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Dealing with Debt Collectors
At one point or another we’re all going to have to do one of the scariest things with our debt collectors, talk to them. There are a large number of possible scenarios, ranging from simply being nice and talking to them all the way to suing them. I can’t tell you exactly which tactic will be the best for you at any given time. You will have to consider you’re overall debt strategy, including your financial and emotional situation. Here are some potential strategies.

Talk to Them
Sometimes simply talking honestly is the best thing you can do. This is usually most effective when you're current or just a little behind and are confident that you'll be catching up soon. It can also be effective if you are in big trouble and you're just about to make a big decision. If you're about to declare bankruptcy, there's really nothing to lose by telling the truth to your credit card company. They're going to find out anyway. If you're dealing with a collection agency they may either see this as a sign to give up or mount a last-ditch all-out assault.

Scott Bilker is one of the most effective negotiators that I know. This is especially true when dealing with credit card companies in the early stages of debt. If you're going to be talking to credit card companies it's well worth getting his book Talk Your Way Out of Credit Card Debt

Make Them Prove It
When ever a collection agency or attorney takes over a new account they are required by law to notify you in writing that they are attempting to collect the debt. Within that letter there will be a paragraph that notifies you that you have the legal right to challenge the validity of the debt. If you do challenge the validity of the debt all collection activity must cease until the debt has been proven valid. Unfortunately you can still be sued at any point.

As far as I know* there is no case law that determines exactly what a proper validation is so you may get back anything from a letter that basically says you owe the money to a stack of printouts of all of your credit card statements since the account was opened. Or you may get back nothing at all.

*Here’s an update. It seems as though there has been a court decision that specifies what a proper debt validation is. I’m not sure if there have been other decisions, or if this one is the ultimate decision but as of now it’s the only one I know of. It’s the case of Chaudhry v. Gallerizzo. If you want to read the decision you can here. Or you can read my interpretation of the decision. That is that the collection agency can basically tell you that you just owe the money. While this doesn’t seem fair to me, that’s what the court said. Now the good news is that most collection agencies don’t know about this. So don’t tell them.

If your bill is fairly new, within the last six months, challenging the validity of the debt that with a collection agency really won’t help much. If you get a letter that’s for a bill that is old, challenging the validity of the debt may be enough to cause the collection agency to give up. If it’s with an attorney it may slow down the legal process. Now, it may not. If the lawyer is gung-ho or has orders from the client to sue they're going to sue. But if you request proper validation the lawyer will have to provide it and will understand that you won't roll over and be an easy mark. If the case is questionable and the lawyer is just looking for a fast buck he may look elsewhere.

If you do challenge the validity of the debt you’ll need to write a letter and send it certified with a return receipt requested.

Avoid Them
"Leave a message at the beep." An answering machine is a great way to avoid collectors. Or you could simply get a wireless phone to use as your primary phone, wireless phones aren't in the 411 database, and keep your old landline phone. You just turn off the ringer on the old phone and then let the collectors call. They won't bother you a bit.

Another way to avoid them is to send them a Cease and Desist Letter.


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Debt Calculator

See how long it will take for your debt to get paid off with one of these four options. We have listed a standard debt amount as a default on the debt calculator. You will need to enter your current personal or business debt amount below to see what your debt payoff amounts will reflect.

What's Best For You: Minimum Payments?

Debt Consolidation?

Credit Counseling? Debt Settlement?
Total Unsecured Debt $30,000.00 $30,000.00 $30,000.00 $30,000.00
Months To
Get Out Of Debt
430 60 60 36
Interest Rate 18.9 % 12 % 10-12% Ave None
Total Interest Paid $49,978.53 $10,040.01 $21,300.00 None
$900.00 $667.33 $855.00 $458.33
Total Cost
To Be Debt Free
$79,978.53 $40,040.01 $51,300.00 $16,500.00
Monthly Payments   Months To Get Out Of Debt   Total Cost To Be Debt Free
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PLEASE NOTE: This calculator gives you an estimate of how much it will cost you to get out of debt, how long it will take and how much your monthly payment may be with the different options to pay off your debt. Keep in mind "Minimum Payments" assumes you NEVER make any further purchases on your credit cards and the credit card companies NEVER raise the interest rate on your cards in the future from the rate calculated above. The "Debt Consolidation Loan" example is usually only possible when taking out an "equity line of credit" or "second mortgage", which involves securing your unsecured debt with your home. This is a very risky option for most people because the home could be foreclosed if you cannot make the payments.