Tips for Dealing with Debt Collectors

Debt collectors will do whatever it takes to get a payment from you on a past due account. They will call you constantly, even calling relatives or neighbors in an attempt to collect debt.  Most are paid a high commission for every debt that they receive a payment on.  Many times, creditors sell their past due accounts for pennies on the dollar.  The debt collectors make large profits by purchasing debts for pennies on the dollar and then collecting much more than that from intimidating, threatening or even suing you.  If you are being harassed by bill collectors, you should consider hiring an attorney to help you deal with those collectors and filing a bankruptcy case.  Here are a few tips in dealing with debt collectors.

Be Careful When Settling with a Debt Collector

If you owe a debt and cannot pay it, the debt collector (especially if the debt has been purchased for pennies on the dollar) may suggest that you settle the debt for less than is owed.  This will result in the debt collector filing a 1099 with the IRS for the amount of debt forgiven.  This will cause you an IRS problem and you may have just converted debt that is completely dischargeable in a bankruptcy case, to non-dischargeable IRS debt.  If they state that they will not issue a 1099 for debt that was forgiven, don’t believe them.  They are required by IRS regulations to report all debt that is forgiven.  You are also required to report debt that is forgiven in your income tax return.   Many times, creditors will sell the debt two or three times and so you will think you have “settled” with one creditor and then another debt collector surfaces trying to collect the same debt you thought was “settled”.  Many times, they refuse to place their “deals” in writing, and so you can not even prove that you “settled” the debt.

It is Not a Crime Not to Pay a Debt

Some debt collectors will tell you that you will go to jail for not paying a debt.  Pay day lenders are famous for this scare tactic.  Many times, pay day lenders will loan you money when you are broke and demand that you issue them post-dated checks for that debt.  They then attempt to cash those post-dated checks and those checks “bounce”.  They then hold your “hot check” and threaten criminal prosecution.  In Texas, “theft by check” is not a crime if the check that was delivered was post dated for a debt that was incurred before the date on the check.  Also, remember that a creditor cannot “throw you in jail”.  A “crime” can only be prosecuted by a district attorney or a U.S. attorney and those attorneys do not prosecute post dated checks.  If you are receiving threats like that, you need to consult with an attorney immediately.

Know your Rights and Consider Bankruptcy

No matter what financial position you are in, never allow a debt collector to threaten you, especially with jail. It is a violation of the Fair Debt Collection Practices Act for a  debt collector to threaten you with criminal prosecution in order to seek payment of a civil debt.  Bankruptcy is an honorable, moral, legal manner in which to deal with debt.  Most bankruptcy attorneys offer a free initial consultation and you should consider speaking with an attorney if you are receiving serious threats about your unpaid bills.

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