Do you get calls from a debt collection agency? Having delinquent debt not only hurts your chances of getting a loan but can also affect how much you pay for insurance and even your ability to get a job or promotion. Here are some things you can do:
1) Know your rights.
Under the Fair Debt Collection Practices Act, there are a variety of limits placed on how debt collectors can contact you. For example, they can’t contact you before 8 am or after 9 pm without your permission and you can forbid them either orally or in writing from contacting you at work. You can also request in writing that they no longer contact you at all. If you think that a debt collector is violating these rules, harassing you, making false statements, or using other unfair practices, you can file a complaint against them to the Consumer Financial Protection Bureau.
2) Know what you can afford to pay.
You can’t negotiate an affordable plan if you don’t know what’s really affordable for you. You don’t want to just estimate your expenses though. Instead, look at your bank and credit card statements and categorize your expenses for a month on a worksheet like this. Once you know where your money is going, see if you can then use any of these money-saving ideas to reduce some of those expenses. The result should provide you with a good sense of what you can afford to put towards the debt each month.
3) Know what you owe.
For each of your debts, find out the balance, the interest rate, the minimum payment, and how long it’s been delinquent. You can use this worksheet to record the information. If you see anything that’s not accurate, you can dispute it with the credit bureau to have it removed. It’s bad enough if you’re suffering from your mistakes. You don’t want to suffer from other people’s mistakes too.
4) Focus on newer debt first.
There are several reasons for this. First, the older the delinquency, the less it affects your credit score. Second, depending on your state and how long the debt has been delinquent, the statute of limitations for them to sue you may have passed. Third, delinquencies typically fall off your credit report 7 years from the delinquency date.
5) Try to negotiate an affordable payment plan.
Once you know what you can afford to pay and have identified which debt you’d like to focus on first, contact the debt collector and try to negotiate an affordable payment plan. Remember that the payment plan shouldn’t jeopardize your ability to keep a roof over your head, the lights on, food on the table, and your car in the driveway. Finally, just be careful of contacting collectors of old debt because even just acknowledging it can restart the clock for the statute of limitations.
6) Consider working with a credit counseling agency.
If you’re unwilling or unable to negotiate a payment plan directly, consider working with a credit counseling agency (not a debt settlement company) to negotiate on your behalf. Since debt can be such an emotional issue, you might want to look for one that’s in your local area and offers in-person counseling. Also see if they’re associated with reputable organizations like the National Foundation for Credit Counseling and if they’re included in the United States Trustee Program’s list of credit counseling agencies approved to provide pre-bankruptcy counseling if you’re unable to work out a payment plan. You can also check with the Attorney General’s office and local consumer protection agency for any complaints filed against them.
7) Wait it out.
If all else fails, you can simply wait for the debt to get past the statute of limitations and/or drop off your credit report. Unless you’re planning to purchase a new home or apply for a new job before that happens, it shouldn’t have a significant impact on you.
Having a debt in collections isn’t the end of the world. (Fortunately, the days of debtors’ prisons are over.) While no one likes getting calls from debt collectors, there are steps you can take to not only make them stop calling, but also get rid of the reason they’re calling in the first place.
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