Debt  >  Handling Debt Collectors  > What Should You Do After Being Contacted by a Debt Collector?
What Should You Do After Being Contacted by a Debt Collector?

Step 1:  First of all, don't panic.  Debt Collectors make a lot of idle threats that they never intend to follow through with.  Odds are very high that you will NOT ever be sued for any debt you owe that is UNSECURED, like credit card debt.  Debt collectors make all sorts of threats to scare you in to paying today, but 99 percent of it is bluff.  We do not have debtors prisons in North America.  We do not put people in jail for non-payment of credit card debt, auto loans or mortgage loans, so if they tell you that you will be arrested if you don't pay the debt today, they are fibbing and you shouldn't believe them.  (Note:  We do put people in jail for nonpayment of child support and taxes)

Step 2:  Do not admit to the debt collector that you owe the debt and do not agree to make any payment on the debt -- not a partial payment, not a full payment -- DO NOT AGREE TO MAKE ANY PAYMENT ON THE DEBT in an attempt to forestall them because they are threatening you. Do not even admit at this point that it is a valid debt that you owe.  If the first contact you receive from a debt collector is by telephone, simply tell them that you are not aware of the debt or do not want to discuss it now, and wish to wait until you receive a letter from them by mail.  And hang up the phone.  Refuse to talk to them about the matter until they send you something in writing through the mail. They are required by federal law to send you an official notification by mail.

Step 3:  When you receive the letter (official notification)  from the debt collection agency, what you need to do next depends on whether or not you LEGALLY owe the debt and whether or not you want to pay it.. 

If you do not owe the debt because you are a victim of identity theft, write the debt collection agency and the original creditor a letter and send it certified mail, return receipt requested wherein you tell them that you were a victim of identity theft and are not legally responsible for the debt.  You might enclose a copy of the police report proving you reported the matter to the police when you first became aware of it.

If you do, in fact, owe the debt and you incurred the debt in the last THREE YEARS, you might want to make a payment agreement with the debt collection agency now OR you might want to remain silent for a few months ignoring their telephone calls and letters until they offer you a very nice settlement where they will likely accept as little as 25% of  the debt as payment in full.  If you are "judgment proof" meaning you have no assets and are broke, you can probably ignore them completely, not pay the debt, and they will eventually stop contacting you.  (Note:  You cannot ignore a creditor or debt collector for SECURED debt -- you have to deal with them or they will repossess the secured property - your house, car, motorcycle, boat, or whatever).

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If you incurred the unsecured debt more than five years ago, odds are high that the statute of limitations has run and the debt collection agency and the original creditor are no longer legally allowed to collect the debt. Your debt was likely purchased by a "scavenger" debt collection agency. 

Some debt collection agencies purchase debt that is out of statute, meaning it's too old, sometimes really, really old, and they try to collect on it using very threatening tactics, such as an immediate lawsuit will be filed.  They claim the debtor owes all sorts of outrageous fees and costs that are completely bogus. 
If you are contacted for a debt that is really really old, you do not have to pay it.  If they sue you for it, show up in court and tell the judge it is out of statute.  If they have already sued you for such debt, contact the court and ask that the judgment be overturned on the basis that the debt was out of statute.

The statute of limitation on debt varies from state to state.  In some states it is as little as two years and others it is as many as 7 or 8 years.  Click here to find the SOL in your state.