10 Dec Proven Techniques for Dealing with Debt Collectors
A few days ago, I wrote a post on this blog suggesting that private “debt settlement” or “debt negotiation” companies often turned out to be rip-offs. Bankruptcy is certainly an option to deal with out of control debt but as any experienced bankruptcy lawyer will advise you, filing Chapter 7 or Chapter 13 should always be your last resort.
How, then, should you deal with debt collectors? Perhaps a better way to frame this issue – how do you deal with multiple debt collectors as anyone who is in collection status most likely has more than one credit account in default.
My Bankruptcy Law Network colleague Cathy Moran forwarded to me a very helpful article that appeared in the Tribune Media Services web site entitled “Ease the Stress of Dealing with Debt Collectors.” Written by journalist Kathy Kristoff, this article identifies a number of proven tactics to protect yourself from potential abuse by debt collectors, including the following tips:
- don’t hide
- don’t pay dormant or “zombie” debt
- dispute inflated debts
- use the protection of the Fair Debt Collection Practices Act to stop harassing phone calls
- don’t cut off communication with creditors and bill collectors, but communicate on your terms (i.e. by mail or fax instead of by phone)
- record or chronicle conversations
- don’t hesitate to negotiate
- don’t drain your home equity or nest egg
Here are a few more that I would add:
- don’t drain your 401(k) or retirement account – this money may be protected by state law against garnishment and retirement money often will be sheltered in bankruptcy. You should check with a lawyer in your jurisdiction for more information about this
- take control of the process – recognize that bill collectors either work for a collection company or a collection lawyer and their goal is to produce cash flow. Your goal is often to buy time without being sued. I frequently advise my clients to send a regular payment – even if it is $25 per month just to keep the account active. It is unlikely that the creditor will refuse your payment and it may forestall the filing of a lawsuit
- never, never, never give a bill collector permission to take money out of your bank account. If you have already done this, revoke the permission in writing by sending a registered letter to both your bank and to the creditor/collection agency
- if your sole or primary source of income is Social Security, this money cannot be seized by a civil judgment creditor (except in very limited circumstances). Make sure to advise both your bank and the bill collector about your protected money and use this fact as negotiation leverage
Bill collectors rely on psychology to manipulate you. I will discuss this psychology in a forthcoming blog post.
Jonathan Ginsberg, Esq.
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