how should you handle debt once it has gone into collections now not to give away the ending but i'm telling you right now that paying it is quite literally the very last thing that you should do when it comes to debt collectors hi i'm laurie ann co-founder of dow jane's and if you are dealing with the stress of having a debt collector chasing you for money don't worry i am going to tell you everything that you need to know what a debt collector cannot do what your rights are and how you should handle debt collectors if you want to learn more about how to save invest and make the most of your money be sure to subscribe and hit the bell so you don't miss out on future videos [Music] now let's dive in what happens when your debt goes to collections well one of two things happens when a debt goes into collections either option one the creditor that you owe money to so say your credit card issuer or your mortgage lender when the lender thinks that you're behind on payments the creditor might use its own debt collectors to follow up and collect the debt from you or they may hire a debt collection agency or a law firm to take it on option number two is that a different company actually buys your debt from the original creditor and now they are trying to collect on the money that you owe in this case the original lender probably already received some sort of insurance money and sold your debt for pennies on the dollar now before i give you some tips for dealing with debt collectors i want to make sure you know what debt collectors can and cannot do and how to make sure that you are not being scammed and what your rights are when it comes to debt collections so the first thing i want you to know is that debt collectors are only allowed restricted contact they can only call you between the hours of 8 am and 9 pm and they're not allowed to call you at work so if you get a call outside of these hours then you might be dealing with a debt collection scam the second thing i want you to know is that you can request a callback number just like any other legitimate business a debt collection agency should be able to provide you with company information including a number to call them back when you get contacted by them write down as much information about the company as possible including its name and address this is important to see if they are legally operating in your state the third thing i want you to know is that debt collectors cannot lie or harass you or just generally be toxic people debt collectors cannot make you pay more than you owe or threaten you with a arrest jail time property liens or wage garnishment if you don't pay they do not have the power to do that so if they say otherwise hang up wage garnishment may be legal in your state but your debt collector will need to take you to court first and if a debt collector is posing as police or threatens to arrest you then there's a good chance this is a scam and you can report them to and the threat to the federal trade commission and the consumer financial protection bureau the last thing i want you to know about your rights is that you can stop a debt collector from contacting you under the fair debt collection practices act if you notify the collection agency in writing to stop communicating with you then they can only contact you again to advise you on one of two things one that they're going to stop trying to collect from you or two that they intend to take action against you such as filing a lawsuit and this law applies even if you do own the debt so you do not have to just surrender to the fact that you're going to be called repeatedly by debt collectors notify them in writing if you don't want to hear from them anymore now that you understand your rights uh and how to watch out for potential scams let's talk about how you should actually handle it when the debt collector starts ringing you up number one don't admit to the debt i know i might sound like a fat cat lawyer here but seriously just don't admit to the debt especially not on the first phone call some debts come with a statute of limitations meaning after a certain period of time collectors legally can't win a court order for repayment and so if you admit that the debt is yours you may actually reset the clock on that statute of limitations so don't confirm the debt especially on your first contact until you get more facts even if you know the debt is yours so point number two is you want to get the facts straight without admitting that the debt is yours get information on the debt itself ask who the original creditor was the original debt amount and how much is owed and the more details the debt collector can provide the better if the statute of limitations has expired the debt collector can no longer sue you to recoup the debt plus when your debt has been sold there's often misinformation about the debt itself or who owes it so you want to make sure that all of that is accurate point number three don't be emotionally manipulated a lot of people feel guilty about their debt and debt collectors prey on that emotion they create a sense of urgency that hits you right where you're sensitive we always tell people that they have to learn how to deal with the difference between money facts and money feelings so think about where your emotions and attitude towards debt and money have come from and then release yourself from any negative emotions that are holding you back if you find yourself on the phone with a diet collector don't let them make you feel bad okay and don't pay or promise payment or give any payment information at this time you're sensing a theme in this video like i said paying is literally the last thing that you're going to do you want to just ask for information on the debt and say that you'll be in touch later number four dispute any errors with the debt if you find any erroneous information with the claim dispute it mail a letter to the debt collector stating the amount that they're saying you owe is incorrect you should also ask for proof of the debt collector's claim that you owe money such as copy of a credit card bill and be sure to keep a copy of the letter yourself the consumer financial protection bureau offers a sample dispute letter on its website which i'll link to down below if you and the collector cannot settle the dispute you may want to bring in a third party arbitrator to weigh the evidence and if things get really hairy you may want to consider hiring an attorney make sure that you have records of everything you've been discussing with the collector in case it reaches this point it's always better to communicate via email or mail so you have a copy of your conversations in writing the fifth step you're going to decide if you want to pay off this debt or not this may sound a little odd we often feel like we have a moral obligation to pay our debts but the truth about how debt works is that the lender does take on a certain amount of risk when they lend out money this is part of why they charge interest it's to cover the cost of debts that have gone bad so you may have your own relationship to debt you may want to pay off this debt but it may actually not be in your best financial interest to do so when a debt goes into collections the main impact that it has on you is damage to your credit score and any debt that has already gone into collections has already done that damage and it's going to continue to have a negative impact on your credit score for about seven years until it falls off of your credit report now in some cases you may be able to negotiate the removal of this derogatory mark on your credit report as part of paying a settlement on the debt but if you have a debt that's gone into collections and it's close to being seven years old it will likely fall off your credit report soon and it may not be worth paying it's not going to improve your credit score at this point to clear it off because you've had that mark on your report for so long and if it's going to fall off and stop damaging your credit report you may be better off just waiting it out especially if you have any current debts that you're struggling with so i want you to focus first on maintaining good standing with the active debts that you have before paying off debts in collections number six negotiate the debt if you do decide to pay it at the end of the day whether it's a creditor or a collections agency reaching out to you all they want is some money and usually they paid a lot less for the debt than the amount that you actually owe on it so they might be willing to consider either lowering the debt so you can pay it all off in one lump sum or setting up a payment plan that you can reasonably manage make sure that you negotiate and always always always get any agreement that you come to in writing before you take the final step step 7 pay down the debt now at long last after you have done all of the previous steps it's finally time to pay up if you have decided to pay off this debt how you go about this will depend on what you worked out with the collector if you agreed to a lower lump sum then pony up the payment and move on with your life if you've set up a payment plan then make sure that you have that payment built into your monthly budget and that you're going to be able to meet it and if you need some help setting up a budget we have a video to help you out which i'll link to in the description below all right final thoughts i mean rarely should you just try to solve a problem by throwing money at it and when it comes to debt collections that should not be your first instinct i know this is stressful but take a deep breath and approach this problem with knowledge patience and strategy if you need some help getting out of debt be sure to check out our free training say goodbye to debt forever the principles that we teach in this class are specifically around credit card debt but really they apply to all kinds of debt all right hope to see you in that free training and good luck