A guide on how to effectively deal with collection calls
The law firm of Merritt & Hagen, APC has helped thousands and thousands of people deal with their financial problems, many times through the effective use of bankruptcy. Over the years, they have heard from their clients almost every conceivable trick or tactic which creditors use to collect money. The following represents their advice on how to best deal with bill collectors tactics.
Please understand that these tips apply to most creditors which an individual might have. It does not apply to the governmental taxing authorities as they have additional power which most creditors do not have. It also does not apply to the collection of student loans, bad checks, or if a creditor has filed a lawsuit. If a lawsuit is filed, we recommend that you immediately consult with an attorney.
Perhaps the biggest way you can even the score when dealing with creditors is to realize that all they can do is call you, or sue you. Frankly, it’s a game. They have rules they must follow. You have rules you must follow. It’s not a game in the light-hearted sense of the word. Rather, it’s more like a strategic chess match where both sides have rules they must follow in an attempt to get to their desired objective. Creditors cannot levy on your wages or put a lien on your house without first obtaining a judgment. They cannot obtain judgment without first suing you in court. You cannot go to jail for failure to pay your bills. They cannot publish your name in the paper and call you a deadbeat. Once you realize this, you have substantially increased your strength when dealing with creditors.A creditor can threaten to put a derogatory mark on your credit report. So what? Admittedly, a good credit report is valuable. However, it is far from the end the world and it will drop off in a few years. Chances are, if a creditor is calling you, you already have some negative information on your credit report.
Remember that you have the money and they want it. The fact that your money is in your possession gives you a substantial advantage in negotiating with your creditors. The creditors’ goal is to try to tie you up, use your time, and create enough inconvenience, guilt, or pain that you send them some money. Your goal, of course, is to pay your debts. However, if you’re not able to meet that goal, you must develop a plan to protect your sanity and your assets.
Don’t lie to a creditor about your financial situation. Admittedly, you may want to present your financial situation in as bleak of terms as possible. However, never make a misrepresentation to a creditor. They will hold it against you later. Don’t make promises unless and you are absolutely sure that you can keep them. A common creditor strategy to get you to commit to something and then use it against you when you cannot keep your commitment. Simply don’t commit to them in the first place.
You may want to develop a plan with the assistance of an attorney or financial adviser. You need to have a plan, or strategy, as to how you intend to make it through this difficult time. Do you just need some additional time to pay your debts? If so, you might adopt one type of strategy in dealing with your creditors. If you know you will not be able to pay the full amount, but have some assets, you may adopt a plan whereby you sell some assets and attempt to settle with your creditors for less than a full amount due. It may be your plan is simply to go bankrupt and avoid the debts. If this is in the case, you will adopt an entirely different plan.
Bill collectors are threatened with bankruptcy in almost every call they make. A threat of bankruptcy is almost like the boy who kept calling wolf. Don’t mention bankruptcy unless you are fully prepared to go through with it.
However, if bankruptcy is a legitimate consideration, tell the creditor that you are exploring this option. If they ask you if filing bankruptcy is a consideration, admit it as it may give you some additional leverage.
Never send a creditor a check or draft directly from your bank. If you do, the creditor will know exactly where you work and bank and then will be able to go directly after your money if they ever obtain a judgment against you. If you make a payment to a creditor, get a draft from another bank. If a creditor asked you where you work, simply decline to answer. Do not feel guilty about not giving them this information. They will use it against you if they can. Why make things easier for them if they sue and get a judgment?
Bill collectors will attempt to get you take some action based upon a perceived urgency. Resist these types of pressure. Never send post-dated checks to a creditor. They may deposit them early causing you problems with your bank. If you later decide not to make the check good, they may attempt to use it against you. If the checks bounce, you may have liability for writing a bad check. Never allow a creditor to take money directly out of your checking account. It is usually unnecessary to send money via overnight mail. Explain to the creditor that you would rather have the charges for the overnight mail go to them rather than spending it on overnight mail service.
If you pay for one account with a charge against another and you later need to file for the protection of bankruptcy, the creditor upon which the recent charge was placed may ask that the debt be declared nondischargeable as it was incurred at a time when you were in financial trouble. This is called bankruptcy fraud. The same is true of cash advances. Moving debt from one account to another, or cash advancing, significantly increases the chances you could have trouble making all your debt go away in a subsequently filed bankruptcy.
If you purchase something from a department store and use their credit card for the purchase, there’s a good chance you posted as collateral the item which you purchased. An example of this might be purchasing an appliance from Sears. If this is the case, you may offer to give them back the collateral if they will agree you do not have any further liability. Creditors don’t do this too often. However, in extreme situations they might. Make sure you confirm in writing the fact that you will have no further liability on the account if you return the merchandise. If you do not make this agreement, they could later sue you for the difference between the balance on the account and the value of the collateral which was returned.
If you’re offering to settle your accounts, you’ll get a much better deal if you offer a one time cash payment. If you can pay in one lump sum, creditors will generally accept between 30 – 80% of the total amount due. While creditors may vary on the amount which they will accept, we have found that the average cash settlement is approximately 60%. If you’re asking for payments, we have found the creditors will usually want a much higher percentage on their account, typically 90% or more.
If you’re negotiating with a creditor to reduce your payments over some period of time, try to get them to reduce or waive the interest. You’re much better off paying more on a monthly basis if you can get the interest waived as opposed to making smaller payments over a greater period of time and having the interest remain intact. Remember, 90% of the time it is the interest which gets individuals in trouble with their credit accounts to begin with.
Both federal and state laws don’t allow creditors to use abusive tactics to collect debts. They cannot make threats of actions which they cannot legally take. They cannot threaten actions they don’t intend to take. They certainly can never threaten you with jail or reporting you to the district attorney for failing to pay your debts. They can only call friends and relatives on an extremely limited basis. They cannot ever use obscenity in any of their calls. They cannot make multiple phone calls in an effort to harass you. They cannot make calls late in the day or early in the morning. Phone calls made after 9 p.m. and before 8 a.m. are presumptively considered abusive. They can only contact third parties once. At that time, they can only attempt to verify basic information about you such as your address, etc. They cannot use recorded messages to repeatedly call you if you tell them not to. They cannot publish information about you in the paper or threaten to put you on a “deadbeat” list. If the creditor is a collection agency, you can send them a letter stating that under federal law (15 U.S.C. 1692 (c)), you do not wish for them to contact you anymore. At that point, they can’t even contact you! If they persist, you can sue them for damages. You can even do this without an attorney as you can sue them in Small Claims Court.
If the creditor starts to become abusive, we recommend that you immediately start keeping a log about each and every phone call. Mark down the date and time of a call as well as who you spoke with. Also write down a short summary of the conversation. We have found that these logs are extremely valuable in dealing with abusive creditors.
If you feel a creditor is getting abusive, bring someone else into the conversation on an extension telephone line. This gives you a witness as to what was said and forces the creditor to be much more careful about what they say. Do not record a telephone conversation without the creditor’s knowledge as it is a crime in many states. However, in California, you can record the call if the creditor agrees. Be sure to have their agreement included as part of the telephone recording.
Don’t assume that a collector knows fact or law which you do not. If they make a statement, asked them why it is so. For example, if the collector states that a payment must be received by the end of the month, asked them why. If the creditor states that they cannot accept a discounted cash payment, asked them why. If they tell you that their management does not allow them to make such arrangements, asked for the name and phone number of the person who makes those decisions. You can then ask for permission to contact them directly.
Always get the name of the person you’re dealing with. Remember that many times collection agencies let their collectors use an alias name. However, they usually use the same alias name so it would be easy to attribute improper conduct or statements to them.
Any time you make an arrangement with a collector, get their name and address and send them a confirming letter. The letter should be directed to the person with whom you made the agreement. It should make reference to your telephone conversation with them. It should state your understanding of the agreement which was reached in that conversation. Lastly, it should request that if there understanding of the agreement is something different than that set forth in your letter, they should contact you immediately.
Remember that bill collectors usually get paid based upon how much money they collect. They’re not trying to do you a favor and they are not your friend. They are simply trying to separate you from your money. Because they usually get a percentage of what they collect, they usually are very aggressive and annoying in the beginning and then their interest usually drops off. If they obtain a judgment, the most they usually do is place a lien on your home (they almost never force a sale of a home) or garnish your wages. If they garnish your wages, the worst that can happen is that they can take 25 percent of your wages. Only one creditor can garnish your wages at a time. While this can be very difficult for most, it is not the end of the world. Realize this when dealing with the creditors.
If you feel as though creditors are getting particularly abusive or you need additional leverage to make an agreement for payment, consider hiring an attorney. Of course, you will begin to incur fees. For this reason, you should discuss a budget with your attorney prior to them undertaking any work on your behalf. Sometimes, but not all the time, being represented by an attorney can make the extra difference in coming to an arrangement with a creditor.
If all else fails and the creditor files suit, you must immediately file an answer to the lawsuit. We recommend that you then immediately sit down with an attorney. The attorney may just assist you in preparing some paperwork or, in the alternative, they may represent you. In any event, a lawsuit usually means that there will be a trial in 6-12 months. At any time during this period, you still have an opportunity to make settlement arrangements with the creditor. In fact, many times the collection attorney is much more agreeable to settlement then the initial bill collector.
Knowing these tips, and using them to your advantage should put you on much more even footing when dealing with bill collectors. Remember that if you feel the situation getting out of hand, you should, at a minimum, consult with a lawyer.
Good luck and we wish you the best of success in your financial affairs!
