Debt collection

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It goes without saying that none of us wants to hear from a debt collector. While once largely the province of organized crime, debt collection has attempted to go somewhat legit. This is not to say that today's collection agencies don't resort to strong-arm tactics, including harassing phone calls and threats that are often illegal. Given the complexity of debt collection laws and regulations that vary state to state, there are hundreds of ways a debt collector can engage in illegal practices, including but certainly not limited to harassment. The key is to know your basic rights, and to record abusive and illegal practices. In many cases, your debt can be erased (due to collection agency misconduct) or reduced. In some cases, you might even have the right to sue for damages.

Collection agencies are counting on you to not do your homework. They are counting on you to be an easy mark and to be overwhelmed by Kafkaesque bureaucracy, harassment and shame. Our current economic downturn only amplifies the problem. Everyone has less money and more debt. Debt collectors themselves are making less money and this is a recipe for more aggressive and increasingly illegal tactics. Even if the collection agency does not engage in activities and techniques that are technically illegal, they are likely to use intentionally obfuscating tactics. If this sounds like the kind of thing that we're all used to from credit card fine print and gym membership terms, that's because it is. While this chapter can't tell you everything you need to know to handle your specific situation, it can provide a basic outline and point you to resources that can help beat the system that wants you to fail.


A collection agency often works on behalf of an original creditor (OC). An OC can be a department store, a credit card company or a rent-to-own furniture shop, just to name a few common examples-basically wherever you took out a credit card or loan. When bills go unpaid, the OC contracts with collection agencies or third-party debt collectors to collect the debt. In many cases the collection agency simply takes a commission of every debt it collects on behalf of the OC. Another likely scenario is that the collection agency has bought your debt outright from the original creditor, such as a credit card company after a period of non-payment. Many banks are required by law to charge off unpaid debts after a designated period of delinquency. The original creditor may sell your debt to a collection agency, but the collection agency doesn't pay full price. In fact, it will almost certainly pay much less, usually 2%-25% of the debt's face value. So if you owe $1,000, the collection agency might pay $150 for the right to collect that $1,000 from you. The credit card company may also claim your debt and all the interest and fees you have accrued as a write-off in its financial filings.

In short, the collection agency is essentially buying the right to take a gamble on your debt, debt that the OC may have already charged off. But they aren't just buying your debt. They are buying debts of hundreds, even thousands, of people like you. For their gamble to pay off, they only need to convince enough debtors-through legal means or otherwise-that we must pay them. The collection agency might also tack on additional late fees and interest all while harassing you by phone and by mail to collect.


It is key to understand how collection agencies think if you want to know how to best engage with them.1 First, it is usually pointless to go back and contact the original creditor. The original creditor almost certainly has an agreement with the collection agency that prevents them from negotiating directly with you.

Collection agents often receive little training beyond, "Here's your desk, your phone and computer-now go make some money." Many collection agency workers' pay is tied to a monthly quota of how many debts they can collect and it is common for collectors to employ more aggressive and illegal tactics toward the end of the month. Because they work on monthly commission, collection agency workers are also most likely to pursue the people with the largest debts and the people who seem most likely to pay.

It is important to remember that you are the most important variable to a collection agent. To quote one message board familiar with their tactics, "It is your fears, your fantasies, your partial understanding of the truth that empowers the debt collector and each of these is a weapon to be used against you. By carefully stating half-truths and letting your imagination run away . . . "

It is also important to note that there are two common types of collection agencies: letter writers and just plain "collection agencies." Letter writers basically just write letters directing you back to the original creditor to make your payment. Collection agencies require you to pay them directly, often so they can be assured they will get their commission from the OC. Either way, they must include a mini-Miranda in their letters or read it during their phone calls. If they do not, you may have grounds to sue.

If your first contact with a collection agency is over the phone, the mini-Miranda warning should sound something like this: "Hello, I am [name of collector]. I am [or "this office is"] a debt collector representing [creditor]. Information obtained during the course of this call will be used for the purpose of collecting the debt."

If your first contact with the collection agency is via mail, the mini-Miranda should look something like this: "This correspondence is an attempt to collect a debt. Any information obtained will be used for that purpose. Unless within 30 days of your receipt of this notice, you notify us that you dispute the validity of this debt, it will be assumed to be correct. If you notify this office within thirty days that you dispute the validity of the debt, we will obtain verification of the debt or a copy of the judgment. If you request it within 30 days, we will provide you with the name and address of the original creditor (if different from the current creditor)."

Do not ignore the call or letter. The biggest mistake people make when they get a letter or call from a debt collection agency is to ignore them and hope they will go away. Because you have 30 days to contest the debt, you must act immediately. If you ignore the contact, you are by default agreeing that the debt is legitimate.

Whether the debt is legitimate or not: o Write a letter to the office of the collection agency or attorney and state that you (a) dispute the bill; and that (b) you want a full accounting of the monies claimed to be owed. The Fair Debt Collections Practices Act of 1996 (FDCPA) requires they contact the original creditor to secure full account detail. Without a confirmed accounting of this debt, they cannot return to the collection process.2 o In responding to a call, advise the collector that you (a) are disputing the debt and that you are doing so in writing to his/her offices; and that (b) you do not want to receive a call from this agency at your place of work and that they can only contact at your home (or on your cell phone if you don't have a home telephone) between the hours of X and Y. There is a decent chance that you may not hear back. Remember, the collection agency is most likely to pursue the people they think are most likely to pay. You may have to continue to write to them, and even threaten to sue. (See Appendix D for sample letters.)


In every state there is a statute of limitations (SOL) for outstanding debts-a limit on the number of years in which a creditor may attempt to pursue payment. Each state is different so you should check.3 Some states, like Kentucky and Ohio, have extremely long periods (fifteen years for written debt agreements) while states like Mississippi and North Carolina have much shorter periods (three years for written debt agreements). If there is a dispute about which state's laws apply, you can be assured that the collection agency will argue for the state with the longer period.

When does the SOL clock start?[edit]

The SOL clock starts running on the date of the last activity of your account. This is often the date of your last payment but-and this is key-it may also be the date when you entered into a payment agreement or simply acknowledged liability for the debt. This is why it is key to always contest liability. If your debt is beyond the SOL you can contest the debt on these grounds and, should you want to play offense, you can also attempt to set up the collection agency for a FDCPA violation and hit them with a suit.


Even if your debt falls within the SOL, there is a good chance the debt collector will engage in abusive or deceptive practices that are illegal under the FDCPA, but it is up to you to know your rights, be vigilant and document any violations. Violations are grounds for dismissing debt and related lawsuits.

Some common FDCPA violations[edit]

There are countless ways to violate the FDCPA and the longer you engage with your debt collector or agency (while continuing to dispute the debt-this is very important), the greater the chance you will catch them in the act. Unfortunately (or fortunately if you are a debt collector) only a small fraction of violations go reported. You do not need a lawyer to contest debt obligations or report FDCPA violations; you can take action on your own and even win damages.

Due to an absence of regulations and enforcement, debt collectors routinely break the law, verbally abuse and threaten debtors. These practices are rampant in an industry that is run like the Wild West. Here are just some of the very dirty tricks that debt collectors use:

Recently debt collectors have "embedded" themselves in hospitals-like reporters in a war zone-coordinating with hospital staff to make bedside visits. While patients are often at their most vulnerable, sick or injured and naked except for a hospital gown, these debt collectors will attempt to shake them down for money. Jessica Silver-Greenberg writes, "To patients, the debt collectors may look indistinguishable from hospital employees, may demand they pay outstanding bills and may discourage them from seeking emergency care at all, even using scripts like those in collection boiler rooms."[4]

It is common for debt collectors to call pretending to be police officers and claim that they have a warrant to arrest a debtor if they don't pay up. Debt collectors will often continually harass people for debts they don't owe or have already paid or for those that have already been dismissed in court. Collectors frequently target the wrong person, mistaking one person for someone else with the same or similar name. Debt collectors will lie and say that they are calling on behalf of debt relief agencies, learn all about a debtor's situation and collect all of their personal information, and then use it against them. Collectors have been known to illegally call employers and inform them of employees' debts. In the most extreme cases, debt collectors have made disturbing threats to seriously harm debtors and their families.[5] Although illegal, these tactics are rampant.

Even debt collectors who follow the law can legally mislead you or trick you in other ways. Credit card companies have started data-mining cardholder's purchases and using software to create psychological profiles of them. These profiles are then used by debt collectors to psychologically manipulate debtors to pay more than they otherwise would have to, including artificial late fees that would otherwise have been waived. This tactic, although manipulative and immoral, is completely legal. After using a psychological profile to swindle one debtor out of an additional $2,000, debt collector Rudy Santana explained, "It's all about getting inside their heads and understanding what they need to hear."[6]


With all of this in mind, it's important to know what debt collectors legally can and can't do. Below is a basic list to help protect you: o A debt collector can only call a third party once about you unless it believes the third party gave it false information the first time. o Contacting you before 8:00 AM or after 9:00 PM is illegal. o You must tell a collector not to contact you at work by sending them a cease and desist letter (see Appendix D, sample letter #2). You must send this certified mail and keep a copy for yourself so you have proof of receipt. If the collection agency contacts you again, other than to advise you of their intent to take action, then they are violating the FDCPA. o Under no circumstances does a default on a car loan equal theft. It can not be reported to law enforcement. Legal repossession is the creditor's right. o If you do not want to be in contact with a debt collector, then that's your right. It doesn't cancel the debt but it is your right not to speak with debt collectors. o A debt collector cannot sell a debt to another collection agency with full knowledge that it has expired (see SOL) or is in dispute. o A debt collector may try to lead you to believe that you have no grounds for requesting a validation of debt (see Appendix D, sample letter #2). o A debt collector may try to represent themselves as an attorney or law firm even if they are actually not an attorney or law firm. Regardless, it is important to remember that collection attorneys also have to follow the FDCPA just like collection agencies. o If a debt collector sends an initial notice advising you of your right to a validation of debt, then they cannot demand payment within the next thirty days. o A collector cannot call your job and tell your HR department that they need your work information (wages, schedule) unless a valid suit was filed by them and tried in a court of law with a judgment in their favor. Until this happens (if it happens), they cannot contact your HR department or place of work, even if they claim to be looking for information to sue you. o It is not unheard of for debt collectors to use fake case numbers and fake lawyers to scare an alleged debtor into paying. Of course, this is in clear violation of the FDCPA. o Regardless of whether the initial contact is via mail or letter, the collector must provide you with a mini-Miranda (see above). The mini-Miranda should also be on each and every communication you get from a debt collector. o A collector is not allowed to reveal information about the envelope's contents on the outside of the envelope for others to see. Words such as "past due" or "collections" are in clear violation of the FDCPA. o A debt collector cannot impersonate a law officer or claim they can throw you in jail for not paying your alleged debt.


There are two main ways to fight back against debt collectors: letter writing and lawsuits for violating the FDCPA. Both could be made into mass actions that attempt to overwhelm debt collectors while also helping us reduce our debts. With the right organizational structure, debtors being chased by a common debt collector or debt collection agency can coordinate a well-timed, well-thought-out letter writing campaign. If many debts with the same collector are disputed, it will clearly disrupt and possibly halt their business. As far as we know, this has never been tried. If a collector violates the FDCPA (which won't be hard to find out), a class-action lawsuit could be organized. As usual, we recommend you consult a lawyer before considering this.



Carreon and Associates ( The Consumerist ( Debtorboards ( Fighting Collection Agency Debt ( National Consumer Law Center ( Written Off America (


Jude Chao, "How to Report Collection Agency Abuse," eHow ( "Debt Collection FAQS: A Guide for Consumers," National Association of Consumer Advocates ( "Debt Collection Info Packet," NEDAP, 2006 ( Alex Henderson, "'Am I Going to Have to Kill You?': The Horrific Ways Abusive Debt Collectors Threaten and Harass Their Victims," AlterNet, April 17, 2011 ( Lynnette Khalfani-Cox, "How to Handle Rude and Abusive Debt Collectors," AARP, January 16, 2012 ( "Know Your Rights When You Owe a Debt," National Association of Consumer Advocates ( Patrick Lunsford, "Debt Collectors Pursuing More than 14 Percent of Americans," Inside ARM, February 29, 2012 ( Chris Morran, "Debt Collectors Real & Fake: Top List of Most-Blocked Phone Numbers," The Consumerist, August 6, 2012 ( Chris Morran, "4 Things Debt Collectors Won't Tell You," The Consumerist, October 18, 2011 ( "Predatory Lending Practices," National Association of Consumer Advocates ( Yves Smith, "How to Beat Vulture Debt Collectors," Naked Capitalism, August 16, 2012 (


1. "The Psychology of Collections," Professional Recovery Personnel, Inc. ( 2. "Debt Settlement Letters and Sample Letters on Debt and Credit," Debt Consolidation Care ( 3. LaToya Irby, "State-by-State List of Statute of Limitations on Debt," ( 4. Jessica Silver-Greenberg, "Debt Collector is Faulted for Tough Tactics in Hospital," New York Times, April 24, 2012 ( 5. "As a Result of FTC Action, Two Defendants in Abusive Debt Collection Case are Banned from the Industry, Will Surrender Assets," Federal Trade Commission, March 15, 2012 ( 6. Charles Duhigg, "What Does Your Credit-Card Company Know About You?" New York Times, May 12, 2009 (

KYD: Debt Collectors[edit]

What is a Debt Collector?[edit]

Debt collectors, as the name implies, are companies that specialize in getting you to pay a debt. If you have been contacted, via mail or phone, about a debt you owe, it’s likely that the person contacting you doesn’t work for the original lender you took the loan out from. Likely they work for a debt collector instead.

Sometimes debt collectors are hired by lenders to do their dirty work. In this case, a debt collector collects money to pay to the lender and takes a commission.

More common nowadays is for lenders to sell debts to debt collectors outright. They do this when they don’t want to collect on a particular debt anymore. They don’t even have to ask you permission to do this to your debt. When lenders sell a debt you owe them to a debt collector (this is called “assigning” a debt), then you owe that debt to the debt collector and not to the lender. Every dollar a debt collector collects goes to their bottom line—they have bought the right to make money on a debt you owe to somebody else.

Debt collectors generally buy debts from lenders for a small fraction of their original value. If you owe a $1,000 to a lender, they might have sold it to a debt collector for $100 or less. Lenders sell loans at such a discount when they’d rather cut their losses than spend money pushing you to pay on it. Debt collectors who buy loans at such a discount then try to get you to pay the full amount, even though they make profit if you pay a fraction of that amount.

Debt collection is big business. The industry makes tens of billions of dollars each year. No surprise, then, that many of the most profitable collectors are at least part owned by Wall Street banks. So, for example: if you fall behind on a Chase credit card, JP Morgan Chase can then write off the amount you owe them to get a tax deduction and sell it to NCO Group, the debt collector it owns, to keep harassing you until you pay.

Wall Street never misses a chance to make money off of your misery.

How to Deal With Debt Collectors: The Basics[edit]

When lions hunt wildebeest, they are too slow to take on the whole herd. So the lions chase after the herd until the weakest wildebeest fall behind, then they pick them off. Debt collectors take a similar approach.

They run a volume business, buying thousands of peoples’ debts at a time for a fraction of what they’re worth. In doing so, they take a gamble. For the gamble to pay off, they only need to convince a small minority of debtors to pay. That means debt collectors don’t want to spend too much time or money trying to get you to pay. They count on you to be an easy mark, to be overwhelmed by bureaucracy, harassment, and shame. They count on you to give in.

So the basic way to deal with debt collectors is to do the opposite of what they want: make it hard to collect from you. That means:

Act quickly. You have a 30-day window to dispute the debt. Know your rights. They will threaten you, try to confuse you, and often lie to you. If you know what they can and can’t do to you, you won’t be intimidated. Dispute the debt. Make them prove that you owe them and how much you owe. Often they don’t have the required documentation even if it is really your debt. Keep records. Make a file with all their letters and make them communicate in writing as much as possible. Keep dated and detailed notes of what happens. Record phone conversations if legal. Tell them to stop bothering you. They are required to stop contacting you if you ask them. Once you get the information you need, tell them to bug off. If they violate your rights, go after them. You can sue them and/or report them to law enforcement. If you make life hard for them, you may never hear from them again. But they might persist or sell your debt to another collector. Your last resort is to bargain with them. Remember: they likely bought your debt for a fraction of what they’re asking for and it costs them money to sue you, so they’re likely to settle for less than you think possible. Bargain hard.

When a Debt Collector First Contacts You[edit]

As soon as you hear from a debt collector, a 30-day window opens. If you dispute the debt in that window, the debt collector is required to stop collecting on that debt until they verify the debt.

(It is worth disputing the debt even if you don't fall in the 30-day window, you just won't get them to stop collecting. However, in some states, such as New York, you can dispute the debt at any time to stop them from collecting.)

For this reason, it is very important that you do not ignore the call or letter. You should dispute the debt as quickly as possible.

It does not matter if you think you owe the debt or not: make them prove it. Even if you did take out the original loan, the debt collector contacting you may not actually have a right to collect on it. They might not actually own it or they might not have the right documentation to prove that they own it.

You can dispute the debt with our DEBT DISPUTE TOOL.

If the debt collector continues to attempt to collect on the debt (including reporting to a credit reporting agency) without sending you verification, it has violated the Fair Debt Collections Practices Act (FDCPA). The verification (which should be a copy of a bill or something like that) must include:

The amount of the debt The date of the debt The name and contact information of the original creditor Also, when you first hear from a debt collector, whether by phone or mail, they are required to tell you that they are a debt collector attempting to collect a debt. If they do not include this disclosure, they have violated the FDCPA.

I am [name of collector]. I am a debt collector representing [the original lender]. Information obtained during the course of this call will be used for the purpose of collecting a debt.

If they send you a letter, it should have a passage that looks like:

This correspondence is an attempt to collect a debt. Any information obtained will be used for that purpose. Unless within thirty days of your receipt of this notice, you notify us that you dispute the validity of this debt, it will be assumed to be correct. If you notify this office within thirty days that you dispute the validity of this debt, we will obtain verification of the debt or a copy of the judgment. If you request it within thirty days, we will provide you with the name and address of the original creditor (if different from the current creditor).

Some states, such as California, require the debt collector to include additional disclosures. Here are links to laws from states that have additional protections: [1].

If You are a Victim of Identity Theft coming soon.

What Debt Collectors May and May Not (Legally) Do[edit]

A federal law called the Fair Debt Collections Practices Act (FDCPA) regulates the behavior of debt collectors. Many states have additional regulations. Check out: [2]

Under federal law, debt collectors may:

Call you a reasonable number of times between 8:00 am and 9:00 pm, as long as you haven’t told them to stop. Send you letters with information about your debt and urging you to pay it, as long as you haven’t told them to stop. Act like assholes on the phone, making you feel bad for your debt, and pretending that the only way out is to pay them. Ignore this crap. Report to credit reporting agencies. Sue you in civil (not criminal) court. Offer you payment plans and otherwise bargain about repayment.

Under federal law, debt collectors may not:

Have you arrested or have you thrown in jail. Or threaten to do either. Physically harm you or threaten to do so. Contact you without including the notice that they are a debt collector discussed in the previous section. Call you before 8:00 am or after 9:00 pm. Call or write to you about your debt after you’ve told them to stop doing so, unless they are notifying you of a lawsuit. Call your boss or anyone besides you about your debt, unless they are trying to find you or they have won a judgment against you in court. (Often they will pretend to be trying to find you, but if they do more than ask for your contact info, they have violated the law). Pretend to be lawyers or a law firm when they aren’t actually. Take any of your property without suing you first. Of course it is illegal for a debt collector that does not actually own your debt to try to collect from you.

Keep all evidence of any interaction you have with a debt collector, especially if they have done something prohibited. Keep records, keep notes of what violations they committed when, and even record your phone conversations with them if that is legal in your state. In most states, you don't need to ask to record a call. Eleven states require you to get the other party's consent: California, Connecticut, Florida, Hawaii (if you're in a private place while calling), Illinois, Maryland, Massachusetts, Montana, New Hampshire, Pennsylvania and Washington (see

You may be able to use what you record against them (see IF THE DEBT COLLECTOR VIOLATES THE FDCPA)

If You Just Want the Debt Collector to Stop Bothering You[edit]

If you tell a debt collector to stop contacting you about a debt, they are required to do so. Not doing so is a violation of the FDCPA. It is best to make this request in writing so that you have a record of it.

However, just because they are required to stop contacting you doesn’t mean they can’t keep reporting to credit reporting agencies and even sue you if it comes to that. If they decide to sue you for the debt they may notify you that they have made this decision and must notify you if and when they actually do sue you (see IF YOU ARE SUED). They can also notify you if they intend to stop collecting on the debt.

If you used the DEBT DISPUTE TOOL, you have already requested (in writing) that the debt collector stop contacting you after providing verification of the debt.

If You Haven't Paid Your Debt in a While[edit]

All states have statutes of limitations on collecting debts: a limit on the number of years a lender or collector can try to collect. You can see a chart of statutes of limitations by state here: [3]

The clock on a statute of limitations starts running on the date of the last “activity” on your account. That is often the date of your last payment, but it may also be the date when you entered into a payment plan or simply agreed that you owed the debt. This is why it is important to contest whether you owe the debt and definitely never outright admit to owing it if you don’t want to pay and definitely don't promise to pay unless you've decided for certain that you have the money and are ready to pay it.

If you think the debt a collector is trying to collect on is beyond the statute of limitations, you have a weapon on your side. In most states, a debt collector can still try to collect on that debt and they can even still try to sue you on it. But if they report to a credit reporting agency you can contest it as beyond the statute of limitations (use our CREDIT REPORT DISPUTE TOOL for that). And if they sue you, you have a defense. See IF YOU ARE SUED.

So, if a debt collector tries to go after you for a debt that you think is beyond the statute of limitations, you can tell them that you know it is beyond the statute of limitations and you’re not paying. This may get them to buzz off. If it doesn’t, then you have to decide if you want to fight them over it or just negotiate a lower payment to get them to go away. For more, see the BARGAINING FOR A LOWER PAYMENT section (They may also sell the debt to another debt collector, even though that is illegal—if they do that, you have a defense against paying and an FDCPA violation on your hands).

If a Debt Collector Violates the FDCPA (or Another Law)[edit]

If a debt collector does something they are legally prohibited from doing (under the FDCPA or a similar state law), you have gained an advantage in dealing with them. You can use this advantage in four ways:

Suing them Using it as a counterclaim if they sue you Complaining to law enforcement agencies, and Using it as a bargaining chip


Suing a debt collector is always easier with a lawyer, so you should consider getting a lawyer to help you out. You can ask folks in the FORUMS for recommendations. It will be easier to get a lawyer if you can find others who have experienced the same wrongdoing from the same debt collector, since then you can do a class action.

However, you don’t always need a lawyer to sue. If you decide to sue without a lawyer (this is called “proceeding pro se”):

You can sue just under the federal law (the FDCPA), or you can add state laws to your pleading as well. You can draft a complaint intuitively—listing all of the wrongful behavior and linking it to the laws that prohibit that behavior—but you will likely do better if you follow the standard format of a legal pleading. Here is a sample from Texas: Here is a sample from Alabama: You can see if there have been any FDCPA cases filed near you that are available online with an internet search. Once you draft a complaint, you have to drop it off at the court’s office (you should file at the nearest federal court) and send a copy to the debt collector. Here is the full text of the FDCPA: [4] Here is a list of state laws: [5] If you sue, you could get at least $1,000, plus the costs of filing and compensation for any harm you have incurred.

Unless the debt collector gives in right away or starts to bargain with you, you will have to provide evidence of whatever you say they did in your complaint. This is one reason it is important to record all of your interactions with debt collectors.

Using a Violation as Leverage[edit]

Suing a debt collector can give you a lot of leverage—they may propose to stop collecting or to give you a serious discount in exchange for dropping the suit. Even before you sue—or even if you don’t actually plan on suing—you can use the fact that you have a right to sue as a bargaining chip when dealing with a debt collector. If you tell them that you know they violated the FDCPA and that you plan on suing them, you’re more likely to convince them to stop collecting or to accept a low settlement. Tell them that you won’t sue them in exchange for their commitment to not collect or sell a debt. If they don’t agree, you can bargain (see BARGAINING FOR A SETTLEMENT) or decide to sue. Make sure whatever agreement you come to you get in writing, with their signature.

Submitting a Complaint[edit]

Whether you sue or not, you can also submit a complaint to the Consumer Financial Protection Bureau (CFPB) ([6]) and/or your state Attorney General (AG) or other state consumer protection agencies. The CFPB and AGs cannot represent you directly, but if they get enough complaints about the same debt collector, they will consider bringing a lawsuit against them to stop them.


Even if you don’t take any action yourself, if a debt collector has violated the FCPA or another law, you can use that against them if they sue you. For more, see IF YOU ARE SUED.

Bargaining for a Settlement[edit]

Before you decide to pay, you should make sure you’ve put the debt collector through their paces as discussed in other sections, especially if the debt is beyond the statute of limitations. Certainly you should not pay the debt if you do not actually owe it (e.g. if you are the victim of identity theft).

You should also know that if your income comes from social security, public assistance, the VA, child support, or a pension, a debt collector cannot take it from you even if they sue you. Thus, if you have such an “exempt” source of income, you should think twice before paying. (You might still want to pay to improve your credit.)

If you can’t afford the debt, you might consider just letting them sue you rather than agreeing to pay more than you can. See more in the IF YOU ARE SUED section.

Should you find yourself at the point where you’re ready to pay, remember three things:

You can probably get a debt collector to accept less than the full amount they say you owe. You have power. Figure out how much you can afford to pay and then offer them much less. They may act tough, but they will usually bargain if it means that’s the easiest way for them to get paid.

Any agreement you come to with a debt collector should be in writing and signed. Don’t pay them until you have that. Otherwise, they can later say they never agreed and it would be your word versus theirs. Never give a debt collector access to your bank account, including via automatic deductions, and never pay a debt collector with a postdated check. Some tips for bargaining:

Remember: you have power. They would rather collect something from you than fight to collect everything. If you’re bargaining with them, you’re giving them something and they should give you a discount in return. Wait until the end of the month to offer anything. Debt collectors usually have monthly quotas, so they will be more desperate then. Start low, lower than you think you should. Ideally, you’ve already disputed this debt and provided them all the reasons you won’t pay, so you’ve actually started at $0. Make them feel lucky to get any money from you. Make them know that you don’t have enough money to pay them and you don’t intend to pay the full amount under any circumstances. If they violated the law, make it clear that you’re considering suing them if you can’t come to a mutually beneficial agreement. If the debt is older—close to or beyond the statute of limitations—make it clear that you know time is running out for them. If they don’t seem to have much documentation of the debt, let them know that you can force them to prove it in court if they don’t agree to something good now. Etc. Offer a lump sum rather than a payment plan if you can afford it. If you offer a lump sum, debt collectors will usually give you a big discount. Tell them as little as possible about yourself. Stay confident. You know your rights. If they lie to you about what they can do, tell them what they just did was a violation of the FDCPA. Always keep records. Record phone calls if you can. Make sure they agree to remove the debt from your credit report as part of any agreement. Or at least get them to have the credit report say “paid in full”. Get it in writing. Don’t pay until it’s in writing. Especially if the debt is beyond the statute of limitations.

If You are Sued[edit]

If a debt collector sues you, you should receive a summons and complaint in the mail or delivered to your door. These are legal documents notifying you of a lawsuit and outlining the claims against you. Do not throw them away. Do not ignore them.

It is not uncommon for debt collectors to file a case without notifying debtors. But it is illegal. If you find out that you have been sued in another way besides receiving a summons (for example, your wages are garnished unexpectedly), the debt collector has likely violated the law. Depending on the details of your case and the state you live in, you should have the right to reopen the case and possibly to sue the debt collector. The best thing to do is to find a lawyer who can help you. If you cannot find a lawyer, find out where the judgment was entered (ask your employer who ordered the wage garnishment, contact the debt collector, or just go to the courthouse nearest you), go there, tell them what happened, and ask about reopening the case so you can defend yourself.

When debt collectors sue you, they expect you to just give up. If you don’t respond, debt collectors automatically win without having to spend any money actually putting on a case or even having to prove that they own the debt. This is called a “default judgment”. 95% of all debt collection lawsuits are won by debt collectors because debtors did nothing to defend themselves.

So the most important thing you can do if you are sued is to respond. Often, just submitting an answer to the complaint will be enough to get the debt collector to give up. Remember, debt collecting is a volume business: they’d rather spend their time only dealing with people who don’t fight back and give up on the people who do. Frequently they don't even have the evidence they need to sue you--but that doesn't matter if you don't fight back. Just a little push and many debt collectors cave in. Even if they don't give up right away, you have a better chance than you think of beating them in court if you don't give up.

How soon you have to respond depends on the state. The summons should tell you.

If you can find a lawyer you can afford (some will do it for free if they work at a public interest organization), you should get legal help. If not, you can still defend yourself on your own.

The Stakes[edit]

If the debt collector wins in court and gets a judgment against you (whether they do so "by default" or by actually arguing with you or your attorney in court), they gain new collection powers over you. Exactly which powers they gain depends on what the judge decides. Remember: if you don't respond to a complaint, a debt collector could automatically gain one or more of these powers over you.

At its most basic, a judgment is an order for you to pay. If you pay regularly after a judgment (subject to a plan created by the judge), you might not face any of the more coercive consequences below.

A judge could decide to allow the debt collector to garnish your wages, meaning that the collector could take up to 15% of your wages every month directly from your employer. Certain sources of income are protected from garnishment: social security, public assistance, VA benefits, child support, and pensions. If all of your income comes from one or more of these sources, you do not need to worry about garnishment.

A debt collector could also gain the power to seize your assets. Most states exempt certain assets from being seized by collectors. Which assets depends on the state and the type of debt.

The Answer[edit]

The first thing to do is to file an “answer” to the complaint. Here is a template for the state of New York: [7]. You can use this form if you are in New York. Otherwise, you can use it as a guide for how to make your own answer.

An answer can contain three things:

Responses Defenses Counterclaims Responses are just whether you (“the defendant”) admit or deny the claims made by the debt collector (“the plaintiff”). The claims against you will be numbered in the complaint. You can either respond to each claim one by one, referring to their numbers in the complaint, or you can make a general denial of all the claims made in the complaint. You don’t have to be specific about why you admit or deny any given claim: you can just say “admit” or “deny”.

Defenses are reasons you should win even if everything in the complaint is true—they are additional information that work in your favor. Look at the sample answer linked above for examples of common defenses. Use as many as apply to you. If you’re not sure whether it does or not, use it. You can always change your mind and take it away later.

Counterclaims are claims you have against the debt collector. The most likely sort of counterclaim you would submit would be any violations of the FDCPA that the debt collector has committed while dealing with you. See WHAT DEBT COLELCTORS MAY (AND MAY NOT) DO.

After You File an Answer[edit]

Once you fill out at answer, you should bring it in person to the courthouse listed on the summons and mail a copy to the debt collector. It is best to use certified mail ([8]), so you know for sure that it is delivered. You should also make sure to keep a copy for yourself.

After you file your answer, the debt collector may just give up. If not, you will likely get a letter from the court telling you when your first court date is. It is important that you go to this court date. This is another stage where most debtors lose cases just by not showing up. But you could win just by showing up. If the date does not work for you, you can call the courthouse and try to change it.

Sometimes going to court does not happen right away. You may get a letter instructing you to do something different. Follow the instructions and get ready to defend yourself using the guide linked below.

Remember, it is the debt collectors’ job to prove that you owe the debt and that they rightfully own it. If they don’t have enough evidence, they cannot successfully sue you. Debt collectors frequently do not have all the evidence they need—they only win because nobody asks them for it. If you force them to prove their case and firmly assert your defenses and counterclaims, you have a better chance of winning than you think. And even if things aren’t going well, you can always choose to bargain.

For more details about what to expect and how to deal with a court date, see this helpful link from our friends at the New Economy Project: [9]. This information focuses on New York, but most of it is applicable anywhere.

Here is a pretty good resource on how to challenge debt collector's evidence:

Watch out for scams[edit]

Some companies, calling themselves "credit repair", will offer to help you get rid of your debts for a fee. These are quite often scams that just take your money and then don't help you at all. In general, do not pay for help getting rid of loans unless it's from an attorney that you have reason to trust.