Receiving a call that you forgot a past debt and now it’s gone to collections can be overwhelming. Most people don’t deal with this enough to know their rights. Here are some steps you can take if you are contacted by a debt collector.
During that first call
You really have two choices – some people say to just hang up and use the time to research how the process works, what your rights are, etc. Others suggest that if you can be trusted to volunteer nothing, the initial call can be valuable. You should listen politely to what they say and make notes of the debt in question. Perhaps it will remind you that you did have that credit card, or you will be dumbfounded because you don’t remember the debt at all. If you don’t remember, ask for the name of the original creditor. No matter the case, don’t admit anything: not that you owe the amount, not that you’re willing to start a repayment plan, nothing.
Here’s why it’s important to say nothing. The clock is running on your debts. We’ll talk about this more in a minute, but debt collectors have a limited period of time to collect from you. If you agree to a payment schedule or send in money, it can restart the clock.
If the debt collection agency demands immediate payment, uses high pressure techniques, or won’t answer simple questions, hang up. Never provide your bank account information or Social Security Number. And keep a log of all your conversations, noting time and date, what was discussed, and who you talked to (including their identification number or extension).
Immediately ask for proof
Even if you remember the bill, you should request proof of the debt. By doing so, you will confirm that you owe the debt, but also that the debt hasn’t already been repaid, and that the collection agency is authorized by the company to collect. However, you must do this within 30 days of the initial contact IN WRITING. You can find sample validation letters online. Send your letter certified mail to show delivery. Once they have received this letter, they must stop collection efforts until they have provided proof.
If you receive proof that it’s your debt but still don’t remember it, consider calling the original creditor to investigate further. Let them know this collection agency is representing their company, state that you have no knowledge of any past debts, and ask them where and when this debt was incurred.
Research
When dealing with debt collectors, there’s a long list of dos and don’ts that they are supposed to follow, such as they can’t call after 9pm or before 8am. They can ask people about where you live or work, but cannot contact them more than once. And you can request they not contact you at work or at all, something they must abide to.
Pull all three of your credit reports, looking for the debt that the collector mentioned during their call. Again, this might jog your memory about a forgotten store credit card or other debt from long ago. If it’s not on the report, that doesn’t mean you can ignore the debt.
Check with your state Attorney General’s office to learn the statute of limitations for various forms of credit. In many states, the limit for collection of a credit card bill (often called an open-ended account) is six years. Of course, this doesn’t mean that if you’ve been paying the minimum for six years you’re free and clear. The clock only starts when you’ve stopped paying anything toward your debts.
Note: Most states have different statutes of limitations depending on the type of debt. In one example, state tax debt had the longest, then mortgages, and finally credit card bills.
They can’t prove the debt is mine
If the debt collector cannot provide proof that the debt is yours, they are supposed to stop pursuing you for the debt. However, in their haste to contact another debtor, they may conveniently forget to clean up your credit report.
Even if your credit report had no errors when you first checked, check again to make sure the collection agency didn’t put erroneous information into your file. (And make sure to check regularly over the coming months). If they did, send copies of your validation letter and certified mail return receipts, along with any other proof you have, to the three credit bureaus and ask them to correct the error.
The debt is mine
If the debt is yours, there’s no reason not to pay it. That’s not to say you can’t negotiate a better outcome or in some cases simply ignore your past bills. But if it’s truly something you forgot, payment in most cases is the right thing to do.
Payment with benefits. If you are willing to pay the debt, start by negotiating with the creditor. Ask for a reduced sum, perhaps 50¢ on the dollar. Or consider a “pay for delete” agreement, where if you pay in full they agree not to add the collection to your credit report. Obviously, if you try the pay for delete, they probably won’t be amenable to you trying to next negotiate playing only a fraction of the bill.
Willful ignorance. Some of you may choose to ignore the bill, even though it’s actually your debt. Here are some scenarios where that might make sense for you:
It’s outside the statute of limitations. Make sure you’ve researched the information for your state for the specific type of debt. A mistake here could be costly. However, if it’s outside the statute of limitations they should have no standing if they decide to sue you in court.
It’s no longer reportable to the credit bureaus. Most credit bureaus remove negative information after 7 years. If the debt is 10 years old, you can choose to ignore it since it should have no effect on your credit rating.
It’s close to the date when it will no longer be reportable. If you’re within a year or two of your debt reaching 7 years and aren’t going to apply for new debt, you could choose to ignore the collection attempt.
With all of these cases, keep your eyes open. A debt collector can still sue you, even if it’s past the statute of limitations in your state. They can claim it’s within the set time, and if you don’t show up in court they can still win a judgment against you.
Also, collectors may re-age the debt, claiming that you made a payment or agreed to start making payments, and report that on your credit report. If you choose willful ignorance, be sure to check your credit reports regularly. And open all your mail to make sure it’s not a summons to appear in court.
Debt collectors can be intimidating, and it’s easy to wish they would just go away. But they won’t. Stand up for your rights and demand that they follow the letter of the law. If you feel you’re in over your head, consider consulting professional help, especially if you are sued for nonpayment.
Photo by Chris Moore