Right now, there are folks who cringe when their telephones ring.
These people get a sick feeling knowing that the caller is likely a creditor trying to collect on an overdue bill. Much of the news lately has focused on people who are falling behind on their mortgages. But the fact is, other debts are bringing people down, too. Americans are carrying $2.5 trillion in nonmortgage debt.
In a recent column, I wrote about the rights granted to debtors under the Fair Debt Collection Practices Act, which protects people from illegal collection tactics. Now I want to discuss what debtors should do when they get that call from a collection agency or law firm.
One thing you shouldn't do is let the phone keep ringing or go to voice mail. Even if you don't have the money to pay the debt, let the collection agency or attorney know your circumstances, said Bob Markoff, president of the National Association of Retail Collection Attorneys.
"We might be able to talk to you and find a way to set up something that fits your budget," Markoff said. "The consumer has the right to pay whatever they can pay."
Don't be pressured to pay an amount you truly can't afford. Only agree to a payment plan that you can stick with. There's no point in promising money that you won't have, which only will further frustrate the debt collector and stress you out.
"Do what you can do," Markoff said, "and if that is not acceptable, it's unfortunate for that credit grantor."
Having said that, Markoff warns that you shouldn't try to duck the debt by claiming you can't afford to pay anything when, with a little belt-tightening, you could.
Debt collectors aren't fools. They have access to your credit files. They can look and see if you've bought a new home or car, have cable service, or have made recent purchases on credit.
In many cases, you can negotiate to settle the debt for less than you owe, Markoff said. The key to such negotiations is cash.
"If you have cash in hand, you are more likely to obtain a reasonable settlement than a promise to pay something in the future," Markoff said. "You have already broken a promise to pay in the future, so cash today really talks."
Let's say you have an old debt that has ballooned to $5,000 with fees, interest, etc. Offering to pay $10 a month probably isn't going to fly. But if you offer $1,500 in a lump sum, you have a better chance for a settlement.
Of course, the example I gave is just that. How much of a lump-sum cash offer a creditor or debt collector will agree to varies greatly.
However, once you do negotiate a settlement, be sure to get all the details in writing before you send a penny to the collection agency or attorney.
After you've settled the debt, keep a record of the payoff and all your correspondence. My advice: Hang on to the paperwork forever.
Often, old debts get sold and then resold, and it's possible the information about your payoff may not get passed along to the new collection agency or attorney. Years later, you might start getting telephone calls about a debt you long since have settled.
There is generally a statute of limitations in which a debt collector can sue to collect on an old debt. The statutory time limit on certain consumer debt varies by state. Keep this in mind, however: Even if debt collectors can't sue you in court for the debt, they still have the right to collect what is owed.
Here are some other tips from the National Association of Retail Collection Attorneys:
All these tips lead to one thing -- communication. Avoiding a call from a collector won't make the debt go away.
As Markoff said, "Debts don't improve with time. They are not like fine wine."
Write to Michelle Singletary, in care of The Washington Post, 1150 15th St. N.W., Washington, D.C. 20071, or e-mail her at email@example.com.
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