How to deal with debt collectors in 3 simple steps

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

When considering how to deal with debt collectors, it is important to understand your rights and have a solid plan of action. While you’ll likely need to pay back legitimate debt, you should verify the origin and amount of a debt before paying a debt collector. Additionally, you can hold debt collectors accountable under federal laws that govern the way they must act. Finally, it is possible to negotiate with debt collectors, but you want to be sure to get any agreement in writing.

If you fail to make payments on your debt over a period of time—often three months or more—your debt will likely go to a collection agency. Some debt collectors are hired by the original lender, while others purchase your debt at a low cost and hope that you’ll pay them. In either case, if the debt is legitimately yours, you’ll likely need to pay. 

Nonetheless, there are a few simple steps you should always take when you’re contacted by a debt collector. Don’t panic, because you have options, and if you understand the collection process, you can take positive steps toward getting your debt paid off.

Read on to learn how to deal with debt collectors by verifying that a debt is yours, learning what your rights are and determining how you may be able to negotiate with a collection agency. 

Step 1: Verify the debt is yours

When you get contacted by a debt collector, a good first step is to verify that the debt is yours. This process, called debt validation, forces the collection agency to provide documentation that shows the debt belongs to you. In general, a collection agency must send you a validation letter when requested. 

 There are a few important reasons to verify the debt:

• Avoid scams. By verifying that the debt is yours and that the collection agency is authorized to accept payment, you can avoid paying scammers for illegitimate debt.
• Avoid making a quick decision. Instead of responding immediately to the debt collector over the phone, you can look at the validation letter and consider your options with more time. 
• Avoid paying twice. After receiving a validation letter, you may realize that you have already paid the debt in question. In this case, you can challenge the debt or initiate a credit dispute.

Additionally, it’s important to note that debt is subject to a statute of limitations, which means that debt is only valid for a certain time. The statute of limitations will vary based on the type of debt and the state that you are in, so you may want to consult a credit repair professional to determine if the debt is still valid. 

If the debt is legitimate, you’ll need to make a plan to work with the collection agency to pay the debt off. Before doing so, make sure that you know your rights, which are protected by federal law.

Step 2: Know your rights 

Debt collection agencies are bound by the Fair Debt Collection Practices Act (FDCPA), which protects consumers from many behaviors that were once common in the debt collection industry. 

For example, the FDCPA prevents debt collectors from harassing or threatening you. It ensures that debt collectors disclose why they are calling you and that they offer validation for the debt when requested. Additionally, this law protects your privacy when collectors call other people about your debt, and it also gives you the right to request that debt collectors stop contacting you. 

Here are a few other ways that debt collection laws regulate debt collectors: 

• Communication: Debt collectors can only call you between 8 a.m. and 9 p.m., and they cannot call you at work if you ask them to stop. 
• Disclosures: Debt collectors must inform you of the original creditor, the exact amount owed and your right to challenge the debt in writing within 30 days. 
• Behavior: Debt collectors cannot use profane language, threaten you, make false claims about the consequences of nonpayment or lie about what you owe. 

If a debt collector violates any of these rules—or you believe that the debt is fraudulent—you can file a complaint. The Federal Trade Commission (FTC) accepts reports of fraud, and the Consumer Financial Protection Bureau (CFPB) enables you to submit a complaint about unlawful behavior by collection agencies. In 2019, the CFPB handled 75,200 complaints on debt collection, and 99 percent were handled by the end of the year. 

Once you have verified your debt and know your rights as a consumer, it’s time to work with the debt collector to settle your debt. 

Step 3: Negotiate with the debt collector

While it is your responsibility to pay legitimate debts, you’ll want to find a way to work with the debt collector to find an approach that works for your financial situation. Debt can be a burden, but it’s important not to ignore debt collectors, as they may be able to take you to court for failing to pay. 

Here are a few things to keep in mind when negotiating with a debt collector:

• You may be able to set up a payment plan. In general, debt collectors want to start collecting something from you, so many are open to setting up a payment plan that works with your budget. 
• You can sometimes settle a debt for less than you owe, but there are drawbacks. You’ll likely need to make a lump-sum payment if you settle your debt, and your credit score may drop. Also know that the amount of debt forgiven may be treated as taxable income. 
• You should get everything in writing. Oral agreements are generally not enforceable, so make sure to get any agreement for a payment plan or debt settlement in writing before making any payments.

Once you negotiate your debt, you’ll want to begin making payments to get your finances back on track. There are many different strategies for paying off debt, like the snowball method, the avalanche method and the equality method. 

Unfortunately, even after paying off your collection account, negative items may remain on your credit report for up to seven years, which can continue to impact your credit score over time. Therefore, many people who have collections on their credit report can benefit from working with credit repair consultants, who are able to assist with short- and long-term strategies for rebuilding your score. 

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