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Debt Collection - Part 1

Come aboard, welcome. You're trying to drag yourself up out of the ocean of debt and we can show you how to get there. First, you have to learn the ropes. We are not just going to make you scrub the deck, we're going to teach you how to sail the ship all on your own and in no time, you'll be heading back the dry land you remember so fondly. First - the rules of the ocean. If you're having trouble paying the captain on the last ship you sailed on, running onto our boat isn't going to make the problem go away, and if he's a particularly busy sailor, there's every possibility he's going to send a mercenary your way to collect what it is you owe. Don't jump back in the water just yet! Understanding how debt collectors work is vitally important if you have any amount of credit debt, a mortgage debt, or any other kind of debt. It is also something important to keep in mind if you're scraping to planks of wood together to float on, as many of the challenges of debt collection can be avoided with good planning and being prepared.

The Ropes: Understanding Debt Collection

All sailing references aside, debt collectors just doing their job. It isn't anything personal. If you are certain you are not behind on any payments, it may simply be an administrative error by the company which approached the debt collection company to begin with. It's important that you, or your attorney, talk with the debt collector in order to solve the problem. Ignoring it will not make it go away. Debt collectors are people who regularly collect debts owed to third parties, who they represent, such as collection agencies and some lawyers. There are also companies who try to collect debts they have bought from the original lender.

Your Role: Your Rights

Under the Fair Debt Collection Practices Act (for countries outside of America please refer to your government's legislation), debt collectors are not allowed to harass, intimidate, or give you untrue information. If you tell them either orally or in writing not to contact you at your work, they may not. If you do talk to them and decide you do not want any further contact, you should tell them this in writing. They then may not contact you again, except to notify you of two things - either to confirm there will be no further contact or to tell you they or the creditor will be taking legal action to reclaim their money. If a debt collector contacts you they are required to send you a written "validation notice" within five days. This should tell you how much money you owe, the name of the creditor you owe it to and what you should do if you do not think you owe the money.

Their Role: Their Rights

There are very specific rules governing what debt collectors may and may not do to people with bad debt. They may not harass you - in other words, they can not threaten violence, they can not publish your name (although they may give your name to a credit reporting company) and they may not call you repeatedly. They must be honest. They are not allowed to tell you they will take legal action if they have no intention of doing so. If you have a problem with the behaviour of a debt collector you have been dealing with, you should contact your state Attorney General's office. Many states have debt collection laws which are not the same as the Federal Fair Debt Collection Practices Act and the Attorney General's office can help you understand the different rights under your state's specific law.

Who will Mentor me and which Heading do I Take?

If you want a representative to deal with the debt collector on your behalf, the best thing to do is hire an attorney with a specialisation in finances. If you do have a significant credit debt, or other debt, the best thing to do is try to work out a new payment plan with either the collection agency or your original creditor. If you are unable to make an agreement and the case goes to court, a judge may order a garnishment of your wages. This means your employer will withhold part of your pay each fortnight or monthly (according to how often you are paid) to automatically go towards paying off your debt. If a debt collector is contacting you because you have not been able to keep up with your mortgage payments, there is also a high possibility that they will try to seize the assets you have signed over as collateral, whether this is land or even your own home. If you have been struggling with your mortgage, it's important to address this problem as soon as possible. There are a number of companies whose sole purpose is to take on clients with bad debt problems and identify the areas they can improve their spending habits, maximise their income and better manage their debt. Often this involves reviewing where you spend the most money and finding ways to cut back on that spending or making it more efficient, and consolidating your debt so that it is easier to manage. To learn more about debt collection and how to help get yourself out of debt, read Debt Collection 2!