How to deal with debt collectors when you can’t pay them back

Are you getting calls, Emails, and letters from the debt collectors for the unpaid debts?

You may or may not be able to repay the debts. But you shouldn’t ignore the calls. Try to take the proper steps to get out of the situation. You shouldn’t ignore the collection attempts even if the debts are not yours. You should challenge the debts.

There are certain ways to deal with the debt collectors when you can or can’t pay.

What to do when you are getting collection calls

Dealing with debt collectors is always an annoying task, but you should deal with them carefully. If you know the proper ways to deal with them, then they will not be able to scare you to get back the money. You may not have money to pay off the debts that are in the collection. But you should know the proper ways to solve the problem.

  • Find out what you owe and to whom

Once you are getting collection calls, you shouldn’t freak out or ignore the collection attempts. You should find out how much you owe. From where the debt has come from. Get the answers to these questions before acknowledging the debt.

  • Gather the facts of your debt and the original creditor

In most cases, the original creditor sells an unpaid debt to a third party debt collection agency, who can again sell the debt to another collector.  So, it can be difficult to understand whether or not the debt is yours. Thus, you should check your credit report to verify the name of the original creditor and the amount of debt you owe.

  • Ask for a debt validation letter

Don’t start repaying the debt once you start getting the collection calls.

You should first check whether or not the debt is yours and if it’s not paid.

Thus, once a debt collector contacts you, you should request a debt validation letter from the debt collector.

As per the FDCPA laws, the debt collector should send a debt validation letter within the 5 business days of the first contact. If you don’t get the validation letter from the collector, then you can send the request letter to validate the debt.

If you still don’t get any response from the debt collector, then the debt collector can be fake. Or they are trying to collect for already a paid debt.

Make sure you send the debt validation letter from a certified email. Also, keep all the records of communication with the debt collector.

If you believe that you have already paid the debt and the debt collector is trying you mislead you, then make a complaint against them to your State’s General Attorney.

How to deal with debt collectors when you can’t pay

If you are not able to repay your unpaid debts, then you should try to find out an excuse to avoid the debt. Here how you can deal with debt collectors when you can’t pay them.

1. Check the statute of limitations (SOL) of the debt

Your debt has an expiration date, which is known as the statute of limitations (SOL). It prevents the original creditor and the debt collectors from chasing the debt after a certain time. The statute of limitations for a debt is usually 3-6 years depending on the state’s law. It as high as 15 years in some states. So, before repaying the old debt in the collection, make sure the statute of limitations hasn’t expired for the particular debt.

If the statute of limitations has expired, it is up to you to decide whether or not to pay the debt.

Remember, if the statute of limitations has expired for the debt, the collector can’t win a judgment against you. Though it is a good way to avoid repaying an old debt, yet it is always better to repay the old debt if you legitimately owe the debt.

And, even if you’re able to pay, make sure you check the SOL period on the debt.

2. Negotiate a lower payment plan

Once you know that the debt is yours and the debt collectors are not fake, then you should think about repaying the debt. If you think you can’t pay the debt in full due to your current financial hardship, then you should talk to the debt collectors regarding it.

You should explain your financial hardship to the collectors. Tell them why you can’t repay the debts in full. If you are struggling with job loss, illness, and other problems, then tell the truth to the debt collectors.

Request to the debt collectors for a lower payment plan. They may agree to your request.

3. Request for an extended payment plan

If your income is low and you can’t repay the debt in full, then request for an extended payment plan. It will help you to repay the debt while managing other financial obligations.

4. File bankruptcy

If you can’t repay your debts and the collectors are not ready to settle the debts, then you have to file bankruptcy to get rid of them. To do so, you must talk to a bankruptcy attorney for help. In chapter 7 bankruptcy, most of the unsecured debts can be discharged. If you have some property, the trustee can sell them to pay the collectors. There is chapter 13 as well where you will be given a repayment plan based on your current income.

A proficient attorney can tell you which chapter is best for you.

How to deal with debt collectors when you can pay

When you know that the debt is yours and you are financially able to repay the debt, then you should repay the debts in the collection.

However, you should know how to deal with debt collectors even when you can pay the money that you owe.

1. Decide what you can afford to pay

Before repaying the debt in full, you should figure out your affordability. Because you may have other monthly obligations that you need to take care of. So, decide what mode of paying will be ok for you. Figure out whether you can repay the debt in a single lump sum payment or you can break the payments.

2. Stay firm while negotiating

Sometimes, debt collectors ask for a higher amount for the debt. So, you should negotiate hard to lower the amount. Stick to your logic about lowering the amount. Remember you shouldn’t discuss your income and net worth with the debt collectors.

You shouldn’t agree to pay back more than the 30%- 40% of the total amount you owe to the debt collectors.

3. Get everything in writing

In many cases, old debt haunts the debtor throughout the life. Thus, you should get everything in writing.

You should ask the debt collectors to prepare the debt settlement agreement in writing.

Keep all the documents of negotiation, debt collection letters, and debt repayment amount safely. The documents are the proof that you have already paid the debt. If a new debt collector contacts you for the same debt, then you need to show the documents that the debts are already paid off.

4. Be wary of the taxes

If you settle the debts and pay a reduced amount than you owe, then you have to pay taxes on whatever amount of debt is reduced during the debt negotiation process. The reduced amount should be reported as your gross income and you have to pay tax for it.

Lastly, remember, the debt collectors are not liable to treat you poorly, abuse you, or harass you for the money. They are bound to follow the FDCPA laws. So, if you feel they are abusing you or not following the laws, then make a complaint against them. Also, if you see that the debt has expired, then dispute the debt to win the challenge.

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By Valentina Wilson on March 14, 2019

Valentina Wilson is a writer and blogger who specializes in personal finance and positive change and associated with BestDebtConsolidation. She has a master’s degree in financial journalism and seven years of experience in personal banking and believes that small behavioral changes are the key to achieving financial freedom.

Follow her on Twitter: @valentinailson