How to Handle Collection Agencies

If you stop paying your bills or can’t pay your bills, chances are, you won’t get more than three months behind before your account is closed and the debt is sent to a collection agency. However, this is not a death sentence. There are many ways to deal with collection agencies so that the outcome is better than you could have hoped for.

1. Never talk to a collection agency on the phone. – Send a cease and desist letter requesting that the company stop contacting you by phone, then communicate only in writing. This way everything is documented.

2. Never claim the debt unless you are making payment arrangements. You don’t have to deny it either. In fact, the FDCPA says you aren’t required to tell a collection agency the truth about anything. Only make payment arrangements if you can afford the arrangement. Don’t let the collection agency bully you into a payment you can’t afford.

3. If you want to pay the debt, but can’t pay it all at once. What should you do? – You can negotiate with the collection agencies. They have purchased your debt for much less than the total amount or have been assigned your debt and will be paid a fee based on how much they are able to collect. You can negotiate your debt down to 40-60% of the balance and then negotiate monthly payments. You are in control in this situation. You have the money that they want. Use this to your advantage. Take your time negotiating. You do not need to hire a company to negotiate for you. In fact, most credit card companies and debt collectors will give you a better deal than they will give to a debt negotiation company. You won’t have to pay the debt plus the fees to the negotiation company. Credit card companies and debt collection companies much prefer to work with you personally.

4. Can you get a debt that have been sent to a collection agency sent somewhere else? – Yes, you can. Essentially, the collection agency is only offering you a service. You can decline. Send a letter to the collection agency stating that you decline their service and request that the debt be sent back to the original debtor. Chances are, it will get sent to another collection agency. Send the same letter. Eventually, it will just go away. It will probably remain on your credit report though. Wait until a year has passed then dispute the entry on your credit report.

5. The debt is yours, but you can’t or don’t want to pay it. What should you do? – It is possible to get out of this situation through debt validation. Send a request to the collection agency requesting that they validate your debt. You need to send this letter certified mail to document the date that the letter was sent and received. Once the letter is received, the collection account must be removed from your credit report and the collection agency has 30 days to validate your debt. The FDCPA outlines clear guidelines as to what constitutes validation. They must provide a complete account history, signature documents, or proof they they are legally allowed to collect from your original contract with the creditor. Any other response is not validation. Many companies will simply ignore the letter or send you back something that doesn’t meet the requirements of validation such as the amount of the debt, your social security number, or your address. It is also a good idea to find out the statute of limitations for your state and see if the debt is still even collectable.

6. The collection agency couldn’t validate. What happens now? Nothing should happen now. The entry must be removed from your credit report and the company is no longer allowed to pursue you for the debt. Any violation of that such as updating your credit report or making a phone call is a violation of the FDCPA and you can sue the company for $1000 for each violation. The debt may be sold to another collection agency, but one couldn’t validate, another one won’t be able to either.

7. If you weren’t contacted by a collection agency, you were contacted by a law firm, there is no difference. The law firms are simply collection agencies masquerading as law firms. They have to follow the same rules as other collection agencies.


Collection agencies always try to scare you or bully you into making payment. Their threats are just that, threats.  Take your time. Deal with them on your terms. You will be able to be more successful in your negotiations.

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