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 | 7 Ways to Stop Debt Collection |
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The key federal law regulating debt collection, the Fair Debt Collection
Practices Act (FDCPA), applies only to debt collection agencies and
attorneys, and generally does not apply to creditors collecting their
own debts. However, the seven approaches listed here generally will work
with creditors collecting their own debt in addition to collection
agencies.
There are ways to effectively deal with debt collectors. If you feel you
are being harassed, you can stop the harassment by following the seven
techniques below.
1. Work to Prevent Delinquency Before it Happens
Creditors will not forget about a bill just because you fail to respond.
The creditor will hire a collection agency or turn the matter over to an
in-house collection bureau. The job of these collectors is to get you to
notice the bill and respond to a request for payment.
Before the creditor refers a loan to a collection agency, call the
creditor to explain your situation. Promptly contacting the creditor is
most important with hospitals, doctors, dentists and similar creditors
who would otherwise quickly turn a debt over to collection agency.
Although retailers, banks and finance companies are more likely to have
an in-house collection arm, it may benefit you to avoid the transfer of the
debt to that office.
2. The Cease Letter
The simplest strategy to stop collection activity is to write the
collector a cease letter. Federal law requires collection agencies to
stop their dunning after they receive a written request to stop. The
federal law does not apply to creditors collecting their own debts.
The letter need not give any special explanation why the collector
should cease contacts. However, it is generally a good idea to
explain why you cannot pay. It is important to keep a copy of the written
request.
3. The Attorney's Letter
You do not need an attorney to send a cease letter.
When you need such relief, you can send a simple cease
letter without the cost of legal assistance. If these letters do not
stop the collection activity, a letter from an attorney usually will.
Collection agencies must stop contacting a consumer known to be
represented by an attorney, as long as the attorney responds to the
agency's inquiries. Even though the Fair Debt Collection Practices Act
requirement does not apply to creditors collecting their own debts,
these creditors also will generally also contact the attorney instead of
the consumer.
4. The Work-Out Agreement
The common consumer strategy in preventing collection activity is to "work out"
a repayment plan with the collector.
Collectors may continue to call to remind you of the agreed upon paymeny schedule.
Remember to prioritize your debts. Even a small payment to an unsecured creditor is
unwise if this prevents payment of your mortgage or rent.
5. Billing Errors
Collection letters can sometimes be sent in error, mistaking the amount due or
account number, or billing the consumer instead of the insurance
company. Occasionally, you may even receive collection letters meant for
someone with the same or similar name. When a collection letter contains
a mistake, write to request a correction. Collection agencies, by law,
must inform you of your right to dispute the debt. If you dispute the
debt in writing within 30 days, the collection agency must stop
collection efforts while it investigates.
6. Complaining to a Government Agency
Another strategy is to write to government agencies responsible for
enforcing laws that prohibit debt collection abuse. A government agency
is not likely to investigate immediately unless it has other complaints
against the same collector.
The complaint letter should be sent to the Federal Trade Commission,
Bureau of Consumer Protection, Washington D.C. 20580. Copies of the
letter should be sent to the consumer protection division of the state
attorney general's office, the agency performing the collection activity
and also to any local office of consumer
protection listed in the phone book. Addresses can be obtained from a
local better business bureau or office of consumer affairs.
If the collection tactics include abusive telephone calls, a copy of the
same letter should be sent to the local telephone company and public
utility commission. If the collector's abusive behavior appears part of
its routine practice, this should be pointed out to the agency.
7. Bankruptcy
When you file your initial papers to institute a personal bankruptcy,
this instantly triggers an automatic stay. This stay stops all
collection activity against you by collectors, creditors or even
government officials. No further collection activity can proceed unless
a particular collector obtains permission from the bankruptcy court, and
the bankruptcy court will not grant this permission to collectors
seeking to contact you about unsecured debts.
Bankruptcy should be saved for long term serious financial problems. In fact, you should be wary of any
attorney offering to file bankruptcy for you when the only problem is
collection activity.
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