How To Deal With Debt Collectors?

If you owe a creditor a debt and you are in default of that debt, the creditor will try to collect the debt in house.  If the creditor has no luck in having you pay, the creditor may outsource your outstanding debts to third party debt collectors.  Debt collectors normally enter into an agreement with the original creditor and work on commission.  Debt collectors will take a percentage of the debt they collect from the creditor.  If debt collectors do not collect anything from you, they do not get paid.  Debt collectors are regulated by the Federal Trade Commission and they need to abide by certain laws in going about collecting debts.  Unfortunately, thousands of debt collectors do not abide these mandates and go about their own way of threatening and/harassing debtors in order to have them pay.  Just last year, the Federal Trade Commssion has logged in more than 210,000 consumer complaints against debt collectors in the United States.

Who Are Debt Collectors?

Debt collectors are normally third party private collection agencies hired by creditors such as banks, credit unions, credit card companies, and other creditors to collect on an unpaid debt in default.  Debt collectors need to abide by the Fair Debt Collection Practices Act in getting you to pay your debts.

Collection Practices By Debt Collectors

Debt collectors need to abide the hours of collection activities set by the Federal Trade Commission but hundreds if not thousands of debt collectors do not abide by those rules.  If you get collection calls super early in the morning or late at night, you can file a consumer complaint with the Federal Trade Commission.  The Federal Trade Commission gets thousands of complaints each month from consumers against collection agencies because of their un-compliant debt collection activities.

Your Rights Against Debt Collection Activities

As a consumer, you can request the debt collectors not to contact you over the phone.  You need to write them a cease and desist letter.  You need to contact each debt collector via registered mail and request to stop contacting you.   If you are in the middle of a bankruptcy process, your debt collectors cannot contact you or they are in violation of federal collection laws.

Debt Collections And Statute Of Limitations

Another important thing you need to find out is to see if the statute of limitations on your debt has expired.  Statute of limitations is a window of time a debt collector has to legally collect or sue you for an unpaid/unsatisfied debt.  Statute of limitations periods vary among the different states but normally is 5 years.  Collection agencies still try to collect on bad debt after your statute of limitations period has expired.

Debt Collectors Cannot Threaten You

Debt collectors and collection agencies cannot threaten to garnish your wages or sue you if you do not pay.  They do have a right to file a lawsuit like any other person or company can.  Its their right but they cannot try to put the fear of God and threaten you that they will start garnishing your wages, lien your home, empty out your bank accounts, or file criminal fraud charges against you.  You can sue collection agencies and/or debt collectors if they have violated your rights.

Paying Old Bad Debt: Can It Hurt Your Credit Scores?

Never pay an old aged debt unless you absolutely have to and can do a pay for delete settlement.  Paying an old debt will definitely drop your credit scores because it re-activates the old debt which has no impact on your credit scores as new bad debt.  I have seen people pay old debt and have their credit scores drop 80 plus points.  Remember that bad credit falls off your credit report in 7 years from the date of your last activity or the date you last paid your payment.  If you make a partial payment on your old bad debt, your credit report will have the bad date re-activated and your new date of last activity has just gotten re-activated and your start clock starts new again.  If you really need to pay an old unsatisfied debt, then negotiate with the creditor and/or debt collector that you will only settle with them only if they delete the derogatory item off your credit report in lieu of payment.

Unsatisfied And Unpaid Old Debts And Mortgage Approval Process

You can have unpaid and/or unsatisfied old debts and still get a residential mortgage loan approval.  There are mortgage lenders who do not require that you pay off an old collection account even you still owe them.  If you have old unpaid collection accounts or unsatisfied debt in Illinois, Florida, Wisconsin, Indiana, and Florida and need a residential mortgage loan, please contact me at 262-716-8151 or at www.gustancho.com .

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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