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Bad debt

Picture of a Debt Bad debt is an amount that is written off by a business as a loss to the business and classified as an expense because the business was unable to collect on the debt. This occurs after all reasonable efforts have been exhausted to collect the amount owed. It can occur when the debtor has declared bankruptcy or the cost of pursuing further action in an attempt to collect the debt exceeds the debt itself. And once a debt is considered older than the debt statute of limitations in the state you live, no one has the right to sue in order to get you to pay it.

Getting the facts

The most important thing to do right now is to get all the facts about junk debt buyers and the company that’s been contacting you. You need to know how to respond, what not to say over the phone, what records to keep, and what to do if they can legally sue you. Consider this when dealing with junk debt collectors:

Don't assume you are in deep trouble and are “wrong.” Consider the possibility that it's your rights that have been violated. Do not update your profile information with a junk debt collector or in any way acknowledge a debt with a junk debt buyer. Do not agree to a settlement/payment plan until the debt has been “validated” (meaning they send you proof of the debt). Get any agreement/settlement you agree to from them in writing before you start paying, I would also suggest not having payments directly taken from your checking account (mail it to them). Keep track of your credit score to make sure any promises they make are kept.

Junk debt buyers

Junk debt buyers are collection agencies who purchase bad debt. The debt can be anything from an overlooked medical bill to a defaulted credit card. In many cases, there have been previous attempts by other collections agencies to collect the debt. Junk debt buyers purchase these debts in lots, often for pennies on the dollar, in the hopes of making money collecting them. There are others. Don't be surprised if you find one operating under more than one name either as it is a common tactic. This type of collection agency is notorious for using any means necessary to collect the debt, regardless of whether they violate your consumer rights in the process.

Avoiding these junk debt buyers isn't always possible. They will bombard you with phone calls and letters (Thank God For Caller ID and Voicemail!!!). The messages they leave are very conspicuous asking you to call them back it’s a very important “business matter”. I’ve called enough of them back, and fell for it, don’t waste your time unless you’re ready to settle. Some debt collectors may even threaten to garnish your wages, take your savings or worse. While some of these may be possible, they have to follow a strict process in order to do so. In most cases, these are simply empty threats because of the additional time and expense they would have to put forth. They want an easy rollover who’s scared that’ll start spitting out checking and routing numbers in fear.

Educate yourself

To get these collection agencies off your back, start by educating yourself. The Fair Debt Collection Practices Act (FDCPA) is your first weapon. It spells out what debt collectors can and cannot do when attempting to collect a debt. It is also a good idea to read up on the Fair Credit Reporting Act (FCRA) as well since many collection agencies use your credit report as leverage to get you to pay a debt.

Finally, check your state laws regarding bad debt. While many are identical to the FDCPA, some states offer consumers additional protection. Make sure you also research the statute of limitations in your state.