NEW YORK (MainStreet) – If there’s a list of people you never want to get a phone call from, debt collectors are probably nearly the top. But if you get a call demanding payment of an unpaid debt, don’t panic – there are ways to deal with the situation that don’t involve disconnecting your phone and fleeing town.
To find out the best way to deal with this situation, we spoke to Bill Bartmann, a long-time debt collector who advocates for more responsible and ethical debt collection methods.
“First, have the debt collector explicitly identify him or herself: Who they are, where they’re calling from, why they’re calling and the nature of the debt,” he says. “You as a citizen have the right to ask these questions.”
Doing so accomplishes two things. First, asking for his or her information establishes accountability in the event that the collector becomes abusive in any way (and Bartmann also suggests asking if you can record the conversation – even if you don’t have a recording device, bluffing that you do is a good way to keep him or her honest). Secondly, you want to get information you may need to establish the nature of your debt and clear up any misunderstandings.
“Determine if it is even your bill,” he says. “It may be someone with a similar name, or it might be an identity theft crisis.”
If you’re at all unclear about the circumstances surrounding the debt, don’t hesitate to get off the phone to gather further information. Don’t be pressured into settling the debt or giving up financial information before you’re ready.
Find a Way to Settle
If you establish that you do indeed owe money, you’ll need to find a way to pay it off. How much of the debt you actually need to pay off will depend on who owns the debt. If it’s your original creditor (for instance, a bank), then you have very little leeway; if, however, several months have elapsed and the bank decided to sell off the debt to a third party, then you have a lot more wiggle room. Bartmann notes that in situations such as these, a creditor will sell the debt for as little as a nickel on the dollar. So even though the collection agency will likely ask you to pay the full debt, the truth is that they can get a fraction of the total amount and still turn a profit.
Let them know you’re aware of this fact – that you know they only paid 5-7 cents on the dollar for your debt, and that they should be willing to settle.
“Demonstrating that you’re savvy, that you know the game and you know how the market flows – you bet that’s an advantage,” Bartmann says.
If there’s any question of whether your debt is owned by a third party or by the creditor itself, ask who you’ll be writing the check to. If they say a name of a collections agency rather than that of your bank (or other creditor), then you know you’re dealing with someone who will likely be willing to settle for a quarter or less on the dollar.
While that might sound like a favorable resolution, keep in mind that if it is to the point that the debt has been turned over to a third party, then the unpaid debt has probably shredded your credit rating. While some people may be willing to take a damaged credit rating in exchange for a greatly reduced debt obligation, those who want to buy a house or car in the near future will probably be more inclined to deal with it before it gets there.
While that means paying all or most of the total debt, there’s still room for negotiation as far as setting up a payment plan.
“Say, ‘I could pay $50 a month,’ or, ‘I can’t pay anything this month because of x, y and z circumstances, but next month I can pay this much,’” suggests Bartmann.