Finance Guides

You come home from work and there is a recorded message on your phone from a bill collector. Youre one of the lucky people who have a stable financial life and you know you are not behind on any credit card bills or loans. So why is a debt collection agency leaving messages on your phone?

It’s a strategy used by some bill collectors to make money off debt that is years old. It’s hard enough to try and collect from people with current financial difficulties so the strategy is to try to get money from people who are currently financially sound but who have an unpaid debt from the past. These old debts are cheap for the collection agency to buy and new software makes it easy to make the calls.

Collection calls that involve older debt can be a dangerous minefield if not handled properly. An old debt can become a new debt if you aren’t aware of your rights It’s important to understand that an old debt cannot hurt your credit report as badly as new unpaid debt. After 7 years your credit history, good or bad, will roll off your report. More importantly, if the debt is older than your state’s statute of limitations, the collection agency can not sue or threaten to sue to collect it.

Bill collectors who threaten to sue or have your wages garnished on a debt that is not covered by the statutes of limitation are in violation of the Fair Debt Collection Practices Act and could be fined $1000 for each threat. If they are smart they know that and will play on your sense of moral duty to collect the bill.

So what’s the problem? If the collection agency has no legal right to collect, then it looks like you have the upper hand. However, in some states, if the collector can get you to admit the debt is yours or if you pay any amount of money on the debt, the debt becomes new. Not only does the statute of limitations start again, but the collection agency can report the debt to the credit reporting agencies and suddenly your FICO score takes a dive and you start receiving letters from your credit cards advising of higher interest rates and lower lines of credit.

The best way to deal with an old debt collection effort is to say as little as possible. Never admit to the debt, never offer to pay the debt, don’t acknowledge that the debt ever existed. If it wasn’t for the annoying phone calls it would be best not to talk to the collection agency at all.

The best way to respond to a collection notice on an old debt is in writing. Under the law, a debt collector must send you a written notice telling you the amount of money you owe and the name of the creditor. If within 30 days of receiving this collection notice you write a letter back disputing the debt, a debt collector may not contact you again until they can verify the debt. Sending a verification letter forces the agency to investigate or give up. If they cant prove it, you dont pay.

Check with your State Attorney General’s office to insure that the debt in question is in fact outside the statute of limitations. Then send a cease and desit letter clearly stating that the debt is no longer subject to legal action. Make sure that they understand that you know your rights under the Fair Debt Collection Practices act to include the penalties that can be applied to a collection agency who threatens legal action.

Related posts:

1. Loans – Collection Process on Personal Loans Personal loans are available for a variety of uses. Most...
2. Are Debt Consolidation Loans An Alternative To Bankruptcy? Have you ever wondered what exactly is up with debt...
3. Your Rights Concerning Consumer Debt Are you facing financial ruin because of your credit cards?...
4. Collection Agency Head Indicted for Alleged Theft of $2.7 Million From City of Boston A Grand Jury in Suffolk County, Mass. yesterday returned indictments...
5. 60-Second Guide to Getting Out of Debt Imagine being free of debt -- no more sleepless nights...