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Debt Elimination: Step 3a – Five Tips for Dealing with Collections

image by Brad_Chaffee

I know, I know…you’re wondering why there would be a “five-step” system that technically has six steps.  Well, I don’t count this one because I hope you don’t have to deal with this one, even if you do have past due debt.  Nonetheless, if you find yourself on step 3 with lots of collectors hounding you, I want you to be prepared and have some tools in your arsenal to deal with them.  What qualifies me to discuss this?  How about the six years I spent working as a debt collector and training debt collections for one of the world’s largest financial institutions?  I’ve talked with literally thousands of people who are past due on their bills and heard just about every story out there causing those problems.  So how do you deal with collections?  Here are my five top tips:

  1. Know your rights– Some of the most boring reading you will ever do (and the only chapter in my book that I feel I need to apologize for) is the chapter regarding debt collections and the law.  There are four major laws you need to be familiar with as someone who may be dealing with creditors.  They are:
    • Fair Debt Collection Practices Act (FDCPA)
    • Fair Credit Reporting Act (FCRA)
    • Fair and Accurate Credit Transactions Act (FACT Act or FACTA)
    • Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act of 2009)

    Please allow me to make a shameless pitch for my book if for no other reason than I’ve taken these four federal laws and broken them down into what they really mean for you.  If you know your rights then you know what is and isn’t allowed by a collector.  For example: are you getting calls late at night?  That’s a big no-no!  FDCPA says collectors may call between 8a-9p in your time zone. Are you getting calls at work?  FDCPA says that all you have to do is tell the collector you’re not allowed to receive calls at work and they have to stop calling you there.  See how handy this information might be!?

  2. Be reasonable/realistic – Since you are working with a limited amount of income and must prioritize how to spend that income, you must be reasonable when choosing who gets paid and who does not.  If a collector is trying to “make an arrangement” with you and you don’t have the money, don’t set up the arrangement. Be reasonable with yourself and with the collector and be realistic in what you can/cannot do.
  3. Be logical – A collector’s primary job is to get you to pay him/her before hanging up the phone.  That means good collectors will use emotion to beat you at the numbers game.  If you’ve followed my advice thus far and been reasonable and realistic in what you can pay, don’t let a collector change your plans by using emotion.  If you get emotional (mad, sad, scared), you’ll do something desperate.  Use logic, not emotion.
  4. Choose your battles – If you’re emotionally spent, you are in no shape to be working with a collector.  You will not do very well.  My advice to those I counsel is to talk with a creditor once per week or when something changes.  If you are ready to make a payment or if some major change occurs in your situation, talk with them. Otherwise, only answer their calls about once per week.  Calmly advise them of what’s going on (if there’s anything new) and tell them your plan of talking with them once weekly or when something changes.  They won’t like it, but it keeps you from spending hours on the phone fighting and draining yourself emotionally.
  5. Know the difference between secured/unsecured debt – Sad to say, most Americans don’t know the difference in a secured debt and an unsecured debt.  A secured debt is one that is backed by an asset (like your car or house).  If you don’t pay, you lose that asset.  Pretty much everybody knows that if you don’t pay your car payment, the car gets repossessed.  That’s because it is a secured debt.  An unsecured debt (credit cards are the best example here) is one that if you don’t pay, there’s really nothing the collector can take from you.  Learn the difference in secured/unsecured debt because if a collector tells you you’re going to lose your house if you don’t pay your credit card bill, you can be assured that collector is a moron.  Learning this difference will also help remove the fear of what happens if you aren’t able to pay for a long period of time – scary words like foreclosure, repossession, judgment, etc. become less fearful because you know what they all look like.
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