You have several options with a debt that you owe has been placed in collections. This blog post will help you determine whether one of these options will work for your situation and explain the consequences that could occur if you are unable to choose either of these options at this time. Usually, when you owe a creditor, it will first bill you multiple times to attempt to get you to pay them directly. Depending on what type of debt that you owe, you may have some options here to get this debt settled before the creditor turns it over to a third party debt collector.
If You Can’t Pay the Debt
If you are dealing with an original creditor, you can attempt one of the following methods if you are unable to pay the debt in full:
- Contact the creditor immediately, explain why you are unable to pay the bill in full and ask if there are any options to allow you to make lower monthly payments to pay the debt and/or lower the interest rate to 0% while you make the agreed upon monthly payments. If you receive the answer no, always ask nicely to speak with their supervisor and ask the supervisor the same question. Usually the supervisor has more authority to make those decision than a customer service representative.
- If you receive a no after trying option one, another option is to just start mailing in each month what you can afford to pay them anyway. The key is to pay this amount on a regular basis each and every month. Usually, if the original creditor is receiving money from you on a regular basis then it will not turn the debt over to a third party collector or sue you because it sees that you are attempting to pay the debt. After paying regularly for about three months, call the original creditor again and attempt to try step number 1 again.
- Do nothing. If you choose this option, the creditor will likely turn the debt over to a third party collector to collect the debt and additional fees/charges may be added to the debt at that point.
Don’t Let Creditor Violate Your Rights
If you are dealing with a third party debt collector, you need to know your rights under the Fair Debt Collection Practices Act (FDCPA). A third party debt collector can be held accountable if it violates any of your rights outlined under the FDCPA. If you feel that a third party debt collector has violated your rights, contact your local Bond and Botes office today for a free consultation to discuss your case. If the third party debt collector has not violated your rights and you wish to settle the debt directly, you can follow one of the following recommendations:
- If you have proof that you paid the debt directly to the original creditor, it is important to dispute the debt with the third party collector within 30 days of receiving the first written notice from them.
- This can happen quite often on medical debts. Fifteen years ago, I went to a local hospital and had to pay a $25 copay. I didn’t have my checkbook then so the hospital said it would bill me. Upon receipt of the bill, I paid the $25 with a personal check. The check cleared my bank account so I never thought anything more about the bill nor received any notice that it was still outstanding. When annualcreditreport.com was created in 2003 to allow U.S. Citizens the right to review their credit reports, I pulled my credit report and this $25 was there in black and white haunting me two years later. On my credit report was the name of a third party debt collector who I had never heard of stating that I owed them $25. I contact the third party debt collector and was told it was related to this local hospital bill. I advised the collector that I paid the bill but it insisted that I owed it and demanded payment unless I could get the collector a copy of cleared personal check from my bank showing that it was paid. The problem with that was that it had been two years since I received that bank statement with the cleared checks and to obtain another copy from my bank would cost be a $25 fee. So I would have to pay another $25 to prove that I paid the original $25. As you can imagine, I refused to do that. Instead, I disputed the debt on my credit report with the credit reporting agency. Also, I added a statement to my credit report explaining the dilemma of not wanting to pay $25 to prove that I had already paid $25. Fortunately, the debt was so small that it really did not affect any future attempts for me obtaining credit and it fell off my credit report after five years.
- If you agree that you owe the debt then you can attempt to contact the third party debt collector to setup payment arrangements. Again, it is essential that you pay as agreed to avoid any future collection activities against you on this debt. If the third party debt collector agrees to payment arrangement, get them to send it to you in writing and keep it in a folder along with proof of any payments that you send off to them in the future. Only pay them by money order or cashier check because you do not want a third party debt collector having access to your personal bank account number.
- You can contact the third party debt collector to see if you can settle the debt for a percentage of what you owe. My suggestion is that you first offer to pay them 33% of the original debt in full. If the collector accepts an offer, have it email or mail you the offer in writing that states it agrees to accept that amount to settle the debt in full. When you pay the debt, make sure you write on the money or cashier check (never pay by personal check to a third party collector) “paid in full”. Keep these records in a safe location if you have to prove in the future that the debt was paid in full. If you settle a debt for less than what you owe, you may receive a 1099-C for you to disclose as income on tax return for the amount that you were not required to pay back.
When you owe a debt that you cannot pay, it can cause a lot of stress in a household. If you unable to settle any debts that you owe and want to discuss your options on how to deal with them, contact your local Bond and Botes office today for a FREE consultation. We are attorneys providing financial solutions.
Mary Pool is a shareholder of the Bond & Botes Law Offices in Montgomery and Opelika, Alabama. She holds a Bachelor of Science from Auburn University at Montgomery, and a Juris Doctorate from Faulkner University’s Jones School of Law. She has represented thousands of clients over her more than 11 years working in the bankruptcy field. Read her full bio here.