Account in Collections? Here's How to Fix It

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Earlier this year, my husband received a letter stating that he had a debt in collections. We were warned that if we didn't send money soon, they'd start legal action.

Naturally, our breathing quickened and our hearts nearly jumped out of our chests. But then I made us take deep breaths. With my background as an accountant, I knew we had options. Here's how to successfully deal with a past due account in collections.

Research the Creditor's Information

Don't stress or freak out when your receive that dreaded "account in collections/payment due" letter. The worst thing you can do is overreact and succumb to false information from scammers trying to get your credit information. This happens more often than you may realize.

Before taking any action based on what the letter says, you want to verify the information is correct, and research the company contacting you. It's often hard to tell the difference between the legitimate letters and the fakes, as many will include bits of personal information and your account numbers. But don't let this sway you.

A good place to start is with the Better Business Bureau. Simply enter the company's name in the search box on their site. If the debt collector's name and information comes up in the BBB system, they're legit; but if it doesn't, you'll want to proceed with caution.

Or consider investigating the legitimacy of a debt collections company by doing a quick online search. You'll often come across other people's stories or experiences with companies and can verify whether or not the information you've received is for real.

Finally, consider checking your collections letter against an official account of any debts on your credit report. AnnualCreditReport.com is a website authorized by the federal government to give you access to your entire credit report, once a year, for free. By checking your report, you'll be able to verify whether the debt actually belongs to you, and if the right debt collection company's name is on the account.

Make sure you save your credit report for later reference. If you notice errors, suspicious activity, or inaccuracies, you'll want to contact one of the three credit bureaus to get it solved.

Reach Out to the Credit Agency

If the debt agency's information is legit, and you've verified that you do indeed owe this amount, the next step is to contact the debt collection company directly. Call the number on the letter you received and start asking questions. Who did they purchase the debt from? What was the original balance? The balance on your statement is probably highly inflated because of late fees or other charges.

They will likely push you into making a payment right then, but don't let them pressure you. Surprisingly, you have the upper hand in this situation because the debt collection agency paid pennies on the dollar for your debt. They will feel lucky to get any amount you're able to pay, so don't feel rushed.

Ask them to send you this information in writing, so you can keep it for your records:

• The name of the original account holder,
• Your previous account number,
• The balance due now.

Once you receive this information in the mail, you can negotiate a proper payment plan. You don't want this to go too long without being solved, but don't feel like you have to rush to make a payment. That's when you'll overpay. And remember that collections agencies will often accept less than the full amount owed, so don't necessarily agree to their first offer.

Report Them for Unethical or Illegal Behavior

As you go through this process, remember that you have all the control. Debt collection agencies tend to use less-than-stellar methods for getting consumers to make exorbitant payments towards outstanding debts. (See also: 4 Things Bill Collectors Can't Do)

If they start calling you nonstop, verbally abusing you over the phone or with letters, or harassing family members, be sure to report them.

If you need added protection, check out the American Collectors Agency, or reach out to an attorney and a consumer-protection agency for help. You don't need to endure this process alone, and having an expert by your side will help alleviate the stress.

Have you ever had to deal with a debt in collections? What other tips and tricks do you suggest?

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