Today a reader asked me how she should go about beginning the debt settlement process with collection agencies and creditors she’s avoided for three years. I thought it would be a good idea to give her a short ‘duty’ list of how to handle talking with bill collectors. Collection agencies thrive on debtors who don’t know their rights, don’t know the law, and therefore can easily be intimidated. Remember, the bill collector just wants some money, and if possible, they’ll do whatever they can to grasp that money today! Most bill collectors work on commission and know how to handle different types of debtors. You must understand up front that these collectors have a career on the phone talking about debt settlement and you do not. Therefore you must arm yourself with knowledge before beginning the arduous task of negotiation. Here’s my response to June on how to proceed with her debt settlement issues.
**Disclaimer – Debtprison.net does not administer legal or financial advice. The contents of this website are my opinions on collection agencies and how to deal with them. Nothing on this website should be interpreted as legal advice or council. No opinions on this website should be used to replace the advice of your financial advisor or your legal council.
Remember to check out all my articles on collection agencies.
Hey June,
First a reminder that this is not legal advice but is my opinion on how I would handle this situation.
First you need to pull your credit report and look at it. Go to http://annualcreditreport.com and review your credit report since the collection agencies may be listed there. Next you need to create a list of your debts, how much the balances are, and who owns them. You must do this before you can make any settlement offer.
Once you know how much your balances are on each account, and who owns the account, then you can request validation of the debt. You can answer the phone, but you must be careful. You must know your rights and what you can afford to pay.
After reviewing my credit report I would start answering my phone… this is how I would do it.
1. Have paper and pencil sitting next to the phone.
2. Always assume the collection agency doesn’t have the legal right to collect on the debt.
3. Admit no knowledge of the debt.
4. Request validation of the debt over the telephone.
5. If they don’t know your address then hang up…. ignore them for now.
6. Wait on their validation letter, if they don’t validate, or refuse to validate, then tell them to call back when they are ready to mail you a validation letter.
7. Keep an accurate log of who you talked with, the name and address of the collection agency, date and times of the call, and the name of the supervisor on duty. To understand why this is important read Collection Agencies and Their Lies.
8. Once the collection agency validates the debt, if it looks correct you can begin to negotiate with them.
9. You can also opt to request a copy of the original contract (signed by you) that indicates you ever entered into any such contract with the original creditor. At the end of the day this is about contract law. Requesting the collection agency to produce the original contract that you signed is a reasonable request and your local judge will likely agree.
10. Since its been three years since you made any payment I’d start out by offering 20% of what they claim you owe, since what they claim you owe is heavily bloated with late fees and interest, and they only paid a few cents on the dollar for the debt.
11. I’d stick with whatever I could pay and nothing more.
12. Don’t make any promises you cannot keep.
13. Pay in lump sum if possible and get a letter from them in advance stating that this payment 100% satisfies your obligation to this debt and is considered ‘paid in full’ and will not be transferred or sold to another collection agency nor will they attempt to collect on the remainder of the debt. The devil is in the details and you can smother them with the details.
Remember, they are counting on you not knowing your rights!!! They will lie to you and intimidate you. If you sense this is happening just hang up and do some research, call a lawyer, or come back here and talk to me!
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* Sample Debt Validation Letter
I’ll take a moment from talking about debt to ask the very pertinent question “Who is the Techno Viking?” The Techno Viking has become a cultural phenomenon based on a video from a street parade in Berlin, Germany that occurred in 2000. A friend showed me the video the other day and I found myself watching it again later. The most inspiring truth about the video (posted below) is that this event occurred spontaneously and was not rehearsed. This was simply some crazy sh*t that went down on the street in Berlin. It’s very awkward to see a man physically grab another man, threaten him with a fierce gaze, and then break out into techno dancing seconds later. This is the guy you need answering your phone when the bill collectors call.
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