Being strangled in debt can be a challenging enough situation. And receiving collection calls from creditors will only add to that daunting burden.

Your debts can end up in collections soon after you have been delinquent or significantly falling behind on your debt repayments, in most cases, after 120 to 180 days of not paying. If debt collectors frequently contact you, it implies that your creditor has sent your accounts to a collection agency to recover the amount due.

Once your account has gone to collections, it can severely damage your credit scores. The negative marking of debt collections will remain on your credit report for seven years.

However, it can be removed by asking the collection agency for a goodwill deletion or disputing in case of an error.

Sometimes you can also negotiate with your creditor to accept a lesser than the due amount and settle the debt. This can have a lesser impact on your credit score.

Understanding your rights and the strategies for dealing with collection agencies can help you make informed decisions.

How To Deal With a Debt Collection Agency

Remain Calm

When dealing with collection agencies, it is crucial not to rush. Debt collectors may often create a sense of urgency by various means to recover the amount. But instead of making payments in a rush or promising to make any payment, consider the various options available to you.

It is necessary in such situations to remain calm and gather essential information related to your debt.

Get information regarding your debt.

Try to collect as many details on your debt obligations as possible. Getting the necessary information about your debt is integral to dealing with debt collectors.

There are many reasons for this, like errors. Also, making any payment on a debt that has passed its statute of limitations will only reset the time.

If the debt is really yours, you must gather all details you have of the debt. For instance, your payment history, the total amount you owe, the original lender, etc.

Know what your rights are

Knowing your consumer rights and how to use them can protect you from unfair collection practices. For instance, the debt collector must provide you with a debt validation letter within five business days of initially contacting you. You can ask for one from your debt collector in case you did not receive it.

It must include complete information about the debt you owe, the collection agency contacting you to recover the debt, and ways to dispute it.

According to the Fair Debt Collection Practices Act (FDCPA), consumers can specify when and how debt collectors can contact them, also when and how they may not.

Furthermore, debt collectors cannot use profane language while communicating and are also not allowed to hide or provide wrong information about their identity.

Debt collectors also should not provide misleading information about the amount of debt you owe or its repercussions on failing to repay the amount.

Decide your course of action.

After gathering the necessary information regarding your financial situation and debt obligations, you must decide on a course of action.

If the debt is yours, you must look for ways to repay it, like settling it for a lesser amount or consolidating it with a new affordable repayment plan. Besides possible lower interest rates and reduced monthly payments, you will even have few due dates to juggle, which helps simplify your financial life.

If you believe you do not rightfully owe the debt, you can dispute it within 30 days of initial communication with the debt collection agency. The debt collector must stop asking you for payments till the dispute is settled.

How To Negotiate a Repayment Plan

Review your current financial condition.

If you believe the debt is truly yours, you must devise a repayment plan to deal with the collection agency. To do this, you need to be honest with yourself. Review your budget and current debt obligations to figure out your financial standings.

Get a clear picture of all your expenses, debt obligations, and your monthly paycheck.

Figure out an amount and a plan to approach.

After you have a clear picture of your finances, figure out how much you can repay the debt. This amount may be paid in a lump sum or in several payments.

It is crucial to note that while most collection agencies may agree to settle a debt for a lesser than owed amount, it is not a guaranteed method. Some may demand you pay the entire amount.

Ideally, you must not pay more than you can afford. In such situations, it will be helpful to consider other ways to repay the debt, like rolling your debts into one new loan to pay off other revolving ones.

Communicate your plan to the collection agency.

Once you have your amount figured, go ahead and explain your negotiation proposal to your debt collection agency. When proposing your negotiation plan, start by stating your financial condition can be helpful. Offer the amount you are able to repay and the repayment method.

Suppose you are unable to chuck out a negotiation plan most suitable for you or communicate the same to your collection agency. In that case, consulting a reputed financial advisor for assistance can be helpful.

Keep records

Once you strike a deal with your debt collection agency, you must keep records of the particulars of the negotiated terms in writing before making any payments. It can save you from future confusion and stress.

After you have made the payments, you must again get the confirmation in writing.

Closing Thoughts

Having debts in collections can have damaging consequences on your credit score. It can be a nerve-wracking feeling when a debt collector contacts you. However, it is necessary to remain calm and consider your options, which include collecting information regarding the debt and the agency and deciding a suitable course of action.

Furthermore, if the debt belongs to you, preparing a suitable negotiation plan and communicating it to your collection agency is essential. It can help you pay off the debt and eliminate the collection agency contacting you.

Read More:

7 Immediate Steps To Do When a Debt Collector Files a Lawsuit Against You – Thousandaire

What Happens When a Forgotten Debt Comes Back to Life? – Thousandaire

What Type of Debts Remain After Bankruptcy? – Thousandaire