How to deal with debt collectors and resolve credit trauma

A dark, shadowy figure in the doorway frightens a diminutive young girl.

Learning how to deal with debt collectors begins with abandoning fear. (CC BY/Ian Carroll/Flickr)

Many people have had the displeasure of dealing with debt collection agencies. You know how you got to this point – thank you, credit cards, car payments, medical bills, depressed wages and low impulse control – but you don’t necessarily know how to navigate your way out of the mess. Here are some tips for how to deal with debt collectors that do not necessarily introduce bankruptcy into the equation.

How to deal with debt collectors No. 1 – Remain calm

Among the chief weapons of debt collectors are guilt and intimidation. What you debt delinquent must remember is that no debt collector has the power to put you in jail or even bring you before a judge. Their job is to harass you into paying the debt plus the debt collector’s superfluous “interest charge.” They are relentless because they’re trying to make money for their company by collecting on your debt. Remind yourself that you’re dealing with a salesperson who is governed by the Fair Debt Collections Practices Act (FDCPA), so if you know the guidelines, you can let them know if they’re breaking the law.

How to deal with debt collectors No. 2 – If you can’t pay, don’t answer

If you answer a phone call from a debt collector just once, be sure that you plan to pay off the debt immediately – but with the originating company rather than the collector, more on this in a moment. The reason is that one contact will blossom into more attempts at phone contact. Nobody wants that. Let them go to voicemail, then delete them. You are not obligated to speak with a debt collector. When you’re ready and able to pay, give funds directly to the lending party and ignore the so-called problem of the debt collector’s overhead.

How to deal with debt collectors No. 3 – Offer a settlement

Here’s where you actually try to play nice with your lenders. It’s reasonable, considering that you are the one who has reneged on your debt agreement. If you are feeling frisky, try to negotiate a partial settlement with the debt collector.

Let’s say you owe $5,000, but have only $3,000 sitting in your bank account. Make an offer in compromise of $1,000 and see if they bite. If the agent hems and haws, ask for a counter offer. If they won’t play ball, dump the call (being as polite as you feel inclined). Your efforts may have greased the negotiation wheels enough to generate a reasonable offer, but you may be better served by working with your original lender.

How to deal with debt collectors No. 4 – Don’t give up sensitive info

Never reveal to a debt collector how much money you make, where you bank or the digits of your bank account. This information will be used against you. Debt collectors should be kept at least at arm’s length at all times.

How to deal with debt collectors No. 5 – Get it in writing

If you elect to settle your debt with a debt collection agency, here are three absolute commandments:

  1. Never offer a settlement you can’t pay.
  2. Get everything confirmed in writing, with all pertinent account numbers accurately displayed.
  3. Don’t do anything until you have that written confirmation. Oral agreements are for fools.

Having a paper trail that documents everything you do during the process of settling a debt – as well as any promises or offers made by lenders and debt collectors – is absolutely essential. With proof on your side, you’ll have ammunition in case you have to question items on your credit report with any of the three major credit repositories, namely Experian, Equifax and TransUnion.


Fair Debt Collection Practices Act

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