Tips on Dealing with Debt Collectors (and how to make them work for you!)

The average American currently holds over $6,000 of credit card debt. Considering the other common debts most Americans also hold (mortgage, car note, student loans, etc.), it’s incredible that any of us would choose to incur even more debt. However, a sudden medical expense, a car breaking down, or even one poor choice can quickly (and easily) send almost anyone reaching straight for the credit card just to survive. The downward spiral continues if we have to be out of work for any length of time because of one of these unexpected life experiences. We get behind on our other bills as well and that’s when the debt collectors start calling.

How to Stay Away from Debt Collectors

The best way to deal with debt collectors is to avoid them altogether. While you may know by the numbers in your bank account that you’re not going to be able to pay a bill on time, or at all, you can’t turn a blind eye and hope that the bad dream ends on its own. You are not the first person to get behind (and you won’t be the last), and these lenders have policies in place when people are unable to pay their bills.

You must begin calling the companies you owe money to and share your situation. Tell them why you’re falling behind and be ready to tell them your plan to get back on top. Be honest about what you’re able to pay right now and find out if there is any leniency in their timelines.

Often times they’ll allow you to skip a few months. Sometimes they’ll offer you a lower payment plan for a period of time. Some will halt your payment plan altogether (especially student loans) if you’re not making enough money to repay your debts.

Keep very specific and clear notes regarding every phone call you make, including the names of the people you speak to, dates, times, and details of what was discussed. Ask for the new agreement in writing. If you do come to an agreement with your lender and that agreement is questioned down the line, you want to have as much evidence as you can in your corner to fight for yourself.

By making the calls and negotiating the terms of your payments, it is possible to get yourself back to stasis before too long. Normally when you do this you also save your credit from taking a major hit as most lenders won’t report your past-due amounts to creditors if you’re actively working with them.

When will the Debt Collectors Begin to Call?

If you are unable to keep up with your newly negotiated contract with a lender, or you’ve already wasted too much time hoping away your debt, it’s likely that your creditor will send the account to a debt collector. It’s hard to predict just how quickly a creditor will send the debt to collections, but there are a few commonalities you can rely on.

If there is a grace period associated with the due date on your account payments (generally no more than 2 weeks), and you pay within that grace period, it is illegal to move your debt to collections. But if you’ve agreed to make a payment by the 2nd of the month and you miss that deadline, your debt can be sent to collections on the 3rd.

As previously mentioned, many creditors are willing to work with you. They might even offer you repeated grace periods if you continue to communicate your situation and your desire to pay your bills. However, no matter the verbal agreement you make with your lender, there is no law against them deciding enough is enough and sending your debt to a debt collector.

These debts are reported to the credit agencies and can majorly damage your credit score. It is possible to pay the debt collector when you’ve got the money and have that debt removed from your credit report. More on that later.

What To Do When the Debt Collectors Start Calling

First, it’s important to know your rights. Debt collectors have laws by which they must abide. There are strict consequences if they fail to do so.

  • Debt collectors can only call you between 8am and 9pm (in your time zone) unless you’ve expressly requested a time outside of those hours. They can send emails, texts, or letters at any time, but phone calls are strictly prohibited outside of those hours.
  • Legally, debt collectors cannot call you at work if you ask them not to. The first call you receive at your place of business is fair and legal, but if you tell them they may only attempt to reach you at your home or cell phone, they must abide.
  • Collections agencies cannot call you multiple times per day. This is considered harassment by the federal trade commission.
  • They cannot verbally abuse you in any way. They cannot threaten you, use profane language, or falsely imply that you have committed a crime.
  • Debt collectors cannot share your debts with friends, family, employers, or co-workers. They only people they can legally share with are your spouse or your attorney, if you have either.
  • Collections agencies cannot collect a debt that is higher than what you already owe. Ever.
  • You have the right to send a written request for debt collectors to stop contacting you. This does not mean the debt you owe will go away. The debt collector will likely sue you for the remaining balance if you never pay it. So if you do not believe you owe the debt, include that in your written request.

Also, while not illegal, a debt collector cannot legally pressure you or force the urgency of your payment with untruths regarding the due date. Telling you that you owe the full amount by a certain date is often a tactic to frighten you into a payment plan or a lump sum agreement. You do not have to do this.

If you believe a debt collector has done anything illegal according to these laws, report the debt collector to your state attorney general’s office, the Consumer Financial Protection Bureau and/or the Federal Trade Commission.

What’s do Debt Collectors Want?

It’s obvious, right? A debt collector’s main job is to get as much money from those who owe own their debts as possible; but that’s because they have recently “purchased” your debt.

What does that mean?

These collectors paid the creditor you owe money to an agreed-upon amount of money, likely less than the debt that you actually owed. Creditors agree to this arrangement and sell your debts so they have no more involvement in collecting on the money owed, and they get at least some of their money back straight away. It costs creditors more money and time trying to collect the debts than it does to sell them, even cheaply, to debt collectors.

The debt collector now must recoup their loss in the purchase of your debt by collecting on it. Often times, because they’ve purchased your debt for far less than you actually owed, they make their money by collecting the actual amount owed and pocketing the difference.

Knowing the debt collector’s motivation is important for knowing just how to handle their phone calls when that phone rings.

Handling Calls From Debt Collectors

There is no solution to clearing your debt without actually paying it by the time a debt collector starts calling you. If you owe the money, you owe the money. But knowing what it is the debt collector wants most, money, means you have the advantage in the relationship. You can appeal to a debt collector’s sense of greed, so to speak, and often vastly lower the amount of money you owe on your bills when they call.

While the debt collector doesn’t legally have to stop calling you if you tell them you can’t afford to pay you debt (unless you submitted a written request), it can actually help your situation to tell them. Explaining your recent financial struggle, briefly, and giving them an idea of how much money you currently owe can lead a debt collector to move on to other consumers who might be able to pay. It could also prevent your debt from being moved to the litigation pile later down the road. Remember, debt collectors want money, and if they don’t think they can get any from you, the won’t be terribly motivated to come after you too fervently.

It may seem counter-intuitive, but give your debt collector your current address. A debt collector who doesn’t have your current address has the legal right to try and find it. That means contacting family, employers, and friends to try and find your information. Having your current address legally prohibits them from contacting anyone other than you, your spouse, and your attorney.

How Not to Handle a Debt Collector

Never give a debt collector any more information than is absolutely necessary. Your address and phone number are fairly easy to find and, again, make it illegal for the collector to contact anyone else regarding your debt.

You should never discuss the value of any assets or property that you own.

You should never provide your social security number. You should never provide bank account numbers, or any other financial information, unless it’s to make a payment.

Anything you tell a debt collector can be used against you in a judgment. A general rule of thumb is to refrain from giving a debt collector any information that an identity thief could use against you.

Often times a collector will ask you some questions and tell you it’s because they want to help you qualify for a lower payment amount. This is untrue. A debt collector can negotiate your debt amount without any information about you at all, so kindly keep that information to yourself.

Every debt collector has a statute of limitations, a time limit during which a debt collector can sue you but after, they have no legal recourse. A debt collector will often offer you the “opportunity” to make a good faith payment. This is a small payment towards your debt that shows you’re making an effort. Many times people think this keeps you from being sued or helps your credit. What it actually does is extends that statute of limitations, so a creditor has a long period of time during which they can decide to sue you.

Don’t ever make a promise to pay unless it’s when you’re actually making a payment! For example, don’t make statements about when you plan to be able to pay or that you’d like to pay as much as soon as you can. Any such statement can be viewed as a promise, which is a separate contract, and that also starts the statute of limitations over again.

It seems obvious, but watch your temper. Debt collectors can be rude or passive aggressive, but becoming hostile will work against you. Not all phone calls are recorded, but notes are taken and saved every time. When and if you end up in court, or even during your next phone call from a new debt collector, those notes will be used against you.

How to Negotiate with Debt Collectors

Tell the same story regarding your debt every time. That means tell the truth! When a debt collector calls you, explain in one to two sentences how you fell on hard times and that you have a plan to make things right, but that you don’t have any money right now. Debt collectors don’t need all the details. A simple story such as, “I was in a car accident and accrued large medical bills and have since been out of work. I hope to get back to work soon, but right now I don’t have any money.”

Always have a pencil and paper nearby when you take a call from a debt collector. They are keeping detailed notes on your phone calls and so should you. Record the name of the company, caller, debt, and amount. Write down any specific notes about information you provided and information they asked for. Hopefully your debt never makes it to litigation, but if it does it’s incredibly helpful to have your own timeline of what happened.

How to Make Debt Collectors Work for You

You now know what debt collectors can ask for, what information they don’t need, and their motivation: money. Now is when you can use this information to your advantage and make the debt collector work for you.

Your first step can be to offer a settlement. This means that if you owe $3,000, you can use the fact that the debt collector likely paid far less than that for your debt. In order to make their money back, they might only need $1,800. Begin offering a settlement such as, “Will you take $2,000 to resolve this debt?” A debt collector can say no, but can also negotiate back with you offering $2,200. Most of them are trained to negotiate with you because some money is better than no money. If you have the money to pay this debt by the time it reaches collections, you’ve just saved yourself some money. Just be sure you get this new agreement in writing.

If you don’t have the money to make a lump sum payment, you can also suggest a monthly agreement as a settlement. “I will agree to pay you $200 a month until my debt is settled.” Depending on your financial situation, settling these debts can actually save you money. If the debt collector agrees to this, again request it in writing. Then, pay that monthly amount!

Remember no matter what agreement you’ve negotiated to pay your debt, you must also include that you want the debt removed entirely from your credit report. This must be clearly stated. If the debt collector agrees to the new payment plan but does not agree to remove the debt entirely (verbally and in writing), there is no deal. The debt remaining on your credit history will continue to hurt your credit score for years to come and could even result in another creditor calling to collect on a debt you already paid.

With a basic understanding of how debt collections works, and what your rights are, dealing with debt collectors can be a fairly easy road to navigate. While you can never get out of paying your debt, you can use the debt collectors’ desire to collect at least some money in your favor and negotiate down what you owe. Remember, the more information you have, the more control you have over the situation. You cannot be bullied or threatened by a debt collector. Stay the course, be honest but keep the details to yourself, and take your time deciding the best ways to move forward.

Disclaimer: Content found on has been created to be used for informational purposes only and help readers achieve a basic understanding of their finances and financial options. The content is not intended to replace or usurp financial advice from professional accountants, CPAs, etc. If you you’re seeking financial advice, always present any questions you may have regarding your finances to a professional. Never disregard professional advice because of something you read on the internet.

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