How to deal with a Creditor or Collection Agency yourself
There is a legal difference between dealing with a creditor and a collection
agency. If you are dealing directly with a creditor (the one to whom you owe
money) then you must each abide by a variety of federal and state laws. A
Collection Agency must abide by the Fair Debt Collection Practices Act. In
either case, if you owe the money, there are only two legal options for you. Pay
the money or declare bankruptcy.
Validate the debt
If you are already in the process of declaring bankruptcy, simply provide
documentation to the debt collector and that will be the end of it. If you are
not, then make sure you really owe the money. You have a legal right to
challenge the validity of the debt by writing a letter and sending it certified
with a return receipt requested. If you know you owe the money, then this formal
challenge will only prolong the process and allow more time for charges to
accrue. The only thing the debt collector must do to validate the debt
(according to case law Chaudhry v. Gallerizzo) is tell you that you really owe
If the debt has passed the statute of limitations, then you may appeal to legal
means to have the debt cancelled. There are many things to remember about the
statute of limitations.
• The amount of time for the statute of limitations varies from state to state
and depends on the type of debt.
• There is NO statute of limitations on federal student loans, income taxes,
most fines, and, in some states past due child support.
• Generally, the statute of limitations for collecting debts begins the moment
you sign a credit contract, however, just about every state has specific rules
on the running of a statutory period and some even have provisions to adjust
(toll) this period. The term toll means to "stop the running of a statutory
period for a certain period of time". Many states use this term in their
statutes of limitation rules.
• For example, lets say that you live in Florida where the statute of
limitations on credit card debt (open ended credit) is 4 years. You do not make
any payments to your credit card company for two years leaving only 2 years to
go before the statutory period is up. Suddenly, you decide to move to Georgia,
stay 12 months and then move back to Florida. Florida statutes say that leaving
the state tolls the running of the statutory period. So, on the day you move
back to Florida, the remaining 2 year statutory period begins running again.
• In some cases, making a payment, a promise to pay or just acknowledging that
the debt is valid, can reset or restart the limitations, especially for credit
cards, mortgage payments, auto loans and similar types of credit.
Talk to them
The next step is to talk to the creditor or collection agency. Honesty is
the best policy. Tell them the truth about your financial situation. They are
going to find out anyway. If you are dealing with a collection agency they may
either see this as a sign to give up or mount a last-ditch all-out assault. It
may be possible to negotiate a reduction in the amount of the debt or a
reasonable schedule of repayment that is well within your means.
After you have come to an agreement with the debt collector, follow through
on what you have agreed. Make the payments on time and begin to rebuild your