Most of the time, receiving a phone call is a painless and even fun experience. But every once in awhile what you hear on the other end of the line can plunge your heart into your throat. That’s certainly what can happen when a debt collector calls.
Here are a few things that may run through your mind in that moment…
…What?? I know I’m current on all of my debt payments!
…Er, huh? Did my identity get stolen??
…Holy crap, did I forget to pay something when I was younger?
…Ughhh. I knew this was coming.
What’s not so easy to guess is what happens next in the panic that’s sure to take hold. But, this is the most important moment for mental clarity. How you handle this moment will affect your financial situation for years to come.
Here’s what to do if you get a call from a debt collector – or rather, what you should not do:
Do not automatically agree that the debt is yours.
If the debt is yours, then you can agree to it after you’re sure the debt collector is legitimate. If the debt is not yours, saying that it is can lock you into a battle that makes it nearly impossible to expunge the debt from your credit report.
So, before you do anything else, you’ll need to gather some more information. This includes verifying that the debt collector is legitimate, deciding if you are able to repay the debt, and, if you don’t think the debt is yours, sending the collector a request for a validation of debt.
The First Thing You Should Do When a Debt Collector Calls
Whether you know you’re behind on a debt account or the call comes as a total surprise, you can walk into a landmine if you’re not careful during that first phone call. As mentioned above, you should not immediately confirm ownership of the debt. Here’s why:
- If you owe but can’t afford to pay the debt, you’ll lose negotiating power
- If you owe and intend to repay, you should first confirm that the debt collector is legitimate and is legitimately who you should pay
- If you owe but the debt has already surpassed the statute of limitations, confirming that it’s yours could restart the clock on the statute of limitations
- If you’re not sure you owe, it could be a mistake and you’ll want to know for sure before you agree to repay
- If you’re sure you don’t owe, it could be a mistake or even an instance of fraud
As you can probably surmise, there are a multitude of scenarios that can arise in each of these situations. So before you do anything else, you might want to send a request for validation of debt.
What’s a Request for Validation of Debt Letter?
According to The Fair Debt Collection Practices Act (FDCPA), a debt collector must send you written validation of debt within five days of contacting you. If they don’t, you can send them a letter to request a validation of debt (see this sample letter).
The FTC outlines the contents of the letter that you should receive:
- How much you owe
- Who you owe
- Statement giving you 30 days to dispute the debt
- Statement that, if you dispute the debt in the given 30 day time frame, the collector will mail you the verification of the debt or a copy of the judgement against you
- Statement that the collector will provide the name and address of the original creditor (if different from the current creditor) if you write a request for that within 30 days
Note: If you dispute the debt within 30 days, the debt collector must cease attempts to collect until they’ve mailed you verification of the debt or a copy of the judgement to you. If you don’t dispute the debt, the debt collector can assume that you owe and continue attempts to collect – but that is not equal to admitting that you owe the debt.
How to Send A Request for Validation of Debt Letter
Before proceeding talks with the debt collector, there are a few reasons you would want them to first prove that the debt in question is in fact yours. Most notably, mixups are common, Here are just a few that could occur:
- A reporting error that aligns someone else’s debt to your name.
- Fraud such as a person putting down your social security number or identity when creating this debt.
- A collector attempting to collect on debt that has already surpassed the statute of limitations – or on a debt that you already repaid years ago.
So if you’re looking for proof that the debt is truly yours, you can get that by sending your debt collector a request for validation of debt. The letter should be sent certified mail (so you can have proof of receipt) and include your account number, the date they contacted you, the method they used to contact you, and a statement requesting that they provide validation of the debt. It doesn’t have to be long, as you can see from this sample letter.
That said, there may be times when you prefer not to request a validation of debt…
When You Might NOT Want to Request Validation of Debt
According to debt collector turned debt settlement expert, Jared Strauss, there are situations in which requesting validation of debt can be detrimental to you – such as when you know that you owe the debt and that the debt collector is legitimate.
Strauss gives a multitude of reasons why this could be a problem, but they boil down to the idea that asking for validation of debt can single you out among a sea of people unlikely to ever respond to them and turn the tables from being communicative to adversarial. Strauss outlines that this can,
a) encourage the debt collector to obtain more information about you than they started with (making it more likely that they can and will sue you for the debt)
b) single you out as someone who wants to resolve the situation, but potentially in an adversarial manner (collectors typically are able to collect on very few of the accounts that they receive)
c) give the debt collector the upper hand in negotiations for settling the debt, since they now know you’re highly motivated to resolve the situation (something that actually works against you in negotiation)
While this isn’t to say that you shouldn’t receive the proof of debt you are owed, it is something to think about. If your number one concern is making sure the debt collector is the legitimate collector you now owe, read this article for advice to help you confirm that information.
What if You Don’t Receive the Validation of Debt?
If you decide that requesting validation of debt is your best option, keep in mind that you may not get that validation of debt. Strauss goes on to explain why a debt collector might not send you validation of debt:
- They don’t have enough information to prove that you can/will repay the debt
- They can’t verify the debt
If you don’t receive your validation of debt letter, that doesn’t mean you’re off the hook. While it may be that you don’t receive it for the reasons above, the debt will remain on your credit report. The other possibility is that the collector intends to send it, but just hasn’t yet.
While you’re bound to 30 days to send a written dispute of the debt, a debt collector does not have the same restrictions. In fact, there is no time limit after which they are required to send you the letter you requested. Because of this, you’ll want to remain vigilant and keep tabs on the situation.
What to Do if the Debt in Question is NOT Yours
With or without the validation of debt, if you know for a fact that the debt in question is not yours, then dispute it immediately. Disputing the debt is the first in a series of steps to expunging it from your credit report, but it’s the one most restricted by time.
Therefore, if a debt collector calls you about a debt that is not yours, request validation of the debt and make sure you send a written dispute of the debt within 30 days of the initial contact (to play it safe). The Consumerist lists a sample letter to help.
The entire dispute process can take from weeks to years – so make sure you get started right away. Ignoring the problem will only worsen your credit score and cost you money down the road.
What to Do if the Debt in Question is Yours
If the debt in question is yours and you’re wondering what to do next, know that the situation can be resolved.
Here’s how to gather the information you need:
- Confirm that the debt collector is the one you need to be paying. You can do this by pulling up your free credit report, asking the collector for all identifying information, and then calling the collection agency back to confirm with someone else that your information is currently on file there and hasn’t been sent somewhere else. Read this article for more advice on how to confirm it.
- Make sure the statute of limitations hasn’t expired on your debt. If it has, then you can send a cease and desist letter to the collections agency.
And what you should do next:
a) If you have the ability to repay the debt and intend to do so, see if the debt collector will work out a payment plan or ask them to bring the debt back to current so you can repay it as such.
b) If you don’t feel you can pay the full amount, negotiate a settlement with the debt collector. This negotiation will be the most effective if you can pay it in full right when you’re negotiating, so you might want to wait until you’ve put some money aside for the settlement. If the negotiation is successful, get the terms in writing so the debt collector can’t attempt to collect the difference later.
c) If you truly can’t pay any amount, you might want to consult a bankruptcy attorney. This will be a more effective way to move forward than dealing with traditional debt management or debt settlement companies – who can cost you a lot more in the long run and potentially not even resolve your debt.
Whatever you do, don’t ignore the problem. This will only worsen matters over time – causing you stress, potentially costing you money, and definitely damaging your credit score. Follow these steps to resolve the situation so you can get your finances back on track as soon as possible.
Image Credit: Markus Mayer