How to Pay Collection Accounts

The best way to pay debt collectors over defaulted accounts is to settle for less in a one-time, lump sum payment like 25% of the defaulted amount…where you negotiate the terms in writing first, then pay. What you need is a letter on their letterhead confirming that the debt will be “Paid in Full” once the agreed to amount is paid. Once you get this letter, it’s safe to pay. If you don’t get the terms of the settlement in writing first, there is nothing to stop the debt collector from later denying that any settlement was ever made and coming right back after you for the remaining debt.

Pay only with money orders or cashier’s checks. Never give them your bank account numbers.  Assuming you have cash saved up, then offer to settle this account in full for 25% of the defaulted amount and go from there.  Photocopy everything and keep in your records forever as documentation that the debt was resolved.  

Making monthly payments to debt collectors should be avoided if at all possible because – They could take your monthly payments for 7 or so months then turn around and resell the account to another collection agency, which would restart the collection process all over again and you’d be powerless to challenge it

If you must pay on a monthly payment plan, then make sure that you get account statement every other month from the collection agency to confirm that your balance owed is really going down and not just staying the same.

Dealing with debt collectors

As a general rule: You can’t deal in “good faith” with debt collectors. There are too many bad apples in the debt collection field and you have to assume that any promise over the phone about any settlement deal is a lie unless the terms are backed up in writing.

 Debt collectors have no direct legal power over you whatsoever. Don’t let them bully/scare you into giving them your checking account #’s.  You cannot be arrested over debt in the USA. Debt collectors do not have direct power to garnish wages or freeze checking accounts. They’d have to take you to court and win a judgment first.
– Debt collectors love to create a false sense of urgency. If they have waited months or years for your payment, then they can wait a week or two for any settlement agreement or payment to arrive. Any “deadline” like 5PM tomorrow is bogus.
– I generally advise to make your first call to debt collectors on an outside line like a pay phone. See how they respond to your offer to settle the debt. If they start screaming at you or acting belligerent, then it may be best to not renew contact with them.
– Debt collectors love to pretend that they are (or work for) attorneys. If they do this, ask for the full name of their attorney and their license number in the state bar association. If they refuse to give this info to you, then the legal threat is bogus
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Statute of Limitations on Credit Card Debt

If your credit card default is old, like at least 3 years since the last payment, then check to see if your debt is time barred before you pay

Credit card debts become time barred after a certain # of years have passed. and do not have to be paid back if you choose. This is called the statute of limitations. This time period varies for each state. You can find this for your state by going to this link and looking under “open” accounts.  http://www.creditinfocenter.com/rebuild/statuteLimitations.shtml

If the # of years since your last payment is greater than the time period listed for your state, then the debt is time barred.
Example:
Mary lives in California and defaulted on an AMEX card and last made a payment in Jan. of 2006…..5 years ago. The Statute of Limitations in Calif is 4 years, so this debt is outside the Statute of Limitations and is time barred. If her creditors took her to court they would loose, assuming she showed up and used the Statute of Limitations as a defense. Once this time period is up, creditors become legally powerless over you. All they can do is call and annoy you into paying.
At this point you can send a Cease Communications letter and be done with them: http://www.budhibbs.com/cease_comm.htm

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How to stop collection agency harassment

Debt collectors often have trouble locating debtors, so they start harassing the first person they can find with a similar name, address or phone #….esp. with cell phone #’s.

– How to stop collection agency harassment for a debt that is not yours:  First, you’re going to have to get the name, address and fax# of the collection agency that is calling you. Once you get this  Send/fax the collection agency a letter via Certified Mail + Return Receipt (do NOT use regular mail) stating:

Per the Fair Debt Collection Practices Act, cease all communications with me and stop all phone calls to [insert your phone #]. You have the wrong person and this is not my debt. Receipt of this letter is officially being time stamped via Certified Mail. I will pursue each subsequent phone call from your office with a $1,000 per incident penalty for Fair Debt Collection Practices Act violations.
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To speed things up, fax this same letter to the collection agency. Free fax service at: http://www.myfax.com/free/

If they keep calling, read the following statement to them:
– Be advised that this call is being recorded. If you do not consent to being recorded, you need to terminate this call. Continuation of this phone call after officially being informed that it is being recorded implies consent to be recorded. This recording will be used to pursue Fair Debt Collection Practice Act violations in a court of law.

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Being Sued for Credit Card Debt: Steps to Take

If you don’t have money to settle, then it is critical that you show up in court at the appointment date and time. People often make the huge mistake of not showing up because they think they’d loose anyway or because they can’t afford an attorney. Even if you are frightened….or you’re sick with a 102 degree fever, show up anyway. You are not being put on trial and there will be no jury. It will not be like the Judge Judy Show where the judge will be screaming at you and insulting you. It’s almost a step above going to traffic court…it will be over very fast. Creditors LOVE when you don’t show up in court….be sure to disappoint them by being on time and prepared.

If you don’t show up, the other side will get a default judgment and they will get this on THEIR terms. They will tack on all sorts of add-on fees and the amount of the judgment could end up being two or three times the actual amount of the debt. Even worse, the court could authorize maximum wage garnishment if you don’t show up to make your case to the judge, which can be as high as 25% of your wages.

Bring complete documentation of your income and living expenses to court. Pay stubs and copies of bills. Even if you loose, you can use this to negotiate much more favorable repayment terms. If you stay home on the date of the court, your creditor will decide for you how much you can afford to pay –

On the day of the court, DO NOT sign any document from your creditor’s attorney that you do not understand. The other side’s attorney will probably shove a clipboard in your face with a document to sign. It will most likely be a “Consent Judgment” form disguised as a friendly payment plan. They’ll smile at your and say we can avoid court if you just agree to this payment plan. DO NOT SIGN THIS!. If you sign this and you’re just one day late on payment, then this agreement gives them direct power to freeze your checking account and garnish your wages.  Tell them that you will not sign any document without having an attorney looking over it.
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You will also need to file a responsde to the court. Failure to file an answer may also result in a default judgment against you. Hire an attorney if you can afford one to do this. If you can’t afford one, then file a general denial with the court in this format:
Mark “Deny” with this explanation:
– I cannot affirm or deny this debt until validation has been made for this claim in the form of the original application with my signature. I cannot respond until this documentation has been submitted to me by the other party.

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Paying-Charge-Offs

Paying Defaulted Credit Card Debts

Paying back defaulted credit card debts is a tricky move to make…make sure you understand what you’re doing first.
When a credit card defaults (called a “charge off”), the damage to your credit has been done and it cannot be undone by later paying back the debt.  Paying back this debt will not remove it from your credit report. A charge off stays on your credit report for 7 years…paid or unpaid. At best, your credit report would be updated to Paid/Settled R9 Charge Off status with a $0 balance, still bad but a little bit better.
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If your credit card default is over a year old, then it’s most likely that your account is no longer with the original creditor but rather with a 3rd party debt collector that probably bought your account for pennies on the dollar. Pull your credit report to see what collection agency has your account. You can get a free credit report at http://www.annualcreditreport.comThis is the real free site to get your credit report once a year without a credit card. – NOT freecreditreport.com
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The way to pay old debts is to settle all at once in a one-time payment for less, like 25%.  Money talks with debt collectors. Have money on hand to settle all at once. Use this to negotiate away any huge fees or interest. Get all terms in writing first, then pay. If you don’t have money saved up to do this, then don’t contact debt collectors until you do. Before you pay, get a settlement letter on their letterhead that states that the account will be “Paid in Full” once the agreed-to amount is remitted. Once you get this, it’s safe to pay. Pay via USPS money order. Never, ever give debt collectors your bank account numbers.  If you don’t get a settlement letter before you pay, there’s nothing to stop debt collectors from coming right back and demanding more money.
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**  Never contact debt collectors over old defaults if you can only afford to pay in small amounts per month. They don’t want to be paid this way and doing so will not reactivate your closed/defaulted accounts and give you good credit again. “Good faith” token payments on defaulted/closed accounts will do nothing for your credit. If you can’t settle all at once for less, then wait and save your money until you can afford to settle up front for less.
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Dealing with Collection Agencies:

Many collection agencies that deal with old credit card defaults are highly aggressive, and you may get an unpleasant surprise at how they respond. You never know how any one collection agency or debt collector will respond. Some might greet you like a long lost friend, while other debt collectors/agencies will view you as a sap who deserves to have your bank account emptied. Collection agencies have no obligation to take any settlement for less and it’s their right to demand the full amount if you renew contact with them.

The following collection agencies are known to be unpleasant and aggressive: Portfolio Recovery, Fred Hanna, NCO, Midland, LVNV, Calvary Portfolio,, Asset Acceptance, Collect America/CACV, Aurora Gold,  Unifund
– Use extreme caution if either Portfolio Recovery or Fred Hanna has your account as these are notoriously awful collection firms.
– As a general guide: If a debt collector’s lip’s are moving, they’re lying. Any promise made over the phone about a settlement should assumed to be a lie unless those terms are backed up in writing.
Debt collectors have no direct legal power over you whatsoever. Don’t let them bully/scare you into giving them your checking account #’s.  You cannot be arrested over debt in the USA. Debt collectors do not have direct power to garnish wages or freeze checking accounts. They’d have to take you to court and win a judgment first.
– Debt collectors love to create a false sense of urgency. If they have waited months or years for your payment, then they can wait a week or two for any settlement agreement or payment to arrive. Any “deadline” like 5PM tomorrow is bogus.
– I generally advise to make your first call to debt collectors on an outside line like a pay phone. See how they respond to your offer to settle the debt. If they start screaming at you or acting belligerent, then it may be best to not renew contact with them.
– Debt collectors love to pretend that they are (or work for) attorneys. If they do this, ask for the full name of their attorney and their license number in the state bar association. If they refuse to give this info to you, then the legal threat is bogus
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Paying Debt Collectors

Never agree to any settlement over the phone unless you get the terms in writing. What you need is a simple letter on their letterhead confirming that your account will be “Paid in Full” once the agreed to amount is received. Once you get this, it’s safe to pay. Pay only with a USPS money order. Photocopy everything and keep in your records forever as proof that the debt was resolved.
– Creditors/debt collectors have a new trick of adding the disclaimer “if received by [x]” date in settlement letters…usually 2-7 days from the current date. This can allow them come back and claim that your payment was not received in time, so they would come back demanding more money. Only accept the letter if they give you at least 2 weeks to pay. Send you payment via certified mail with return receipt to confirm that payment was received.

Never give debt collectors you bank account numbers for payment.

– If your defaults are small….it’s better to pay them in full
– Any debt that is forgiven/settled must be reported to the IRS as earned income.

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If your default is old, like at least 3 years since the last payment, then check to see if your debt is time barred before you pay

Credit card debts become time barred after a certain # of years have passed. and do not have to be paid back if you choose. This is called the statute of limitations. This time period varies for each state. You can find this for your state by going to this link and looking under “open” accounts.  http://www.creditinfocenter.com/rebuild/statuteLimitations.shtml

If the # of years since your last payment is greater than the time period listed for your state, then the debt is time barred.
Example:
Mary lives in California and defaulted on an AMEX card and last made a payment in Jan. of 2006…..5 years ago. The Statute of Limitations in Calif is 4 years, so this debt is outside the Statute of Limitations and is time barred. If her creditors took her to court they would loose, assuming she showed up and used the Statute of Limitations as a defense. Once this time period is up, creditors become legally powerless over you. All they can do is call and annoy you into paying.
At this point you can send a Cease Communications letter and be done with them: http://www.budhibbs.com/cease_comm.htm

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