In a perfect world, you would be able to pay all your bills on time and all the time. Unfortunately, events in life happen, resulting in unpaid bills and collectors calling you. When one of your bills becomes delinquent, it is important to know what can happen during this process and how you can protect your rights. Here are two tips to help you survive through a debt collection with the right communication and knowledge.
Communicate with Your Creditors
When you get behind on your loan or credit card payments, it is a good idea to get in contact with the company and let them know what is going on and work out payment arrangements. Then, the credit company won't wonder if you are going to pay them, and you can prevent your account from being sent to collections.
Ask the credit company if they will allow you to make payment arrangements that better fit your budget or if they can take a settlement amount. A settlement allows you to pay off only a part of the debt to have the debt wiped off your credit. In the long run, it is better to keep in contact with your creditor to avoid having your debt charged off.
If you don't contact the credit company and don't pay on a debt, federal regulations require the credit company to consider it a noncollectable debt and declare it a "charge-off" after a set number of days of delinquency, which goes on your credit report. A revolving credit account must be charged off after 180 days of delinquency and an installment loan must be charged off after 120 days of delinquency.
After a charge-off, you may begin to get calls from several different collection companies. Once an account is considered charged-off, the credit company can still legally continue to call you for collection, or they can hire a third party collection agency. They can also sell your debt to another company for pennies on the dollar to get back some money for their noncollectable debt. If you begin to get collection calls from another company, understand it may be because your debt was sold to them.
Know the Statute of Limitations on Debt
If you have unpaid debt that is several years old, you should know your rights with the statute of limitations on debt. Each state has a statute of limitations time frame on unpaid debt, which varies by state and begins after the last payment you made on your debt.
After your delinquent loan is sold to another company, the new company will begin calling you to attempt to collect the debt and make some money back from their debt purchase. Understand the new company might continue calling you even if your debt's statute of limitations has passed, as they may not know when you made your last payment on the debt.
It is a good idea to know what your state's statute of limitations is for unpaid debt. If a debt purchaser or collection company begins calling you after the statute of limitations has run out, it is important that you do not make any promises to pay or other negotiations with them. If you do, you will reset the statute of limitations on your debt and you will be legally responsible for the debt again.
For example, you live in Florida and your debt is an open ended credit card account that you have not paid on in five years. The statute of limitations in Florida is four years on open ended debt, and you are not longer legally obligated to pay on it. Tell the collector the statute of limitations has run out for them to collect on it. You can also send them a cease and desist letter by certified mail and they have to stop calling you. It is a good idea to keep proof of when the statute of limitations began on an unpaid account if you ever have to take the matter to court.
These two tips can help you get through a debt collection situation. Learn more about your situation by contacting debt portfolio buyers or accountants.
Share28 July 2015
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