Tiffany the Budgetnista is back with another helpful post! ( You can learn more about Tiffany and The Budgetnista here: thebudgetnista.com)
I know, I know….Debt Collectors can seem reeeeally scary. They’re these mysterious people who call you and demand payment whether you have it or not. They can even threaten you with credit destruction, wage garnishments and legal action. (yikes!)
The good news is, even the most savvy debt collectors have their weaknesses.
Here are 9 ways to successfully handle debt collectors…fear no more!
1) Get Organized
Start a file cabinet where you begin to collect all of your financial papers. Need help? Read one of David Bach’s Finish Rich books. He’s one of my favorite financial authors and in his books he details exactly how to set up your financial file cabinet.
2) Have a Plan from the Start
Before you borrow or buy anything, figure out the best strategy on how to do so. This doesn’t have to be complicated. A plan can be a quick five-minute checklist in your head or a written document that a little takes longer.
The more expensive the financial choice, the more extensive the plan should be. For example, when I approached lenders for a loan to buy my condo, I had an extremely detailed budget. I was able to tell them what I could afford, not the other way around. One lender tried to convince me that I could handle a bigger mortgage, but I showed her my detailed budget on a spreadsheet and declined. No one should be able to tell you what you can or cannot do financially. You should be telling them!
3) Talk to Debt Collectors on Your Own Terms
Remember that you are not obligated to talk to debt collectors when they what. You do have a choice. So wait until…
– you’re at home
– you’re in a comfortable and quiet environment
– you feel calm
– you have a pen and pad (you must take notes: day, time, who you spoke to and about what)
– you have a script ready, because you’re being recorded. (What do you want to say? What don’t you want to say? What information do you need from them?)
4) Do Your Research
The Fair Debt Collections Act: 15 laws that protect consumers from unfair debt collection practices. (link to more info)
Cease and Desist letters: If you want a creditor to stop calling you at home, work or via cellphone and only want to communicate via mail. (link to templates)
Debt Verification / Validation Letter : Proof that the collection company bought/owns the debt/or has only been assigned the debt. (link to template)
The Statute of Limitations on Revolving Debt (credit card debt) in Your State:In my home state of New Jersey, it’s six years.The Statute of Limitations is the maximum time limit for a creditor to file a lawsuit in federal courts to claim an outstanding debt against a debtor. If the lawsuit is not filed within the stated time limit, the creditor will lose the right to claim or sue for it forever. That means the debt collector will no longer have any right to sue you for payment of an old debt. Although you cannot be sued for debts that are past the limitations period, you can still receive harassing calls and unwanted letters from collectors because unpaid debts never disappear. If they do still call, let them know, that you know it’s past the statue of limitations and that the debt is now a “Zombie Debt”, then send them a Cease and Desist letter to stop the unwanted contact.
Find your state’s statute of limitations on debt HERE!
Student Loan Deferments: You should never default on a student loan. It’s one of the worst financial mistakes you can make and it’s also so avoidable. Most (federal) lenders are more than willing to help when it comes to student loans and you can often defer your loans easily right online! (link to more info)
5) Be Prepared
Have script ready, example: “Before I say anything, I first want you to prove that you are entitled to have this conversation with me. I’m requesting that you send me a Debt Verification Letter; so that I know that you are legally allowed to inquire about this debt.”
Have your financial papers organized so you can answer questions quickly and easily.
6) Remain Calm
Cooler heads prevail.
If you feel yourself losing your temper or getting upset, excuse yourself and say you’ll call back another time.
Most mistakes are made out of emotion. Be reasonable and rational.
Be firm, not rude.
7) Do Not Admit to Anything (at first)!
The creditor is going to try and get you to concede that you owe them, by getting you to agree to a payment plan, no matter how small. Some other things to watch out for:
– Acknowledging or saying yes, when they ask you questions about the debt. If the debt is over a number of years old (and past the statue of limitations) they may be trying to get you to reopen a debt that they no longer have the legal backing to collect on. If you agree to a payment, no matter the amount, you’ve opened your “case” back up, the statue of limitations is renewed and they now have the law on their side.
– They may even try to upset you in hopes that you’ll say something on tape that they can use against you.
-Your first words to an unfamiliar creditor that calls you should be: I’m requesting that you send me a debt verification/validation letter; so that I know that you are legally allowed to inquire about this debt. If you receive a debt verification/validation letter from them, then and only then should you talk about the debt you owe.
8) Ask for Everything in Writing
Should you ever go to court, it will be up to you to produce evidence in your favor. It will help you keep track of what was said, discussed and agreed upon, and will help you prove the statute of limitations.
9) Never Forget Who You’re Talking to…
The creditor calling is always looking out for the company’s best interest, not yours.
They are trained professionals and will be looking to get you to say specific words and phrases that will translate into evidence to use against you at a later date.
Don’t be fooled by politeness or a friendly voice. If you owe money, this is not your friend, although they are not your enemy either…
It’s your job to look out for your own best interest.
Final Things to Remember:
– You’re being taped, use it to your advantage and state your grievances again the company.
For example you may say something like, “You have tried to threaten me by using illegal means of collecting the debt; You have hired a locksmith to illegally lock my home by wrongfully telling a locksmith that the property was vacant when I told you that it is still my primary place of residence.”
This happened to me when I was in danger of losing my home during the recession. I used the fact that my bank was taping our conversation to get them to admit and answer for their wrongdoings.
– Anything you say can and will be used against you.
– Your creditor is not your friend. Listen carefully to the questions asked, and answer even more carefully. They are most likely trying to get you to admit and accept ownership of the debt.
– You can always determine when you want to speak. If you’re not sure what to say, ask to speak at another time.
– Do not unwillingly renew the Statute of Limitations by making a partial payment or by making a written or verbal promise to pay, which extends the statute. First ask for the Debt Verification/Validation Letter and ask that at a minimum, it include some account statements from the original creditor.
-You have more power that you realize. Exercise it!
About the author: Tiffany “The Budgetnista” Aliche is a speaker and a passionate, award winning teacher of fun, financial empowerment. She is also the best selling author of the book, The One Week Budget (#1 Amazon / budgeting). Her company, The Budgetnista, specializes in the delivery of financial literacy education.
Tiffany is the financial literacy expert for City National Bank, and she and her financial advice have been featured on the TODAY show, Pix11 Morning News, News 12 New Jersey, ESSENCE Magazine, FORBES.com, The Star Ledger, Ebony Magazine, FoxBusiness.com, MSNBC.com, Redbook, CBS MoneyWatch.com, Black Enterprise, USA TODAY, VIBE.com, as well as numerous online publications. She also blogs about personal finance, for The Huffington Post.