How to Deal with Debt Collectors When You Can't Pay Your Bills?
When you started college or opened your first credit card or had to have your appendix removed, you probably did not think it would cause massive problems for you down the line. You did not count on owing debt over the long term. Now, your situation changed, and that bill still sits there waiting for you to pay it.
You probably want to find a way to deal with the bills. No person typically plans to welch on their bills. Most people open a credit card and make payments regularly. Something happens like losing their job, and they fall behind. It happens.
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How to Deal With Debt Collectors?
What also happens is that the credit card company or the bank or the hospital hires a debt collector after their internal staff becomes exhausted trying to recoup the money owed.
You do not need those debt collectors harassing you. In fact, if they have become harassing, they are breaking the law. The US government set specific laws governing how credit card companies, banks, and other debtors, the debt collectors they hire, can contact individuals. The law also limits the methods they can use and what they can say or do. It provides each individual the right to tell the companies to cease all methods of contact and once they say that the company may not legally contact them again. The debtor or debt collector cannot legally hire someone else to do it either once the debtee has stated that they refuse contact. More on all of this later.
So, how do you learn how to deal with debt collectors when you can't pay?
Start by reading this article.
The Obvious Answer
It takes three months of you not paying anything on a bill for it to move into collections. This makes the obvious answer that you do not allow your bills to get that behind.
That does not mean that you pay them off fully, or you make the recommended payment every month. You can usually keep things out of collections by simply paying for something every month. Even if you can only pay $5 towards the bill, the creditor sees that you plan to pay them. This lets them know you are not ignoring the bill.
Since it requires three months of no payment for it to go to a debt collector, the minute you know that a problem arose, phone the debtor. I know. This seems icky. You do not want to talk about tough things you’re going through with some stranger but phoning the day you lose your job or the following day to explain what happened and that it might make you late on your bill can save some problems. Here’s why. If it is a credit card or bank/credit union loan, many of these have a provision for one skipped or missed payment with no penalty. Asking to use this can save you. It buys you time to find a new job.
Behaving in a proactive manner also helps you look good to the creditor. They know that you stay on top of your finances. You respect your debt.
Okay, but what if you already owe?
Handling Debt and Debt Collectors
Let’s get the other obvious out of the way.
Right number - wrong person
When you get a new phone number, it was someone else’s old phone number. You may find yourself receiving spam calls, sales calls, and debtor calls for the person who once had that number. Legally, all you have to do is tell the debt collector that they are calling the person’s old number and your name. Let them know it is now your number and that should solve the problem.
They have no legal right to phone you about a stranger’s debt. Even if you were the family of a person who owes a debt, they only get one phone call to the family member. Once they speak to the person once to try to locate the other person, they have no further right to contact that person.
The only exception is if you cosigned a loan.
If this happens, and you tell the debt collector nicely your name and that this is your new number, but they phone you again, you should report them to the Federal Trade Commission (FTC). They are breaking federal law so long as you are telling the truth.
Also, avoid getting upset at the person for whom they ask. First, you do not know the whole situation. Second, most debt collectors making calls to old numbers are unscrupulous folks that the FTC is trying to close down. They harass people about zombie debts.
“They’re coming to get you, Barbara.”
Zombie Debt
No, zombie debt is not an homage to “Night of the Living Dead.” Zombie debt occurs when you settle a debt for a reduced amount and after the statute of limitations has passed, a debt collector attempts to re-collect the debt that the person already settled and paid. The zombie part of the name comes from the fact that it was a “dead” debt, a paid-off one.
Watch Out for the Scammers
The other category of these callers falls into scammers. They phone using robo-dialers claiming that the person at the number owes student loan debt or a car loan. They offer to help you avoid defaulting or to settle the debt for a lesser amount.
You KNOW it is a scam when any entity offers to reduce the amount of a student loan. They never do that. You can have a student loan debt forgiven. You can earn a reward that you put toward paying off a student loan, typically through service via AmeriCorps, VISTA, or Teach for America. The US government does not negotiate for a percentage of debt though.
So, before you start thinking poorly of a person, as my dad would have said, realize that they probably had the cell phone number long enough to pick up some unscrupulous spam just like people did with landline phones years ago.
Register with do not call
Register the number of your cell phone with the Do Not Call List online. This requires you to provide your name, address, and telephone number, and registration on it means that telemarketers cannot legally contact you at that number.
So, if you got a new cell number, you could register it at the DNC website and apprise the debt collectors of this when they call. This helps you get rid of them because they have access to this list. They can check it and see that, indeed, that number now belongs to you and not the person they wanted to reach with their spam.
Hangs Head. The Debts Are Mine Though
Okay. There’s help for that, too. You have debt management solutions available to you. Let me grab a cup of espresso. You can do the same. We'll meet back here in five minutes.
Okay, back to proactive financial management.
First, the US government protects you from debt collectors harassing you. The prevailing law in this area, The Fair Debt Collection Practices Act, limits how and when they can contact you. It also limits what they can say and how they can say it.
The short version: If you owe them money, they can contact you to ask for it. They have to ask nicely.
They cannot:
Berate you. Curse you. Yell at you. Threaten you.
Lie to you. Mislead you. Falsify information.
Contact you in any manner you stipulate that they cannot. If you say, "I really cannot talk to you on the phone, but here is my email address. I would happily email with you about this matter," then they have to do that. Legally.
Contact you at a time they know is inconvenient, such as your work hours. If you tell them you can’t talk during specific hours, they must adhere to that.
The law assumes convenient times fall between 8 am to 8 pm in the debtee’s time zone, but the debtee can tell them that those aren’t convenient, and they must use a convenient time to the debtee. (If the individual works from home or in an office from 8 am to 6 pm, they obviously would not want constant interruptions about their invoices.)
Call you directly once you let them know you retained the services of an attorney, and you provided that attorney’s name and number.
Call you at work if you tell them that your employer does not allow personal calls at work.
Call your family, friends, neighbors, random strangers, etc., or contact them in any other way. Your debt is a private matter protected by federal law. They may speak to you directly about it or your attorney if you hire one. That is all. That is it. Smack them upside the head with an FTC violation if they dare do otherwise.
Congress really looked out for folks on this one. The law states “A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt.” Period. Boom.
This means that you can tell them your email address and offer to conduct all correspondence via email. You can tell them that no other form of contact currently existing or created in the future is acceptable except email.
You can also tell them that no form of contact is acceptable or allowed. If you want to do the latter, you need to also mail them a certified letter that results in you getting a receipt of delivery when it reaches them.
Unconscionable: not right or reasonable; also, unreasonably excessive.
Synonyms: unethical, amoral, immoral, unprincipled, indefensible, wrong, unscrupulous, unfair, underhand, dishonorable, dishonest, corrupt, depraved, unwarranted, uncalled for, unreasonable, unfair, inordinate, undue, outrageous, preposterous, monstrous, inexcusable, unnecessary, needless,..
The simplest thing to do is to limit them to email which puts everything in writing and makes it so much easier on you when you go to court as you will probably need to if they continue to harass you.
Paying Off the Debts
Now that the phone stopped ringing and you have achieved peace and quiet, let’s get down to business on how to get those debts caught up. You have four higher priorities than any credit card debt or hospital bill. You must first pay for:
Shelter,
Food,
Utilities,
Transportation.
Logically, you need a safe, enclosed place to sleep. You also have to eat to live. The place you sleep in needs lights and heat and cooling. You also need a method of getting to and from work.
Once you pay for those four things, you can put the remainder towards your bills, and you should. Back to paying just $5 a month lets the creditor see that you want to pay them. Sometimes that really is everything. When you show them that you want to pay your bills, they will help you do it by creating a payment plan.
Do not let them guilt you into paying them before you pay the top four necessities. You never go homeless just to pay somebody. You pay for your basic necessities first.
Cut Your Expenses
Now, that does not mean that you live high on the hog, another of my mom and dad’s awesome Deep South euphemisms. You can find a cheaper apartment or reduce your grocery bill. Switch to a cheaper phone plan. Start carpooling to get to work or school. All of those things reduce your outgoing funds without harming you or your way of life. Those options also provide you more discretionary income to make a payment each month.
Make a Payment Plan
Once you have that money each month, you can contact the debtor and offer to either make a monthly payment of that set amount, or you can inquire about settling the debt for a percentage of its value.
Always make these offers in writing. Always require the debt collector to write back accepting the offer or making a counter-offer. Everything always gets put in writing. This helps you. When you make these proactive offers, you look good. If you ever do have to go to court, the judge sees that you really did try to pay off the debt. You tried to negotiate. You tried to pay them.
Make a budget. Document every penny of income. Allocate it to the four needs. Whatever is left, pay to the creditors. You will have to come up with free ways to have fun for a while. (I recommend the local library for books, movies, and even games.)
Eliminate the Unnecessary
Let me stipulate that food is actual food. Alcohol, cigarettes, and/or drugs do not count as food. You probably would not be in debt if it were not for using one of those things, so eliminating that will quickly help you. They’re not necessities. Once you stop using any and all of them, you will see money just pile up. You will suddenly be able to pay off bills and have money in savings.
I promise this and I can. I’m backed up by AA, NA, etc. If you use anything, I can promise that once you stop, and you work at a job, you will seemingly magically feel rich. Your bank account will start to look like you’re rich. You will have money to pay your bills.
Getting Started Getting It All Together
You can learn how to deal with debt collectors when you can't pay, and you can learn how to reduce your bills while increasing your income, so you can pay them.
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