As the cost of living continues to rise, it’s no surprise that over 68 million Americans have had one or more accounts sent to a collection agency. If you’re reading this, chances are you’ve been contacted by a collection agency regarding your debt, and you may be wondering about your rights and legal obligations.
This article will provide you with valuable information to help you determine your legal obligation to pay your debt in collections. Additionally, we’ll show you how to verify your debt with the collection agency, as well as provide tips to help you protect yourself.
So, if you’re feeling overwhelmed and unsure about what steps to take, keep reading to learn more. We’re here to help you navigate through the complexities of debt collection and ensure that you know your rights.
What to Do When Contacted by a Collection Agency
If a collection agency contacts you about a debt, your first reaction may be to acknowledge it and pay up. However, before you do anything, it’s important to know your rights and options.
Don’t Acknowledge the Debt Yet
The first thing to keep in mind is not to acknowledge the debt right away. Debt buyers or collection agencies must verify any debt they claim you owe before they can collect it. You can request verification of the debt yourself, which is a simple and easy process.
Validate the Debt
The Federal Trade Commission recommends that you validate any debt a collector claims you owe to protect yourself from fraud and avoid paying illegal fees and interest. To do this, take note of the collector’s information, including their name, phone number, account balance, and the date and time they contacted you. It’s best to request debt validation in writing to create a paper trail that the collector can’t deny. The Consumer Financial Protection Bureau offers sample letters you can customize for your situation.
Document All Communication
It’s crucial to document all communication from a debt collector, including dates and times of their calls, the agent’s name, and any notes on your conversations. This can help you in case the collector violates the Fair Debt Collection Practices Act (FDCPA) and you need to prove it in court.
What to Do if the Debt is Yours
If the collector sends you a validation letter and you confirm that the debt is yours, you still have options. Check the information in the letter and compare it with your records. Contact your original creditor to get all the information they have on your account, including a copy of your contract. Verify the balance information and check if the collector is charging illegal fees and interest.
Know Your State’s Statute of Limitations
Check with your state’s attorney general’s office to find out the statute of limitations for debt collection. Ask the collector when they show your last payment was, and if they don’t answer, check your credit report to verify it. Time-barred debts start when you become 30 days delinquent, so if the statute of limitations has passed, you may not be legally required to pay the debt.
What Are Your Options When You Owe Debt?
Once you’ve confirmed that a debt is yours, your next move will depend on your financial situation and goals. If you have a large amount of debt or are at risk of falling behind on other debts, you have options to consider.
Chapter 7 and Chapter 13 Bankruptcy
Chapter 7 and Chapter 13 bankruptcy are legal options that can give you substantial protection from lawsuits by creditors. In a Chapter 7 bankruptcy, your unsecured debts can be discharged in as little as 120 days if you meet the means test income requirements. This is the cheapest way to get out of debt and start rebuilding your credit right after your debt is discharged. In a Chapter 13 bankruptcy, your debts are restructured and you make monthly payments to the court to pay off certain debts over 2-5 years. At the end of the plan, any remaining eligible debts are discharged, and you can start rebuilding your credit.
Debt Settlement
If bankruptcy is not a good fit for you or you have $6,000 or less in unsecured debts, debt settlement can be a great option. This works by negotiating an agreement with your creditors to pay less than what you owe, and you make monthly payments until you pay off the agreed amount. To manage your debts and negotiate with your creditors on your behalf, consider working with a reputable debt settlement company.
Consider Your Financial Goals
When deciding which option to choose, consider your financial goals. If you’re planning to make a major purchase such as a car or a home in the next two years, bankruptcy may affect your ability to qualify for loans. Debt settlement can also affect your credit score, so weigh the pros and cons carefully before making a decision. By exploring your options and seeking professional advice, you can take control of your debt and get on the path to financial freedom.
A Summary of What You Need to Know About Debt Collection
Dealing with debt collection can be overwhelming, but there are steps you can take to protect yourself and your rights. Here’s a summary of what you need to know:
- Don’t Acknowledge the Debt Yet: Before acknowledging the debt or making a payment, send a debt verification letter to the collection agency or debt buyer. This will help you verify the debt and protect you from fraud.
- Document All Communications: Keep a record of all communications with the collection agency, including calls that you do not answer and voice messages, text messages, emails, and letters. This can help you in case the collector violates the Fair Debt Collection Practices Act (FDCPA) and you need to prove it in court.
- Know Your Rights: Debt collectors cannot threaten you with violence, jail time, or release of your personal information. They also cannot call you excessively, call your work after you tell them to stop, call your friends or family, and express that you owe them money.
- Check the Statute of Limitations: Before acknowledging or making any payments on your debt, check with your state attorney general’s office on the statute of limitations regarding debt collection. This can help you determine if the debt is still legally enforceable and if the collector can sue you for it.
By following these steps, you can protect yourself from debt collection fraud and make sure you’re not paying more than you owe. Remember to keep a paper trail of all communications and seek professional advice if you’re unsure of your rights and options.