Debt collectors knocking at your door?

Dealing with debt collectors is a very unpleasant experience. It feels like an uphill battle of being threatened with how to spend your money, calls at all hours of the day and night, being belittled and even embarrassing you at work. It's no secret that debt collectors present themselves as big bullies and that can be very intimidating. The common reaction is to simply avoid them. But the truth is, they will never stop until they are satisfied and avoiding them will only make it worse.

Simply put, financial debt is money you owe to someone else. It is an obligation to pay whether it is based on a hand shake, verbal agreement, contract or judgement. Debt you owe based on a hand shake or verbal agreement may be easier to get out of (depending). Debt you owe to creditors can come with a big price tag both financially and emotionally if you do not pay it. Bottom line, if you owe money to someone you should honor the obligation, be responsible and pay it back. So let's talk about some very important things you need to know about effectively and confidently dealing with debt collectors.

The Fair Debt Collection Practices Act (FDCPA) was put in place by congress in 1977 to protect against unfair and abusive collection practices. The Federal Trade Commission states, "There is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy."

Know your rights: Creditors can only call you between 8:00am - 9:00pm. They can only make one contact with you per day, per debt. They can call you all they want, but they can only leave one message OR talk to you once a day. Remember this is per debt. So if you have 6 credit cards seeking collection against you, that means six different contacts and countless calls daily. They can not call you at work if you tell them not to. They can't be abusive or threatening. They must identify themselves and state the reason for the call. They can only speak to the person who has the debt. They can not harass you, your family or friends. They can not use inappropriate language. They can not contact you at unusual times or places. They cannot collect more money than the amount of the debt unless allowed by law or contract. They can only contact you if your name is on the debt. So if you cosign a loan you are very much at risk and are responsible for the debt (a good reason to never cosign a loan).

Do NOT avoid a debt collector: Be proactive. Communication is key to getting this over with and behind you. Being in collections may feel like a personal attack but it's just business. If you say you will be in touch with them 1x weekly then follow through.

Remember, communication could help you avoid getting sued.

Tips for communicating with collectors: Exude confidence. Empower yourself by knowing exactly what you owe to who. Be honest about what you can and can not do. Remember you are not asking them for permission for what to do with your money. You are telling them what you can and can not do. As much as the desire may be, do not argue. Listen to what they say, respond calmly and don't waste energy on emotions. Do not make promises that you can't keep and do not over commit. Do not fall for any bait. Keep it short and to the point. Don't let the interaction drag on. Keep a log of all calls and contacts (name, date, time, summary of call). If you want to record the calls make sure it is allowed in your state and let the collector know you are recording. You can try to negotiate. If you are able to get your debt lowered and a settlement is agreed to, you must get it in writing before paying anything. Do not share your personal financial information with any collector as it could be used against you. If you feel like you are being treated unfairly stop the conversation and ask to speak to their supervisor. If it continues, report them to the Better Business Bureau and Federal Trade Commission.

If you are concerned about your credit score and have a desire to maintain or improve your current score, then you need to be able to make at least the minimum monthly payments on all your debt on time. If you are not concerned about your credit score then you can send less than minimum payments. At least you are paying something.

Most people who have debt do not understand the difference between secured and unsecured debt. It is important to know the difference. Think of secured debt as something that can be taken away like a car or house. Student loans and taxes are also considered secured debt as they can garnish your wages, social security and tax refunds. Unsecured debt essentially can not be taken back. If you had a hip replacement, owe medical debt for the procedure and are in collections for that debt, they won't take your hip from you. That's comforting. Credit cards are also unsecured debt.

If you signed on the dotted line then you are obligated and responsible for the debt. But if you end up in collections that doesn't mean that you deserve to be abused and treated unfairly by the collectors. You have to be prepared to deal with the situation and communicate. Get to know the FDCPA not just on the federal level but also what the laws are in your state, as each state can vary.

If debt collectors have entered your life, check out our last blog: Protecting your 'Essentials' during difficult financial times (Food, Shelter, Clothing, Transportation) https://www.justlivekauai.com/post/protecting-your-essentials-during-difficult-financial-times

Need help financially but don't know where to start? Book a FREE 30 minute consultation at justlivekauai.com. Just Live! Your path to financial wellness and freedom.

Keep checking out our weekly blogs. Upcoming content: Monthly Cash Flow Planning/Budgeting, Getting out of Debt, Mortgages, Retirement and much more.