Ignoring the Calls Won't Make Debt Go Away

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 behind on their mortgages. But the fact is, other debts are bringing people down, too. Americans are carrying $2.5 trillion in non-mortgage 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 a 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."

If you do answer the phone, don't be pressured to pay an amount you truly can't afford. Only agree to a payment plan that you can really stick with. There's no point in promising money you won't have, which will only further frustrate the debt collector and stress you out.

"Don't allow yourself to be bullied by anyone asking for your money," Markoff said. "Do what you can do, and if that is not acceptable, it's unfortunate for that credit grantor."

Having said that, Markoff warned 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 actually could. Debt collectors aren't fools. They have access to your credit files. They can see whether 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 agrees 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.