Money Sense Tips

When debt collectors start calling, we might consider throwing the phone out the window. But that’s not the best way to deal with collection efforts. If you ignore them, they will keep calling for months or even years on end. And no one wants to live in fear every time the phone rings.

Debt collectors are rarely as unreasonable as we imagine them to be. They want to collect the money they’re owed, but they realize that they are more likely to succeed if they work with us. And the law prohibits them from threatening or harassing us. Here are five tips for effectively dealing with collectors:

1. Know your rights. It pays to familiarize yourself with the Fair Debt Collection Practices Act, which protects consumers from unscrupulous collection practices. If at any time you feel that your rights have been violated, you can report the incident to the Federal Trade Commission or file a lawsuit to collect damages.

2. Be honest. Let the collector know if there are extenuating circumstances that have caused you to fall behind or stop making payments altogether. This won’t stop them from trying to collect the debt, but it could buy you some time and make it more likely that they will work with you to get things resolved in a way that is acceptable to both parties.

3. Know how much you can afford to pay each month, and don’t let them convince you to pay more than that. Even if they take all of your obligations into consideration and tell you that you should be able to pay a certain amount, you may not be able to pay that much realistically. If the collector insists on not accepting less than a certain amount, you may want to seek legal advice.

4. Take notes. Each time you speak to the collection agent, write down the highlights of the conversation along with the date and time of the call. Keep these notes for future reference, and if the collector contradicts himself, you’ll have your notes to refer to. These notes will also be helpful if you end up filing a complaint or lawsuit.

5. If you reach an agreement, stick to it. As long as you keep up your end of the bargain, the collection agency can make no further efforts. If you find that you won’t be able to make a payment on time, contact the debt collector immediately and let him know when you will be able to pay.

No one looks forward to dealing with a collection agency. But if you are honest and reasonable, it’s rarely as bad as you think it will be. In most cases, you can work out a mutually agreeable arrangement, get your debt paid off and get on with your life.

Few people go through their entire lives without incurring some type of debt. When you go in debt, it’s important to know your rights and obligations. These rights and obligations vary according to the type of debt contract you enter into.

By definition, a contract is the exchange of promises between two people. This can take on many forms. When it comes to debt, there are four basic types of contracts:

* Oral contract – This type of debt contract has been around since the beginning of time. It simply involves one person lending another person money, and the borrower agreeing to repay that money. Nothing is put in writing.

Oral contracts are legally binding. The problem with them is that they are more difficult to enforce. This is due to the fact that there is no written proof of them. There may not even be any witnesses to the agreement except for the two parties. Due to these factors, it may be difficult for the creditor to collect.

* Written contract – A written contract may be as simple as an agreement written on a piece of notebook paper, or as complex as a multi-page document. When a loan is involved, the terms are defined and the contract is signed by the creditor and the debtor. This type of contract usually holds up well in court, even if it is created informally.

* Promissory note – A promissory note is very similar to a written contract, but there is an important difference. In a promissory note, the payment schedule and amount of interest charged are spelled out. Promissory notes are rarely informal agreements. Examples include mortgages and auto loans.

* Open-ended accounts – An open-ended account usually does not require a traditional contract. It is a revolving line of credit in which the balance varies. The most recognizable example is a credit card.

The category under which a given debt contract falls may sometimes be confusing. Oral contracts are easily identifiable as such, but there is often confusion about the subtle differences between a written contract and a promissory note. Credit cards are open-ended accounts, but there have been cases in which creditors have attempted to enforce them as written contracts. But in the absence of an actual written agreement, this would not hold up in court.

No matter what type of debt contract you enter into, it’s important to read it carefully. No matter how reputable the creditor may be, it’s essential to know the terms to which you’re agreeing before you sign anything. It’s also a good idea to familiarize yourself with the laws governing the different types of debt contracts. If you need assistance, an experienced consumer rights attorney can help.