Dealing With Third Party Debt Collectors
July 3, 2008 · Print This Article
Currently, the American penal system doesn’t feature debtors’ prisons. We’re not living in Victorian times. Nowadays, the law encourages timely payment of debt while protecting the people who do owe money from having their lives ruined. Laws exist at the state and at the national level to protect individuals from invasive debt collection practices. These include statutes of limitations, which say that people cannot be prosecuted for failing to pay a debt after a certain amount of time passes.
Additionally, federal law mandates that negative information about an individual’s debt payment history (for example, failure to make a minimum payment) cannot be reported to credit bureaus more than seven years after the fact. Moreover, debt collectors are legally prohibited from threatening people or being openly abusive over the phone, or from calling people after repeated requests to stop.
In light of this, it may not be in your best interest to start paying off your ancient debts, especially after the original lender has sold them to a collection agency. In states such as California, statutes of limitations prevent you from being sued for defaulting on debts after just four years (two years if the contract was oral rather than written). If a third-party debt collector calls about the debt after more than four years have passed, and you agree to pay off part of the debt, you are re-opening the statue of limitations. Then, the third-party debt collector can sue you for all you’re worth.
That’s not all. If the collection agency’s convinces you to pay off part of a debt, they can report the “paid-off” debt to the IRS (Internal Revenue Service) as money that you’ve earned. Plus, they can sell off the rest of your debt to yet another collection agency, beginning the whole process over again.
In that case, what should you do if you’re hounded by third-party debt collectors? Here is what lawyers advise.
First, look up the statute of limitations in your state for not paying old debts. It can be as little as two years (California), or as much as fifteen (Indiana). If the statue of limitations has passed, you can’t be sued.
Second, educate yourself as best as you can about debt and credit law. The Internet is your best bet for finding and buying the right books, or a large local bookstore if you live in a big city.
Third, you always have the option of not answering the phone. When a representative from a collection agency calls you, that person’s job is to get money from you, regardless of your interests–usually, contrary to them. That person is going to know more than you, and will try to outtalk you. If you don’t pick up the phone, there’s not much they can do, especially if the statute of limitations has expired.
If you really want them to stop calling you, write them a letter. Use certified mail, and get a receipt. They must, by law, obey your written demand, or be vulnerable to a lawsuit.
Get copies of your credit report. Make sure the agency hasn’t lied about the date of your old debts to make them look like current debts.
Finally, if the statute of limitations has not yet expired, negotiate with the collection agency. Find a lawyer friend (or law student) to help you, or hire one if you must.
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