Debt collectors can make life really stressful. They can be overbearing, merciless, and even downright abusing while interacting with you. However, you don’t have to give in to such bullying. You still have your rights and your options.
There are a few steps you have to follow before you send off your payments hurriedly. Following these will not just reduce your stress but also help you negotiate and clear your debts for far less than what you actually owe.
Verifying the Creditor’s Information
The first thing you should do after getting a letter or notice from a debt collection agency is to find out if it is a legitimate company. Do a quick online search to verify the company’s phone number or website. You could even check with Better Business Bureau. A company that is accredited with BBB is usually a legitimate one. If not, you may have to proceed with caution.
Checking Your Credit Report
Once you have verified the creditor, it is time to find out which financial institution owned your debt previously. This information can be obtained through your credit report that you can apply for free from the three major credit reporting companies – Equifax, Experian, and TransUnion. See if any agencies have reported collections on your credit report.
Validating Your Debt
In case you don’t find any collections reports, there are chances that the debt in collections, doesn’t belong to you. Find out if you actually owed the debt that was sold to the debt agency. Call up the credit agency listed in the letter and get details about the purchase of the debt and its original balance. You should ideally contact the agency within five days of receiving the notice if you need full information of your debt in writing. If it is not your debt you can always dispute it by sending a letter to the collection agency within a period of 30 days.
Negotiating a Lower Amount
If the debt collectors have purchased your previous past-due debts, they would have done so at a reduced rate. So you stand a chance to get your debt cleared by paying less than what you owe. If you are not comfortable doing the negotiation you can get in touch with a debt settlement agency that can do it for you. Most such agencies contact borrowers directly through debt settlement leads. They will know exactly how to convince the debt collectors and help you get debt-free within the shortest span of time.
One thing you need to remember before signing up with a debt settlement agency that gets in touch with you through debt settlement leads is that you will have to pay taxes on the amount for which the debt is forgiven or canceled during the negotiation process. You might get a Form 1099-C at the end of the year from the debt collection agency. You will have to report this canceled amount as gross income unless there is an exception or exclusion. To know more about this you can consult a tax professional or a chartered accountant.
Get it done with
After negotiating and settling on an amount that will clear your debt for good, you can think of sending the funds. Do it through a cashier’s check or money order as this will not reveal your bank account details. Keep records of all your conversations and correspondence with the debt collectors. This will come of use if the collections agency at any time sends you a statement that confirms a balance due to the debt that has already been settled. If you get such a statement you can always report with the help of an attorney, a consumer-protection agency, or even the debt settlement agency that came to you through debt settlement leads. The idea is to make sure the debt never haunts you again in life.