Handling Collection Agencies because of debts you’ve failed to pay can be intimidating. The outcome will depend on you. The level of action one can harness is different for each and every individual. DebtPrison.net does not administer legal advice. The information provided here is readily available online at various websites and discussion groups across the internet. If you are in trouble with bill collectors keep educating yourself about debt and collection. And most importantly, make the disciplined lifestyle changes necessary to insure this never happens again.
See also Debt Prison related article Get Everything in Writing: Collection Agencies and Their Lies.
See also all of my articles on Collection Agencies.
In house collection vs. collection agencies
There are three different scenario’s creditors use to collect on past due debt. Some creditors have their own in house collectors. This means that when you fail to make payments someone from their ‘collection division’ tries to contact you. So if you have a past due account with Bank of America – someone from Bank of America is calling you trying to collect. This is the best scenario because a third party hasn’t gotten involved. If at all possible you want to remain inside this scenario. It’s always better to deal directly with the original creditor. In this case - Bank of America. See also, Restrictions on Wage Garnishment for Debt Collection.
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Another method creditors can use is to assign the collection to a collection agency. Let’s say it’s been three months since you’ve made a payment to Citibank. They weren’t able to get in touch with you so they assign the debt over to Beehive Collection Agency. Beehive begins the collection process (2 to 3 phone calls per day). Beehive’s goal is to get you back on track with the original creditor. If they can get you to make a payment they will receive a percentage of said payment. That’s how Beehive makes their money. During this process the legal rights of the debt are still owned by Citibank.
The last scenario is when Discover Card sells your debt to a collection agency. Discover Card hasn’t heard from you in six months and has given up on collecting this debt from you. So Discover sells this debt to Beehive for 20 cents on the dollar. If you owed Discover Card $5,000 Beehive pays discover $1000 for the legal rights to the debt. In essence, Beehive has bought your debt from Discover. Since this debt is only six months old Beehive figures they can get more than $1,000 out of you. At this point Discover Card would have reported this ‘write off’ on your credit report. Keep in mind that Beehive can also add negative marks on your credit report. And if Beehive can’t collect, they can sell it to another collection agency for 3 cents on the dollar. This new collection agency can plot additional negative strikes to your credit report. Hence, the first scenario is where you want to be if possible.
Methods described in this article are for dealing with collection agencies in the second or third scenario. The original creditor has assigned or sold your debt to an outside collection agency. This bill collector is trying to collect for the original creditor or now owns your debt – not Discover Card. You can no longer deal with Discover if they sold the legal rights to Beehive. However, you should contact Discover Card and make absolutely sure that they sold (not assigned) the debt to a collection agency. If they sold it they no longer have any legal authority over the debt. If they assigned the debt you should try and deal with the original creditor instead of the collection agency. If the original creditor is still in possession of the debt then you should read these articles Reasons not to file bankruptcy or settle your debt and How to settle your debts on your own.
If you legitimately owe a debt you should try and satisfy it. The information I provide assumes you cannot satisfy the debt and are therefore seeking the path of least resistance.
Should you simply ignore their calls?
Often, it’s better to simply ignore their calls and letters. If you owe $1,000 or less on a debt there’s a good chance they won’t bother taking you to civil court to pursue a judgment. However, some collectors have sued for amounts under $1,000. Also, you are more likely to get sued if you have continued applying for or are currently using credit to make purchases. A collection agency is able to gain access to your credit report, therefore they are aware of any new credit you’ve applied for. From their perspective, if you can afford to apply for new credit, certainly you are able to make payments on your old debts.
I would also research the collection ageny on the internet to see what information I could dig up on them. Recently a family member contacted me about a debt of $6,000, that was being collected on by a collection agency, which was utilizing a lawyer. Many collection agencies have a lawyer on staff who writes their letters and handles disputes. So I researched this lawyer and collection agency, only to find a ton of information at various websites and forums. Most of the information I found came from x-employees, who hated the company, and was blabbing about how the company operates. As it turns out, according to these employees, the collection agency would only sue a debtor who lived in Texas (where their office was located) – so in Mississippi he was assumed to be safe from legal action. As a result, I advised my family member to simply ignore the calls and letters for now. Most likely the debt will be passed on to another collection agency. In which case, the new agency will be researched, and then another decision will be made regarding how to handle their calls and letters.
Dont talk to collection agencies on the phone
Talking on the phone with bill collectors is not wise. They do this for a living and you probably dont. If you answer the phone and its a bill collector tell them to hold so you can find something to write on. Find a pen and paper and ask the collector for his name. Next, ask for the name of the collection agency, their address, their phone number, the reference number for the account, the amount of the debt, and who the original creditor was. Do not answer any questions or admit to knowing anything about this debt. Just get the described information and then hang up immediately. The reason you dont want to talk with them is because they may be recording the conversation and can use what you say against you in civil court. These discussions are best held on paper. Ask the collection agency to send a letter defining the debt to your address. Then promply hang up.
Request for the collection agency to validate the debt
As described under the Federal Trade Commissions Fair Debt Collection Practices Act (this is my easy to read version) you have the right to request validation of the debt by the collection agency. If the collection agency hasn’t mailed you a letter within 30 days you can either request they validate, or you can choose to ignore them. You can write a letter like this one. This forces the collection agency to ‘prove’ that you owe the debt. It’s possible that the collection agency doesn’t have all the paperwork necessary to prove you owe them the money. The older the debt is, the more likely the information they possess will be insufficient. Also, once the debt gets old enough (usually 4 to 6 years) it will have passed the Statute of Limitations in your state. This means that no one has the legal right to collect this debt from you. You’ll notice that in the validation letter is a limited cease and desist clause. This is the section that outlines that communication with you should be accomplished strictly through the mail; they are not to call your home anymore or your place of employment. Failure to comply puts them in violation of the Fair Debt Collection Practices Act.
For a listing of the Statute of Limitations in each state click here.
In the letter you are also warning that they may be in further violation if this debt is reported to Credit Bureaus (Equifax, Experian, and TransUnion). If they can’t legally validate the debt and they report it to the CB’s then they could be sued.
You should mail the validation letter immediately after receiving the phone call from the collector. If you don’t hear from them within 30 days write a new letter, and include a copy of the first one. The second letter should explain that this is the second time you have requested they validate the disputed debt. This is their last opportunity to prove that you owe the debt. Mail the second letter with USPS as a registered letter. When the receipt comes back, staple it to a copy of the second letter.
Keep good records
Send the validation letter as a registered letter. This way they will have to sign for the letter and USPS will return the receipt to you. Staple the receipt to a copy of the validation letter. Keep copies of all correspondence in a file under lock and key. In the event you end up in civil court, a flawless paper trail is essential to winning and avoiding a judgment. If it’s legal in your residing state, record any phone conversations you have with them. Although you shouldn’t be speaking to them - perhaps they didn’t obey the ‘limited cease and desist.’ It would be nice to have a taped recording of their willing violation of law.
If the collection agency can’t validate the debt
Often the collection agency won’t be able to validate the debt, if that’s the case then you simply don’t have to pay it. If they sued you in civil court they would most likely lose because they failed to adhere to Federal Law and correctly validate the debt. The collection agency must have sufficient evidence that you legally owe them the money. If they can’t prove this to you, they certainly couldn’t persuade a judge to rule in their favor. If the collection agency won’t validate the debt 30 days after the mailing of the second letter, you should be in the clear. Take the time to read the Fair Debt Collection Practices Act.
By making a payment on this debt you are admitting that you owe it. So don’t make any payments unless you are absolutely positive that you are still legally required to pay this debt. Making a payment also resets the clock on the Statute of Limitations - even if the Statute has passed! If the debt has passed the SoL then you don’t have to pay it, you can’t be taken to court. Some collection agencies are buying debts that people have filed bankruptcy on. They might pay only 1 penny on the dollar for this debt. Then they begin calling the debtor. Using threats and intimidation the collector tries to convince the debtor to pay up. Some people aren’t aware of their rights and give in. No one can force you to pay a debt that’s been legally wiped away by bankruptcy.
The collection agency legally validates the debt
There are two ways a collection agency can collect money on a debt you legally owe. First, you can pay them. Second, they can win a judgment against you in civil court. I’ve been in civil court four times while representing my previous employer. Let me give you some advice. Make sure you have all the evidence you need to support your case. If you can’t legally show why you are not required to pay the debt then don’t go to court. The judge will just slap a judgment against you. This judgment could lead to garnishment of wages and even liens on personal assets (land, vehicles, or home). So if you are clearly in the wrong then try and work out a solution with the collection agency. One solution is to pay the debt in full through an agreed payment plan (or simply ignore their calls and letters). The other solution is to try and settle the amount of debt you owe. Often collection agencies will settle for 50 cents on the dollar and sometimes less. For advice on settling your debt on your own click here.
What if the collection agency takes you to court?
If the collection agency doesn’t have the proper paperwork the case can be dismissed by the Judge. Most collectors won’t bother with court unless it’s a large amount of money - usually in excess of at least $1,000. You should bring the paper trail into court. Bring copies of your bills and income statements. There should be a very good reason why you have not been able to satisfy this debt. And you better be able to prove this to a civil court Judge. If your case is dire enough the Judge could declare that you no longer owe the debt. The Judge will most likely do what is logical and fair. If the collection agency can prove that you owe them, explain to them why you can’t pay. If they believe you the account may be sold to another collection agency.
The collection agency could assign your case to a ‘law firm’. These people will call you and threaten with lawsuits and court. They will ask you why the debt hasn’t been paid. If this happens it doesn’t change anything. Your circumstances at home won’t change just because a ‘law firm’ has been assigned your debt? And I’m not even convinced that some of these people are lawyers at all. You should ask them who they are, write down the name of their office and look it up. If you have the money it would be a good idea to seek legal advice from a local lawyer that you trust.
Most likely you won’t go to jail for failing to pay debt! I would take the time and explain to the law firm why I could not satisfy this debt. If your circumstances are dire enough they may just write it off – that could be the end of this battle. Just because a law firm is involved doesn’t mean that one will lose in civil court. Someone very close to me was contacted by a lawyer in regards to the remaining balance on a repo. Ford Motor Credit had to repossess a truck and charged my relative for the money they lost. My relative explained in detail why they could not repay the debt. The law office dropped the case and it was written off. If you legally owe a debt that you cannot pay - explain in detail the reasons why. Often this will be enough for the collection agency or law firm to drop the account. Go to other websites on this subject. There’s a lot of good, free information on the web. Good luck. Go forth and be debt free!
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Related Articles
* The Fair Debt Collection Practices Act
* Reasons not to file Bankruptcy or Settle Your Debts
* Can you go to jail for not paying your debts?
* How to settle your debts on your own
* Sample Debt Validation Letter
* Information on Credit Card Balance Transfers
* How I Escaped Credit Card Debt
I did not receive a collection letter from CREDITWATCH that was address to a place that I have not lived at since 11/10, I was unaware of the debt/collection. They reported to my credit report this Feb, found out when i went to purchase a home. Now i have received an additional collection letter from AFNI, at my current address, for the same debt. i am submitting validation letters to both agencies.
- my question is…Can i get the debt removed from my credit with a validation letter, that the account is not mine? Its for $316, I will pay it if necessary, but this is not my account. I just want it removed from my credit, this is really impacting my interest rate!
In 2011 my husband got a call from a collection agency regarding a credit card debt that had from 1996. The guy on the phone was being very threatening and saying he bad paperwork all set to take him t
o court and get a judgement and garnish he wages. My husband had no knowledge of this debt but figured it was frim when he was married previously. We trusted that this was a very serious situation and could not afford to have his wages garnised. He areed to a payment plan even though we were tight on money due to paying student loans in the rehabilitation process. Now I find out that the statue of limitations in our state (wisconsin) was far past and this guy was basically lying since he had no legal right to take him to court in the first place. Two questions…is there a way to request a copy or transcript of the recorded call? What can we do now that we know this guy was deceiving my husband in his attempt to get payment? We have stopped paying and are extremely angry about this.
Please if you can help I would gladly appreciate it. I was in the process of buying a house last year good day before the closing, I was told I would not be able to close because I had a judgement against me that was not on my credit report but it was in county records. they urged me to set up payment plans
but it turns out even though I did it would have to be paid in full to be able to buy the property so I decided to wait for two years buy a property. I started paying my debt, which is over 7 years old. should I still be paid on this. I understand if I dont I will never be able to buy a house but I don’t think I want to anymore. has this reached statute of limitations?
Request for help!
I was foreclosed on my home because my payments went up and the lender did not want to do a loan modification. I also lost my second job and could not longer afford the loan.
I have two mortgages. The first mortgage was with Indimac and the second one was with Citybank.
In MN, the state where I live, the first mortgage gets the house and cannot pursue you for their money.
However, the second mortgage can.
The second mortgage, Citybank, passed my information to a collection agency, and I am starting to get mail requesting the money. My second mortgage is for $45,500.
I do not have money to pay them. Any ideas on how to deal with them and what is their process next?
I received a second letter today trying to settle the account for ******* **** ****. They are located in Addison TX.
Any advice?
Thank you.
I have a friend who lives in Kansas and is buying a home,the bank that carried his loan sold it to a collection agen. in return they sent a letter saying if they did’nt get the loan refin. by july they loose the house. All I can find when I try to find this collection agent is nothing. I wanted to by his loan and let them pay me back but I can’t find them. Their name is CITADEL FINANCIAL GROUP , 15 W. STRONG ste 11-b ,Penscola Fl. 00003-2501 I need a phone number to call. JIM
I pay all my bills, everything is current, except for one closed credit card account.
This account has gone to Creditors Financial Group for collection. The original amount owed to the original creditor is approximately $24,000. There are 2 reasons why I stopped paying this account, 1- the economy tanked, 2-even though I did not loose my job, i lost considerable income due to reason #1, worked much less hours etc. CFG has started the harassing calls and so on, I have not spoke to them at all yet.
I cannot afford to pay all of this debt or a settlement at this time. I was thinking about doing what I can to save up until I can make a fair settlement offer to settle this debt but I am concerned that I do not have enough time to do so before CFG takes some kind of lawsuit action.
What are my options? What should I do?
Thanks, – Ron
West coast filing services anybody dealt with this company before on law suits for 10 year old credit card debt.
Is there a law that states that all disclosures such as APR, etc. be disclosed pertaining to a credit card account be provided to an applicant in legible print or explained verbably prior to the date the account is activated ? Is it enforced? If proper disclosures are not provioded does that legally void the debt?
Any information on this would be appreciated.
Roy
I got a loaner car from my dealership while it was in their shop for repairs. The dealership arranged for a rental car which they paid for. When my vehicle was repaired I returned the rental car to the dealership in excellent condition. A couple of weeks later the rental car company contacts me and says I owe them $700 for damages to the vehicle I rented. I asked for proof of the damage and witnesses and they failed to provide any information. They then turned over the debt to a collection agency who keeps harassing me. I told the collection agency this is not my debt but they keep calling me. What can I do and how can they try to collect this debt without proof that I damaged the vehicle? if it was damaged at all it could have been done by the dealership, a car rental employee or a renter of the car after me or it could even be existing damages that were already on the car when I rented it. Please advise!!!
Georgia Library sent my account into collections 10/2010 but collection agency never sent my deliquency to any of the 3 credit bureau. June 2011, I was able to pay off the account directly through the library (not the collection agency). I just checked my credit report & NOW it shows up. Yes, it shows up as paid, but its still deliquent (hurting my credit score). I ask that they removed it and they refuse. What are my rights (if any)?
Since, I paid the account prior to them reporting it to the credit bureaus shouldn’t that just be it. I mean they went 8 months without reporting it. Why NOW?
Is there anything I can do to have them remove it (before the 1 year they claim)?
Beth, yes they can sue you in civil court if they want. Even if the bill is only $800
i have a credit card bill which i only owe about $800. Collections is now threatening that the credit card company is going to get a summons and take me to court. Is this really true
As a former debt collector I can tell you for a fact that if you are contacted by a “law firm” at your place of employment or your home and they will verify every question you ask to verify the debt, tell them to buzz off and hang up!
Questions To Ask:
1) Who is the original creditor?
2) When did this “law firm”/collection agency aquire the rights to this debt?
3)The address (NOT PO BOX, GET PHYSICAL ADDRESS) to the “law firm” is
4)The name (first and last), extension or direct phone number and supervisors name of the “lawyer” you are speaking to.. ((FYI, not many lawyers have supervisors…just saying))
If someone calls me and expects me to wip out a credit card and pay someone ive never met before in my life for something that I very well may have forgotten about and refuses to verify pertinent information with me, I’d hang the f**k up! Good luck all!!
Good advice if you want to be a schlep and not pay your bills. Collection agencies and people whom you owe money too have a right to collect what is theirs. You are the one who got into debt, not them.
Be responsible and pay your debts. What’s wrong with this country is everyone wants to live it up in a millionaire fashion and play the big-wig and show off to their friends. But when the time comes to pay, they throw up their hands and say ” Oh, I’m sorry, I can’t pay, and I won’t pay”. Actually anyone who gets into debt this way and ingnores the obligation to pay and work out an arrangement is a theif. They received goods and services and now refuse to pay for them!!!!!!
Lisa, there is one included in the following article, it’s called the ‘cease and desist’
http://debtprison.net/wordpress/49/sample-debt-validation-letter/
Barry
Is there a sample letter my mom can send, or write to her credit card companies that will stop them from harassing her? Thank you!
Leafcutter,
If you have the money to work out a ‘deal’ and pay this off in full then I would do so. However, there’s often some red tape involved in the process. Please read the following article:
http://debtprison.net/wordpress/170/collection-agencies-get-everything-in-writing/
Barry
Hi again, Barry,
There was never a schedule of payments set up.
The balance is currently $1850 and I’ve been paying in small increments as money comes into the business, with my first priority being to not fall behind on other bills, personal and business. I’ve actually paid off almost $1000 of its highest amount, but it’s been over the course of almost 2 years, so it’s been slow going. (Economy got hit hard in this area and the damage isn’t over yet. It is now obvious that my timing in setting up my first business was horrendous, but with no jobs in the area, I’m continuing to try to make the business viable.) I have skipped payments when money wasn’t coming in but the last 4 or 5 months I have managed to send in a little each month. The most recent payment was 10 days before the phone call from C.A. and I was under the impression that the creditor was willing to continue along this track.
Evidently they have decided that this has gone on long enough and they want it all now. The question is, should I pay the original creditor or the C.A.? If I can take their “deal” and save $500 I sure would rather do that, but don’t know how to negotiate that. I have a small savings account that I have used to keep a roof over my head during the very lean winter months when money isn’t coming in. This will clean it out, but it will get them off my back…Business seems to be picking up this spring, but this leaves me no safety cushion if it doesn’t last. I also have credit card debt and don’t want to add to that if there’s any alternative.
Leafcutter,
I don’t see the need for validation since you contacted the original creditor and they verified the collection.
Yes the original creditor has ‘assigned’ it to the collection agency.
Why can’t you make payments on this debt? How much is this debt? How much do they want monthly?
Barry
I received a phone call, then 4 days later, a letter from a collection agency. The letter names the original creditor, acct number, and amount accurately–yes I owe it (thought I was working successfully with the creditor to make small payments but apparently this wasn’t good enough, although they didn’t tell me that). Is there any point is sending a request for validation, or does the letter I received qualify as that?
Next, in the letter, the collection agency says to write the check to the original creditor but to send it to the collection agency. I called the original creditor and their answer (verbally) was “you have to pay the collection agency now.” Has the creditor “assigned” the account to the C.A.? I have heard and read so much horrible stuff about C.A.s in general, is there a way to prove that this IS the actual situation?
Also, during the phone call, which I was totally unprepared for, the C.A. rep mentioned a deal that would save me around $500. I was so flustered I didn’t write things down, don’t remember all the details, probably did lots wrong (DID I admit the debt is mine? Not sure, maybe….)–yep, I was the perfect target for the professional bullies that they are. And of course, they’ve got it on tape because the one thing I do remember is them saying they were recording the conversation. Saving $500 would be great, as obviously money is a huge issue or I wouldn’t be in this situation in the first place, but that option isn’t mentioned in the letter.
And to further complicate things, this debt pertains to my business, which I’d just started when I opened this (advertising) account that I’m behind on. My business is a struggling single member LLC. I have heard that the Fair Debt Collection Act doesn’t pertain to business debt but am having no luck finding info on that…and all their correspondence is addressed to me personally anyway.
Any advice on how to proceed at this point? (And thanks very much for a straightforward, very informative website.)
Ed,
I don’t think they can get a lien against the truck. If I were you I’d simply explain to them that you are unable to pay. I would explain to them why you cannot pay. And that if they take you to court and seek a judgment that you will have to explain these circumstances to the judge.
Even if they sue you, if you situation is dire enough, the judge may declare that you legally owe nothing.
I’d work hard (patiently) with the collector and explain why you cannot make payments. I would not offer any information such as the details of your income or assets.
Barry
For over 50 years, I have had perfect credit. Never missed a payment. Always paid on time, and most importantly, paid off many debts. Now, I’m retired and live on a modest pension. I live in a mobilhome that is on leased land. My 09 Toyota is paid off. Here’s the problem, I have three banks that want money I no longer have. Can they take my home and my car? My wife and I are scared they will. Our medical expenses are overwhelming. We have no frills…no vacations…rarely eat out… HELP!!!
Anita,
Sounds like you have two choices.
1. You can keep making tiny payments and see where it leads. This makes no sense if you’re never going to be able to pay it off.
2. Stop paying and deal with the collections as they occur. Yes you may be sued but that can happen at any time even if you’re making ‘tiny payments’.
You need to add up these debts and make a logical decision on the best path to take. It might make the most sense to stop paying all but one and send your money to that one debt till it’s paid (debt snowball).
http://debtprison.net/wordpress/231/should-i-use-the-debt-snowball/
Either way if you can’t really pay the debt it’s going to be trouble. You need to select the path that will put you in the best financial position. What is the point in sending money to all of your creditors when you’re not even putting a dent in the interest they charge each month (making payments but the debt still increasing). It doesn’t make much sense.
No easy solution here.
Barry
Due to illness and my spouse’s long-term unemployment, we have lost our home to foreclosure and have close to $50,000 in debt (four credit card account [three with the same bank, Chase], credit cards, school loan, and unsecured line of credit, medical bills). We have been paying small amounts ($10/month) and are fairly close to paying off the medical-type bills but will never be able to pay off the credit accounts. We have received collection notices from the Chase account folks and Bank of America, and have continued to make our regular “good faith” payments. Does it make sense to do this? My hope is that the collection folks will get tired of our little payments and write us off, but sounds from what I read on your blog that we are doing the wrong thing Should we just stop paying altogether and see what happens? Two of the credit card balances are big — in the $10,000 range. The others are around 4,000 each. I am self-employed, we live in Arizona (although may be moving to California if my spouse can get work) and we have a college-aged (freshman in community college) child who we support.
Any advice?