Do Debt Collectors Call YOUR House? Understanding the Job of a Debt Collector!
Debt collector…two words you'd probably rather not hear. Most, if not all of us, have at one point or another been contacted by a debt collector (yes, including me!). No doubt about it, debt collectors are intimidating. Though debt collectors are only doing their jobs, they don't have the right to threaten and harass you on a daily basis. So what is the best way to handle a debt collector…especially if you don't have funds to pay the bill they are trying to collect? We will get to that in a minute.
First of all, let's get an understanding of exactly how debt collectors operate. Let's say you purchased a new television and you charged it on your Sears store credit card. You make regular payments for the first three months and then, unfortunately, you lose your job and are unable to make further payments. I probably don't need to tell you that you are now in…well, deep doo doo for lack of better words. Before a debt collector is assigned the job, you will receive several late notices from the company that you owe money to (in this case, Sears). After several failed attempts to collect the debt the store will then turn your account over to a debt collection agency. Five minutes after your account has been assigned to a debt collector your phone will ring and the harassment will begin. Ok, I'm exaggerating a bit….but you get the picture.
Unsecured Debt vs Secured Debt
Different debt collection agencies work in different ways. However, don't be fooled…they all have a strategy when it comes to collecting tactics. Some debt collectors are friendly at first…while others go right for the jugular. It is important to understand that most debt collectors are paid according to how many calls they are able to make and how much money they actually collect. Therefore, the more money they bring in…the fatter their wallets become (hence the reason many are mean, pushy and intimidating). Debt collectors also realize that the longer a debt goes unpaid…the less likely they will ever collect (and yet another reason they are so pushy…time is NOT on their side!).
Most debt collectors are trying to collect "unsecured" debt. What exactly is unsecured debt, you ask? A good example of an unsecured debt is an overdue credit card payment or medical bill. It is a debt that is not tied to anything. If the debt is secured…the story is quite different. A good example of a secured debt would be your home or car (hence the reason you can lose your house or have your car taken away by the repo man if you don't pay your bills). If the amount of your unsecured debt is relatively low, the debt collector is likely to give up after a few failed attempts at collecting as low debts simply aren't worth their time. It is important to note that just because a debt collector gives up on the collection process does not mean that a negative report won't be sent to the credit agencies.
When it comes to LARGE unsecured debts, debt collectors will go to great lengths to collect their money. It is possible to be sued by a debt collection agency. If a collection agency decides to sue you, you will be notified of the lawsuit via a summons. Not good. If you receive a summons, it is important that you contact a consumer law attorney as soon as possible. If the suit ends up in court and you lose, the debt collector can do one or more of the following (note: they will need the court's permission first):
- Garnish your wages
- Take one or more of your assets (car or house)
- Put a lien on your home (or other asset)
Negotiate a Settlement
If you do no t have the money to pay a debt then you may wish to negotiate a settlement. If the debt collector realizes that you really cannot pay the amount that is due, he will most likely settle with you. Most of the time, a debt collector will work WITH YOU as they realize that something is better than nothing! It is worth noting that even though you work out a settlement or payment plan your credit report will still show a negative rating. However, the bright side is that it will also show that you at least took responsibility and paid as much as you could (shows good faith on your part). Once you and the debt collector have reached an agreed upon settlement it is important that you ask for it to be put in writing. It is important that you do this BEFORE making any payments. To really play it safe (especially if you are dealing with a very large sum of money) it would be a good idea to have the agreement examined by a consumer law attorney. If the debt collector refuses to put the agreement in writing…you can take the bull by the horns and do so yourself! Simply type up the terms of the agreement, sign it, and fax it to the debt collector. The terms of the agreement should include:
- How much you have agreed to pay
- Payment terms
- Date of first and last payments
- How the payments will be made (check, electronic transfer, etc)
Consider Credit Card Counseling Services
If, for whatever reason, the debt collection agency absolutely refuses to work with you then it would be a good idea to contact the original creditor. Let's go back to the example previously mentioned in the second paragraph. You purchased a television set from Sears (you charged it to your Sears credit card). You fell behind on your payments and Sears turned you over to a collection agency. If the collection agency refuses to work with you, then by all means, contact the Sears consumer credit department and see if they will. There is no guarantee that Sears will accept your payment plan, however, it's worth a shot!
If you are REALLY over your head and have many unpaid debts, then you may consider contacting a credit card and debt consolidation counseling service. They will do a complete assessment of your current financial situation and then make recommendations as to how you should proceed. In some cases they may suggest a debt reduction plan in order to get rid of your debt. In worse case scenarios, they will suggest filing for bankruptcy. Whatever the case may be, a REPUTABLE credit card counseling service can put you back on the path towards a debt free life!
Though debt collectors can be annoying, they are, in fact, only doing their job. It is important that you know your rights when it comes to debt collectors as there are certain things that they CANNOT do! For more details, please read my HUB: Are Debt Collectors Calling Your House? Know Your RIGHTS! Learn What Debt Collectors CAN and CANNOT Do! Good luck with your finances and may you one day, be free of debt!
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