Getting out of debt and knowing how to deal with debt collectors is essential to gaining control over your finances. This article aims to help you successfully negotiate and deal with debt collectors.
Did you know that every 1 out of 3 US adults has a debt collection account(s)?
In this article, I share our story dealing with debt collectors including 4 tips to help you when dealing with debt collectors.
This post may contain affiliate links; please see our disclaimer for details.
Table of Contents
Dealing with Debt Collectors – My Story
My collection account came as a big surprise, it was from past college tuition that was never paid off.
I transferred to a new college in Hawaii and thought I had successfully received the student loan for the semester.
Turns out I was wrong.
One document needed to be signed before the tuition/loan could be dispersed, but I completely missed it.
Since the document wasn’t signed, I never received the student loan. Unfortunately, the entire amount was sent to collections.
After one semester of school in Hawaii, I transferred back to my school in Utah. One year later, I started getting calls from a debt collector.
They told me that I had a collection account because I didn’t pay my tuition.
Both my wife and I didn’t believe it at all and thought it was a scam at first. We thought there was no way I didn’t pay my tuition, so we just ignored it.
Our Story Continued…
We discovered the collection account was real when applying for our second property loan. It turns out it was not a scam, hurting my credit score!
Fortunately, my wife’s credit score was still excellent, so our combined score wasn’t too bad. My wife’s credit score was terrific. Together our score was still around 700.
Unfortunately, we could still not get the best interest rate for our second property loan. The interest rate on the mortgage ended up being almost 5%, ouch!
We learned a valuable lesson and became much more aware and careful of our credit scores.
We started saving like crazy after we closed on the loan. Our total debt collection account was $6,000, but we successfully negotiated with the debt collector.
For the final settlement, we only needed to pay $3,500 in total as a one-time payment. After paying, the collection account would be removed entirely from our credit history.
Our credit score shot up a lot after that, YES!
Now let’s look at the reasons for how we successfully dealt with debt collectors.
How to Successfully Deal with Debt Collectors
1. Verify Your Debt, Avoid Scams!
First, you must ensure the collection account is yours, including all information regarding the debt. There are real scammers out there trying to collect personal information.
Don’t give away your trust or your personally identifiable information too easily. Remember it is best to be careful.
We requested the debt collector send us everything in writing through the mail. We also called my school in Hawaii to verify the debt account was real.
2. Know Your Rights.
The Fair Debt Collection Practices Act (FDCPA) clearly states how and when debt collectors can talk to you. Here are a few key points
- Debt collectors can only contact you between 8 a.m. and 9 p.m. That is for your time zone unless you agree to another time.
- Debt collectors cannot discuss your debt or ask for your personal information with anyone but you or your spouse.
- Debt collectors can’t harass, lie, or mistreat you.
If the person calling you violates the above rules, you can report them to the Federal Trade Commission and the Consumer Financial Protection Bureau.
3. Negotiate.
Don’t just negotiate regarding your monthly payments or lower your total debt. Request they remove the collection account from your credit account/history.
Removing the lousy credit account from your credit score sooner will be well worth it.
After finding out the total collection amount was around $6000, we calculated our monthly budget to see how much we could afford for a monthly payment.
We worked hard to save up a big lump sum of money to pay off the account with a one-time payment, even though it was less than the collector was asking for.
We talked with the debt collector, and they agreed on a very minimal amount for the monthly payment plan.
You can always explain your financial situation to the debt collectors. It’s okay to say you don’t have much money or cash flow and propose the only amount that works for you.
Saving Up Money & Negotiating to Pay Off With One Lump Sum
After that phone call, we worked our butts off and saved $3,500!
We felt we could try to negotiate again with the debt collectors by proposing to pay off all debt with a lump sum of money.
We didn’t think our negotiations would be successful because it was almost half of our original collection amount, from $6,000 to $3,500. It never hurts to try!
We called our debt collector and discussed what was possible if we made a one-time payment. Next, we requested debt account be removed from my credit report.
The debt collector listened as we explained we didn’t have a lot of money and worked our butts off to save this $3,500. Having him agree to a one-time payment would help us a lot.
We also told him how the collection account happened and how we didn’t know if the collection account typically takes full responsibility for our bills.
As mentioned at the beginning of this post, it just happened by mistake.
The debt collectors told us he needed to talk with our original debt owner, my school back in Hawaii.
We told him to please tell my school our situation. We emphasized it would be a big blessing for our young family if they agreed to our plan.
Luckily just a few days later, we received a miracle call from the debt collector who told us my college agreed with the $3,500 settlement PLUS the collection account could be removed from my credit history!
We feel this is such a massive blessing that everything worked out great.
4. Have Everything In Writing.
After receiving the news of being able to make a one-time payment and have the account removed from our credit, we requested a settlement agreement showing we paid the total collection amount in full and that it would be removed from my credit history.
After the debt collector agreed to send over everything in writing, we made the one-time $3,500 payment.
My credit score shot up a few months later, and the collection account was gone!
In Conclusion
Life is a journey of learning lessons, and we have learned a lot about dealing with debt collectors. It’s important to learn quickly from mistakes and face life with an optimistic viewpoint.
Paraphrasing what Kevin Hart has said –
“It’s okay to make mistakes, we just need to learn how to fail better each time”
Due to this experience dealing with debt collectors, we have become more concerned about our credit scores.
Including more frequently checking our email and mail to see if there are any unpaid bills.
If you’re having issues with improving your credit, I highly recommend checking out The Credit Pros! They are a very reputable company that offers incredible credit repair services.
They have all of the tools needed to help rebuild your credit, and you can check your credit score for free!
Disclaimer:
We hope the information in this article provides valuable insights to every reader but we, the Biesingers, are not financial advisors. When making your personal finance decisions, research multiple sources and/or receive advice from a licensed professional. As always, we wish you the best in your pursuit of financial independence!
