Another post on collections… but I really feel these zombie collection practices deserve one more short post. Here are a couple of tips and final warnings to help deal with these agencies trying to collect on super-old debts.
- Understand your rights under the Fair Debt Collection Practices Act. It is prohibited for collection agencies to harass you, to call you early in the morning or late at night, or to continue contacting you once you have expressed in writing that you do not wish them to contact you (except to indicate an intention to seek legal remedies or that they will cease contact with you).
- NEVER give a collection agency your banking information. If they have that information, they can withdraw the amount you owe from your bank account and you will have no recourse.
Cherish your integrity and do not allow yourself to be “manipulated” into a strategic mistake. The junk-debt business (and the financial system at large) is built around profit and gives no thought to morality. In fact, paying off the debt renews the bad marks on your credit reports! This is an unintended flaw in the credit reporting system. The collectors know this, don’t care, and aim to wreck your FICO score for a few dollars. You are better off paying the money to a charity and hang up on the collector.
- Do not ignore a court summons, even if you think the statute of limitations has expired. Get an attorney. If you don’t show up in court the judge is likely to accept all of the allegations against you as facts and give your creditors or the collection agency whatever they ask for. It’s called default judgment and may be enforceable.
- Making a payment, even a small “good faith” payment can restart the statute of limitations on your debt, or restart the collections process if the statute has already expired.
- Always consult an attorney if you have any questions or are uncertain about the laws regarding your debt.
- Settling for less than the full amount is not much of a deal. The part forgiven is reported to the IRS, on a Form 1099. You will owe income tax on this amount, unless you can show (under IRS rules) you were insolvent.