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Approximately 30 million Americans had a debt in collections in 2013. The debt collection process can seem scary. You hear horror stories about the world of debt collection (like this article on the New York Times). However, what happens when a bill goes to collections is fairly simple – and there are some simple steps to follow to remove yourself from that uncomfortable situation. Keep reading to figure out how to handle the debt collection process.

Debt collection basics

The Consumer Financial Protection Bureau (CFPB) defines a debt collector as, “a person or a company that regularly collects debts owed to others, usually when those debts are past-due.” If you haven’t been paying your bills, there’s a chance your creditor will sell your debt to a collections agency. Not paying your debt can have serious consequences, like damaging your credit score or even leading to legal ramifications.

Tips for handling a debt collector

1. Don’t avoid the situation.

Debt is a significant source of stress for many Americans. If you feel that it’s easier to just ignore the collector’s calls and pretend everything will work itself out – you’re doing yourself a disservice. If you avoid the situation, there’s a chance the collections agency will file a lawsuit against you to collect the debt. If they win, they would be legally allowed to freeze your bank account or garnish your wages (meaning they take a percentage of each paycheck). Avoiding the situation will only make it worse.

2. Know your rights.

The Fair Debt Collection Practices Act was created to protect consumers. Make sure you know what debt collectors are and are not allowed to do when pursuing repayment. Some of the act’s guidelines state that:

• Collectors may not use obscene language or make threats of violence.
• They may not call you before 8am or after 9pm.
• They cannot discuss your debt with a third party – unless it is the attorney representing you, an approved family member, or simply to ask for local information like address, phone number, or place of employment. If they do reach out to a third party to collect that legal information, they may not state that they are a debt collector.
• Collectors must respect your verbal or written request to not contact you at work.

Read more guidelines here. FDCPA violations should be reported to your state Attorney General’s office, the Federal Trade Commission, and the Consumer Financial Protection Bureau.

3. Validate the claim.

Make sure that the debt the agency claims belongs to you actually does. Collections agencies have been known to make mistakes, and it’s also possible that the debt was fraudulent. Validate the claim by requesting a copy of your credit report. The report will list all debts under your name. Information provided will include the name of the original creditor, the date it was opened, and your payment history. Make sure the debt the collector is calling about is on your credit report, and that you are the person who opened that account.

Read our article “The Guide to Understanding your Credit Report” to learn how to get your credit report for free.

4. Negotiate repayment.

If the debt truly is yours, you must figure out how to repay it. Some choose to pay the collector in full – but depending on the amount it may not be financially feasible. It is possible to negotiate repayment terms with a collections agency. Some have even found success in decreasing the total amount of debt owed. Regardless of the repayment terms, make sure you always notate who you’ve talked to and have all of the details in writing.

How to prevent this from happening in the future

If you’ve ever wound up in this situation, you’re not alone. Many others before you have had to deal with debt collectors and bad credit as a result. Luckily, there are plenty of resources for how to start rebuilding your credit and ensuring you don’t fall in the same trap. Research reputable financial advisors in your area or even a local financial institution. Many offer free resources for managing your money and fixing your credit score. They can help guide you towards healthy financial decisions.

If you want to try and improve your credit score on your own, read our article “Use These 7 Hacks to Repair & Raise Your Credit Score.”

Tackle Your Debt with the Snowball Method

Popularized by financial guru Dave Ramsey, this method for becoming debt-free is built on human psychology. We’ve created an easy-to-use calculator that will show you exactly how to pay off all of your debt using this method. Check out our FREE debt snowball calculator here.