ones) with any future care until you get caught up?

File for bankruptcy. Past due medical bills are one of the leading causes of bankruptcy these days. Consult with a bankruptcy attorney if you believe filing is your only option for dealing with your medical debts, if you are about to be sued by a medical provider, doctor or medical debt collector, or if one of them has already sued you. Even if you don't want to file, you need to find out from the attorney what the medical provider or collector can and cannot do to collect from you.

Tip: A possible strategy for avoiding medical debt problems in the future is to try to negotiate future medical care with your providers in advance. For example, many doctors will give you a discount on their services if you talk to them before they provide you with a service and if you are willing to pay the cost of the service in cash up front.

Resources:

## More Help For Debt Collection Problems

We hope what you've learned in this book will help you put your collection accounts behind you. You will also find additional answers to even more collection questions at http://www.DebtCollectionAnswers.com.

Remember, sign up for our email list at DebtCollectionAnswers.com/free to get a sneak peek of new chapters from the upcoming new edition, and to find out when the new edition is available. (The new edition will also be free for a limited time.)

Need one-on-one help with your debts?

Visit DebtCollectionAnswers.com/debt-help

There, you will be able to get information about and connect with the following services:

Debt negotiation help: Need help negotiating settlements with creditors or collectors? Affordable, professional assistance is available.

Debt collection harassment: If you are being harassed by a collector, or if you think the collector may be breaking the laws we described earlier in this book, talk with a consumer law attorney with experience in debt collection cases. The attorney may represent you for free, and you may be entitled to damages if the collector has broken the law.

Lawsuit defense: If you are being sued by a debt collector, talk with a consumer law attorney who represents consumers who are being sued for debts. You may have a defense against the lawsuit, and as a result, may be able to avoid a judgment.

Free bankruptcy consultation: If there is no way you can repay your debt over the next few years, talk with a bankruptcy attorney. It may be time to get a fresh start.

Ultimate Credit Solutions Inc., the publisher of this book, has marketing relationships with some of the services listed in this book and offered via the link above. We've worked hard to find services we believe will be helpful to our readers and hope you find them useful. Choosing a law firm or a company to help you with your debts is an important decision, however, and we urge you to do your own research.

## Collector Contact Worksheet

The following explains the type of information you should gather from a collector when you talk with them.

Date and time they called:

Your location at time of call (At work, on your cell, for example)

Name of collector and agency:

Address of collection agency:

Collector's phone number:

What you discussed:

Collection threats?

What was agreed (if anything):

Physical or emotional problems since:

You can download free copies of the full worksheet at DebtCollectionAnswers.com.

## Sample Letters

In this section, you will find several sample letters that may come in handy when you are dealing with a debt collector. Modify them to meet your needs and your particular problem.

We recommend that you write or type each letter yourself rather than printing off one of these sample letters and then filling in the necessary information. That way you will have as much space as you need to explain your problem, state what you want a debt collection agency to do, etc.

When you write your letter, stick with the facts and get straight to the point. There are no "magic" words you have to use to make the problem go away.

Before you send the letter, make a copy of it for your files. Then send the letter via certified mail, return receipt requested.

If you are working with a consumer law attorney, don't write your own debt collection-related letters! Let the attorney prepare them.

**#1: Sample Letter To Request Verification Of A Debt**

Your name

Your address

Date

Collection agency name

Collection agency address

On (Date), a debt collector with your agency contacted me regarding the collection of a debt. According to the debt collector, I owe $ (Exact amount of money) to (Name of creditor the collection agency says you owe the money to) on (Account number, if applicable). I am writing to request written verification of that debt, as allowed under the Fair Debt Collection Practices Act. I expect that the next time a debt collector with your agency contacts me, it will be to provide the written proof I have asked for.

Thank you,

(Your signature)

(Your printed name)

**#2: Sample Letter To Dispute A Debt**

Your name

Your address

Date

Collection agency name

Collection agency address

On (Date), a debt collector with your agency contacted me regarding a debt. According to the debt collector, I owe $ (Exact amount of money) to (Name of creditor the collection agency says you owe the money to) on (Account number, if applicable).

However, I do not believe that (State what you disagree with; for example, you do not believe the debt is yours or you do not agree with the amount of the debt.) I request written verification of the debt, as allowed under the Fair Debt Collection Practices Act. I expect that the next time someone with your agency contacts me, it will be to provide the written proof I have requested.

Thank you,

(Your signature)

(Your printed name)

**#3: Sample Letter To Stop A Debt Collector From Contacting You Again About A Debt**

Your name

Your address

Date

Collection agency name

Collection agency address

On (Date), a debt collector with your agency contacted me regarding collection of a debt. According to the debt collector, I owe $ (Exact amount of money) to (Name of creditor the collection agency says you owe the money to) on (Account number, if applicable).

Please do not contact me again about this debt. According to the Fair Debt Collection Practices Act, you are legally obligated to comply with this request.

Thank you,

(Your signature)

(Your printed name)

Note to reader: Once the debt collector receives your letter, he is legally obligated to stop contacting you about your debt, although he can acknowledge receipt of your letter (once) and he can notify you about any legal action he intends to take to collect the debt.

**#4: Sample Letter To Stop A Debt Collector From Continuing To Communicate With You About A Debt You Are Disputing**

Your name

Your address

Date

Collection agency name

Collection agency address

A debt collector with your agency contacted me on (Date) regarding a debt that he says I owe. According to the agency, I owe $ (Exact amount of money) to (Name of creditor the collection agency says you owe the money to) on (Account number, if applicable).

As I have explained, I do not believe I owe this debt because (Succinctly state why you do not believe that you owe the money; for example, the account in collections is not yours, you paid the debt, etc.) I am exercising my legal rights under the Fair Debt Collection Practices Act and asking you to not contact me about the debt again.

Thank you,

(Your signature)

(Your printed name)

Note to reader: Once the debt collector receives your letter, he is legally obligated to stop contacting you to try to collect the debt. However, the debt collector can contact you again once to acknowledge receipt, or he can notify you of any legal action he intends to take against you.

**#5: Sample Letter Asking Collector Not To Contact You Again When You Cannot Afford To Pay Debt**

Your name

Your address

Date

Collection agency name

Collection agency address

On (Date), a debt collector with your agency contacted me regarding the collection of a debt. According to the debt collector, I owe $ (Exact amount of money) to (Name of creditor the collection agency says you owe the money to) on (Account number, if applicable).

However, I do not have the money to pay the debt and I do not want to be contacted about this debt again. According to the Fair Debt Collection Practices Act, you are legally obligated to honor this request. I will contact your agency when my circumstances change.

Thank you,

(Your signature)

(Your printed name)

Note to reader: Once the debt collector receives your letter, he is legally obligated to stop contacting you about your debt, although he can contact you again once to acknowledge receipt, and he may notify you about any legal action he intends to take to collect the debt.

**#6: Sample Letter When You Receive Social Security Income**

Your name

Your address

Date

Collection agency name

Collection agency address

On (Date), a debt collector with your agency contacted me regarding a debt. According to the debt collector, I owe $ (Exact amount of money) to (Name of creditor the collection agency says you owe the money to) on (Account number, if applicable).

However, my only source of income is Social Security and I am unable to afford the debt on that income. I have also been told that income cannot be taken to pay the debt.

I am exercising my right under the Fair Debt Collection Practices Act and asking you not to contact me again.

Thank you,

(Your signature)

(Your printed name)

Interview with a Former Debt Collector

We interviewed "Mr. X," a former in-house debt collector and collections manager, in order to gain insights into how debt collectors work and to learn tips you can use to protect yourself when you are contacted by a collection agency. Mr. X has extensive experience working in collections for a number of large banks whose names you'd likely recognize. He has worked in student loan, credit card, mortgage, and auto loan collections. Here's what he told us:

Are past due debts often sold to collection agencies or do creditors usually try to collect the debts themselves?

Past due home and auto loans usually stay "in house," but banks that issue credit cards often sell their past due accounts once the accounts are past due for more than three months. Then, they'll escalate their efforts to collect those debts by turning them over to a collection agency.

If a consumer wants to pay a debt that has been turned over to a debt collector, can the consumer deal with the original creditor instead of with the collector?

A lot of consumers assume that when a debt that they owe has been turned over to a debt collector, they can contact their original creditor if they want to try to settle the debt for less, work out a payment plan, or pay the debt in full. They don't realize that, more often than not, once a debt is sent to an outside collector, the original creditor will have nothing more to do with it. In fact, if a consumer sends the original creditor a payment on their past due debt, they risk not having the payment credited to their account — maybe because the original creditor loses it — or not having the payment credited right away. Bottom line: If a consumer's account is sent to collections, the consumer should deal with the collection agency.

There is an advantage to trying to negotiate a settlement agreement or a payment plan with a debt collection agency rather than with the original creditor: The debt collector is usually going to be more willing to work with a consumer. That's because when a consumer contacts a creditor, he or she will be dealing with employees who earn relatively good wages plus benefits and who must follow their employer's collection policies. As a result, they usually have little incentive to negotiate. A debt collector, on the other hand, gets paid on commission, which means that the more debts he can collect and the more he can collect per debt, the more the debt collector makes. Therefore, debt collectors tend to be willing to negotiate in order to get something, rather than nothing.

Will a bank let a consumer settle a debt that he or she is having trouble paying?

It depends on the bank. Most banks have written guidelines that apply to debt settlement. For example, at one of the banks I worked for we had to put past due accounts into "buckets" and the buckets determined what we would do with a particular debt. For example, a debt that was one month past due would go into Bucket #1, which meant that we would not settle that debt. A debt that was two months past due would go into Bucket #2 and we would be willing to negotiate a little with the consumer who owed it. However, with the approval of a manager, we could settle a debt that was in Bucket #3 for 90% of what a consumer owed on it, and we could settle debts that were in Bucket #4 for 80% of what was owed assuming we got the approval of the bank's Vice President. Usually, once a debt was about six months past due, we would settle it if the consumer paid 60% of what was due.

As you can see, the older the debt, the less money a consumer had to pay in order to settle it. However, consumers who wanted to settle their debts had to be able to convince us that they were financially distressed. In fact, the bank that I worked for required us to use a formula to help determine just how financially distressed a consumer really was. We would plug a consumer's information into the formula. Also, the consumer was required to provide us with certain documentation to help prove the state of his or her finances.

In my experience, most banks will write off a debt once it's six months old unless the consumer who owes the money has worked out a payment arrangement with the bank and is sticking with it. There is an old myth that as long as you pay something on a past due debt, a bank won't put you in default; however, that's just not true.

When a consumer is trying to settle a debt for less, how low will a collection agency go?

Usually a collection agency will settle for no less than about half of the total balance due on a debt. Of course, it will push a consumer to pay everything, but really, it's a negotiating tactic. Therefore, the first time that a consumer contacts a collection agency about settling a debt for less, the agency is not going to agree to a 50% settlement offer. The consumer should expect some back and forth negotiating, which may take some time.

Our Advice: If you are able to settle your debt for less than the full amount that you owe on it, your credit report will probably show that the debt was "settled" and may also list the debt as a "charge-off," both of which will be very damaging to your finances. However, if the debt is already listed as a charge-off and/or collection account on your credit report, settling it won't further damage your credit history. By the way, in hardship situations we've seen debts settled for as little as ten or twenty-five cents on the dollar. When you are trying to settle a past due debt with a creditor, start low and gradually increase your offer as necessary. However, never offer an amount that you cannot truly afford to pay.

Will a consumer who settles a debt have to pay the settlement amount in a lump sum?

Not necessarily. The debt collector may let the consumer pay the settlement amount over a period of time — usually six months to a year. However, the collector will ask the consumer to provide a postdated check for each of the months of the payment period so that the debt collector won't have to contact the consumer each time a payment is due. Also, if one of the consumer's checks bounces, the consumer will be required to pay the debt's full outstanding balance, not just the remaining balance due on the settlement amount.

If you work out a settlement agreement with a debt collector, it's very important to get the terms of the agreement in writing before you begin paying on it. Otherwise, the debt collector may be careless and not document the terms of the agreement, which means it will be as though there never was an agreement. You should also know that if you settle a debt for less, the amount that you don't have to pay will be treated as income. Therefore, the collection agency will send you an IRS Form 1099-C for that amount and as a result, you could end up owing more when tax time comes around.

Our Advice: Although the collection agency you deal with may ask you to provide it with postdated checks, DON'T do that! Also, never give a collection agency your bank or credit card account numbers or any information that the collector might be able to use to debit your bank account or credit card. The safest way to pay a debt collector is with a bank certified check or by using Western Union if the collector is already set up in their online Bill Pay system. You will get a tracking number and email confirmation.

How can consumers increase the likelihood that their settlement negotiations will be successful?

Consumers should let the debt collector know if they can't pay the full amount of the debt but that they would like to pay as much as possible. Consumers may want to let the debt collector know that if they are not able to work out an affordable settlement agreement, they may have to file for bankruptcy.

Before contacting the debt collector, however, consumers should figure out exactly how much they can afford to pay on the debt. Then they should pull together all of their living expenses, debts, and income information, organizing it in a way that will make it easy for the debt collector to quickly understand the state of the consumers' finances. However, consumers should not include any information about discretionary (nonessential) expenses, such as the amount they spend on cable television every month, eating at restaurants, and so on. Including that information might cause the debt collector to begin asking why they can afford to pay for those discretionary expenses but can't pay the full amount of the debt; the collector may be less open to settling the debt if this is the case.

What if a consumer talks with a debt collector who just won't negotiate?

If a consumer gets nowhere with the first debt collector he or she talks with, then the consumer should call back and try to talk with another one, who may be more open to negotiating. If the second debt collector won't negotiate, the consumer should call back again, and so on. Although this approach doesn't work every time, it's worth a try.

Also, when you want to settle a debt for less, it's a good idea to try to do that near the end of the month. That's because at the end of the month, debt collectors are concerned about meeting their monthly commission goals and if they haven't met them, they are apt to be more willing to work with you in order to achieve them.

When are creditors and collection agencies most likely to sue a consumer over a past due debt?

The decision to sue over a debt is based strictly upon economics — whether the amount of the debt is worth the cost of a lawsuit. The bigger the past due debt, the more likely you are to be sued. For example, where I worked, we wouldn't think of suing anyone for a debt under $2,000. However, creditors and collection agencies are reluctant to sue because it they do, they have to pay an attorney a lot of money to handle the lawsuit, which means that the past due debt costs them even more. Another reason they tend not to sue is that if they do file a lawsuit, the consumer's attorney is apt to ask the debt collector to share all of his records related to the past due debt, and if the attorney finds that the debt collector violated the law in some way, that fact could jeopardize the lawsuit and the debt collector himself could end up in legal hot water.

Furthermore, creditors and collection agencies won't sue a consumer unless they think that they not only have a very good chance of winning but also that they have a very good chance of collecting the court's judgment once they win. Therefore, if a consumer provides them with information showing that he or she is financially destitute, they usually won't sue.

When a consumer receives a collection letter from a law firm, does that mean that he or she is likely to be sued?

It's not at all uncommon for creditors to hire attorneys to send out letters for them on their law firm's letterhead related to a past due debt. They may have attorneys prepare these letters because they think the consumers who receive them will get scared and will be more likely to pay their debts.

Our Advice: Never ignore a letter from any attorney because the letter could indicate that a creditor or debt collector is getting ready to sue you. However, don't let the letter scare you into making a bad financial decision. Use the advice in Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights to help you decide how to respond to any attorney's letter; but if the letter threatens you with a lawsuit, get in touch with a consumer law attorney right away.

What should consumers do if they don't think they owe a debt that they are contacted about?

They should immediately dispute the debt in writing. The FDCPA gives consumers the right to do so. They should attach to their letter copies of any documentation they may have that backs up their side of the story.

I've seen many consumers dunned for small debts for services they mistakenly thought they cancelled. Therefore, if you want to cancel a service or dispute a charge on your credit card, always protect yourself by doing it in writing. Also keep a copy of the letter for your files and maintain good records related to your request or dispute. If there are problems later, your records will be invaluable.

What if a collector seems to be going over the line in order to collect a debt?

The consumer should complain in a letter about the collector's behavior and send the letter to the owner of the agency that employs the debt collector. The consumer should also should send a courtesy copy of the letter to the attorney general of the state where the consume resides as well as to the Better Business Bureau in the consumer's community, to his or her Senators and Representative, and to the Federal Trade Commission.

At one of the banks where I worked, we always paid special attention to "presidential letters." These were letters that came through the office of the bank's president. In many cases we just gave the consumers who wrote the letters whatever they wanted.

Our Advice: Writing a complaint letter can be effective if you have a legitimate complaint about a debt collector; but never rule out getting advice from a consumer law attorney if you believe that a debt collector has broken the law. A lawsuit can be even more effective!

How do debt collectors view letters from consumers telling them to stop contacting them?

When debt collectors receive letters from consumers telling the collectors to stop contacting them about a debt, the collectors are legally obligated to respect the consumers' requests. However, debt collectors can contact those consumers one more time to confirm that they will abide by the consumers' requests and to let consumers know about any actions they intend to take in order to collect the money owed, like bringing a lawsuit, for example. Sometimes consumers decide to work with debt collectors after learning about what they intend to do next.

Our Advice: Before you send a letter to a debt collector telling him not to contact you again about a debt, re-read Chapter 2 of this book.

What else should consumers know about debt collectors?

Consumers should realize that only about 10 – 20% of debt collectors are hardcore people who enjoy destroying people's lives. The rest are just doing their jobs, making only about $20,000 a year, and not feeling especially proud about how they earn their living. Also, because many of them are struggling financially themselves, debt collectors don't want to hear consumers go on and on about their financial problems, especially if the consumers are telling them sob stories about how they just lost a six-figure salary job or had their boat repossessed.

Consumers should also understand that debt collection is a pretty ruthless business and that debt collection agencies put a lot of pressure on debt collectors to produce results. The agencies know that if the collectors don't get the job done, their creditor clients will use a different debt collection agency next time.

When consumers are contacted by debt collectors, they should be polite and positive, and should try to sound cooperative. It won't do any good for consumers to fight and argue with collectors, especially considering that debt collectors can always sue consumers for the money owed. So whenever possible, consumers should demonstrate that they really want to resolve the debt that the debt collector is trying to collect.

Our Advice: Knowing your legal rights when it comes to debt collectors will make it easier for you to resist the high pressure tactics that many of them use and to negotiate affordable ways to deal with your past due debts.

## About the Authors

###### Gerri Detweiler

Gerri currently serves as Director of Consumer Education Credit.com, a leading credit education website. She is considered one of the country's top experts on consumer credit. Her first book, The Ultimate Credit Handbook (was named one of the top five personal finance books of the year by Money magazine when it was released) She is also the co-author of Invest In Yourself: Six Secrets to a Rich Life and Reduce Debt, Reduce Stress: Real-Life Solutions for Solving Your Credit Crisis.

Gerri has been interviewed in thousands of radio, television, and print news stories, including USA Today, The Wall Street Journal, The New York Times, Dateline NBC, The Today Show and many others. She has testified before Congress and worked on reform of the national credit reporting laws.

She holds a Master's degree in Adult Education/Psychology from Norwich University and a B.A. in International Business/Political Affairs from Taylor University.

###### Mary Reed

Mary Reed is a personal finance writer who writes about consumer money and legal issues in her own name and also ghost writes books and magazine articles on those topics for clients. To date, she has written or ghostwritten 21 books. In addition, Mary has written for Good Housekeeping, Home Office Computing Magazine, Small Business Computing Magazine, Hispanic Business and other national publications.

Mary also owns MR•PR, a public relations and marketing firm. Her services include planning and implementing national public relations campaigns, developing marketing plans, branding, press kit development, events planning, web site development and assistance with social media. Her clients have included book publishers, individual authors, attorneys, financial planners, health care professionals, entrepreneurs, business owners, hotels, restaurants and nonprofits, among others. She has secured attention for her clients from such media as Power Lunch (CNBC), Good Morning America (ABC), NBC News, Market Watch (American Public Radio), Morning Edition (NPR), Fox Business, The Wall Street Journal, The New York Times, The Street.com, USA Today, Newsweek, Redbook, Kiplinger's Personal Finance Magazine, Inc., Money, Entrepreneur, and many others.

Prior to establishing MR•PR, Mary was vice president of marketing for a national market research firm, director of marketing for a women's health organization, and public relations manager for Texas Monthly Magazine and Texas Monthly Press. She also worked as a legislative aide for an Austin, Texas city council member and as a management consultant for Booz Allen Hamilton in Washington, D.C. and for Abt Associates in Cambridge, MA.

Mary has a Masters in Business from Boston University and a Bachelor of Arts degree from Trinity University in Washington, D.C.

