The myth has circulated for decades: As long as you pay at least part of your bill each month, won’t be turned over to a collection agency. Unfortunately, that’s false information. According to the Consumer Financial Protection Bureau, while many creditors give ample notice, they’re not legally required to let you know they’re sending your account to collections.
If you’re falling behind on bills, it’s important to work out a plan to tackle your debt. While your creditors have every right to send your account to collections when they deem it necessary, they might be willing to work out a plan if you communicate your financial difficulties. Remember to consult with a financial advisor to make sure the action you take to pay down your debt makes the most sense for your situation.
Talk Is Cheap(er)
If you anticipate problems paying off the balance or meeting minimum-payment deadlines, consider confronting the situation proactively by contacting the creditor. Avoid letting unopened invoices pile up. Review them immediately, jotting down due dates on a calendar and scanning bills for errors. It may be uncomfortable, but it’s far more pleasant than the consequences of ignoring your obligation. When you don’t respond, creditors could assume the worst, and all too soon your phone may be ringing off the hook with stress-inducing collection calls.
Work Out a Compromise
Another option is to work with the creditor to negotiate a better rate or create a payment plan based on what you can afford to pay. Express your desire that the account not be turned over to collections. In some cases, providing evidence of a financial struggle might be helpful when communicating your need to work out a plan. You could share your income statement or copies of other bills, may be helpful. If you can get a creditor to work with you, get the agreement in writing.
Collection Agency Practices
There are certain across-the-board rules under the nationwide Fair Debt Collection Practices Act. Collectors cannot threaten you with arrest, use profanity or call during unreasonable hours, and, if you request it, they can’t call you at work. Furthermore, a collector is prohibited from distorting a consumer’s legal rights, disclosing a consumer’s personal matters to third parties, and attaining information about a consumer through false pretenses.
Keep Your Cool
While it may be scary and depressing to be called by a bill collector, getting angry or beating yourself up probably won’t help. Remain calm. You shouldn’t feel you have to volunteer details from your end of the situation. Instead, ask for debt information in writing, which collectors must provide within five days. Check your state’s statute of limitations to see when the time limit for legal action on the debt expires. You may still owe, but after a set number of years creditors or collection agencies can’t take you to court to secure a judgment against you.
Document the Details
Whether dealing with internal or third-party collection departments, send any requests, clarifications or corrections in writing using certified mail with a return receipt requested that proves they received it. Note down every phone conversation and keep all correspondence organized. Continue to monitor your credit report to keep a firm grip on how your credit is being affected as you address the issue.
About the Author
Cyndi Perkins is an award-winning newspaper editor, columnist and reporter. Beginning her career in the 1980s, she has covered business, gardening, health, fitness, travel and parenting for international, national and regional publications.
This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.
Published by permission from ConsumerInfo.com, Inc. © 2013 ConsumerInfo.com, Inc. All rights reserved.