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How to Deal With Debt Collectors When You Can’t Pay

The table’s set, food’s hot, and your family’s gathered for a relaxing Friday night meal. You know what doesn’t go well with dinner? Collectors calling you about that unpaid medical bill. (Why do they always call right as everyone’s sitting down?) Not cool. And what about those work meetings when your phone keeps buzzing. Do I have to get that? No, no I don’t.

Dealing with debt collectors is not for the faint of heart. If you’ve ever experienced it, you know it’s enough to make your skin crawl. And despite all you’ve done to try to catch up on those bills, they don’t seem to care. They just want their money . . . whether you have it or not.

There’s a right way (and a wrong way) to deal with those harassing callers. That’s why we’re here—to help you learn how to deal with debt collectors when you can’t pay, and to give you hope when they start calling you, your friends, your work and even your mom.

How to Deal With Debt Collectors

Debt collection begins when you’re past due on a hospital bill, car loan, cellphone bill or just about anything you owe money on. When you haven’t showed signs of paying on the bill (normally after three months), the company will usually send your account to collections to try to get their money. Oftentimes, these companies will sell your debt to a collection agency for pennies on the dollar. Other times, the original company will just hire out a collection agency to be their muscle and “make you an offer you can’t refuse.”

Spoiler alert: You can refuse their offer—and we’ll show you how in a bit.

Debt collectors have one purpose—to get your money. To be fair, if you owe on a debt, you do need to pay it back. But hear us: We don’t agree with the tactics they use to try to get you to pay.

These companies can be worse than bullies on the school playground. Only this time, instead of taking the bologna sandwich and Little Debbie your mom packed for your lunch, they’re trying to take every penny you have with manipulation and insults. Turns out, their moms didn’t teach them how to use their manners (or give them Little Debbies).

Here’s how to negotiate with debt collectors when they come calling.

First Things First

When you’re scared and wondering how to make ends meet, getting bullied by debt collectors is the last thing you need. So, if you can’t pay on your debts, don’t be pressured to give up what little money you do have to take care of your family. Don’t let them stress you into paying something you really can’t afford.

Instead, set your financial priorities straight—starting with the Four Walls:

  • Food (on the table and in the fridge)
  • Utilities (keep the lights on and the water running)
  • Shelter (make sure you’re current on mortgage or rent)
  • Transportation (so you can get to and from work)

If after taking care of your Four Walls you’ve only got $5 left at the end of the month, then that’s what you can offer. But before they try to get you to believe they’re at the top of your priority list, you need to know three things:

1. Know your rights.

Knowing what collectors can and can’t do when trying to get paid is key when it comes to dealing with them. The Federal Trade Commission has published the Fair Debt Collection Practices Act to help you know when they’ve crossed the line. More on that later . . .

2. Know your debts.

Knowing what you actually owe (down to the penny) will help you when you start getting phone calls and letters. Turns out, most collectors aren’t afraid to lie to get you to pay your debt—and then some.

“You can tell they’re lying if their mouth is moving.”

— Dave Ramsey

3. Know that you can negotiate (and settle).

Like we said earlier . . . if you’ve got money at the end of the month after you’ve paid for food, utilities, shelter and transportation, you can start negotiating. In this instance, they want what you have (money) and you have the upper hand in negotiations—even with $20.

How Does Debt Collection Work?

No matter how you spin it, debt stinks. When it starts piling up beyond what you can control, it’s easy to lose hope and wonder if you’ll ever get ahead. And somehow, it’s around this time that an alarm sounds at your nearest debt collector’s office alerting them that you’re losing hope and it’s prime time to start hounding you. And hound you they will. Daily phone calls, weekly letters, and many threats later, they’ve gotten good at scaring you into giving them money.

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If you’ve ever been sent to collections, this story sounds pretty familiar. You’re not alone. In fact, Dave himself knows what it’s like to be hounded by debt collectors. He knows what it’s like to lose hope, and even the embarrassment of not being able to afford to gas up his Jaguar. Yup—he lost everything . . . and then some.

But that wasn’t the end of his story. He also knows what it’s like to punch fear in the face, confront debt collectors one by one, and settle his debts until the numbers on all of his accounts turned from red to black. And you can too.

What Debts Can Go to Collection?

Any outstanding bill you haven’t paid can be sold or assigned to a debt collections agency.1 Here are the most common debts sent to collections:

  • Credit card
  • Car loan
  • Medical/hospital bills
  • Student loans
  • Mortgage payments

But don’t worry, it shouldn’t ever be a surprise. (If it is, you might be dealing with a case of zombie debt.) In most cases, you should expect a letter letting you know your bill is now in collections. But that doesn’t make it any less scary.

What Debt Collectors Can and Can’t Do

If you owe money on an old bill, it only makes sense that someone might want to know when you can pay on it. And you should. But we both know that collectors are going to use any means they can to get you to pay.

What happens if you don’t pay a debt collector? They do have a few legal options. But there are also limits. That’s exactly why you need to know what collectors can and can’t do when they’re after your wallet. In fact, the Federal Trade Commission has a list of rules under the Fair Debt Collection Practices Act (FDCPA) that protects you from shameless debt collectors.2 If you’re being harassed by a debt collector, you’ll want to commit these to memory:

What Debt Collectors Can Do

  • Contact you by any means possible between the hours of 8 a.m. and 9 p.m.
  • Email, text or send you a direct message on social media.
  • Talk to your spouse (or other family members) to find out how to get in touch with you.
  • Sue for payment. (Make sure you always show up to court or they’ll have the upper hand, which could lead to garnishing your wages.)
  • Try to get you to pay on old debts that are past the statute of limitations. (The statute of limitations depends on the kind of debt and where you live. Learn the laws in your state.)  
  • Charge interest—but not on top of any interest you were already paying.

What Debt Collectors Can’t Do

  • Lie or try to hide who they are or how much you really owe.
  • Tag you publicly on social media.
  • Keep calling/texting/emailing/sending letters if you’ve asked them to stop by writing a certified letter.
  • Talk to anyone else more than once about your debt to try to shame you.
  • Garnish your wages without taking you to court—unless it’s a student loan or an IRS debt.
  • Harass or threaten you with foul language or jail time. (They don’t have this much power.)

If a debt collector continues to harass, lie or threaten you, it may be time to hire a lawyer for a small fee to send a certified letter asking them to stop contacting you. You can also report them to the Federal Trade Commission.3

How to Get Out of Paying Debt Collectors

We’re going to be real honest here: You can’t get out of paying a collector. If you borrowed money, you need to pay it back (after you’ve taken care of your Four Walls).

Learning how to negotiate with debt collectors is for your emotional and mental protection . . . not a free pass to skip out on money you actually owe. You need to get your bills paid (and we’re here to help you learn how to stop the harassment until you can pay them off).

Debt collectors can refuse a payment plan. They’re not under any legal requirement to accept smaller payments over a period of time. Usually they’re going after the full amount, because obviously, debt collectors gotta collect. But this doesn’t mean they won’t work with you.

How to Negotiate a Smaller Payment

  1. Do not give them any money until you have the settlement offer in writing. We repeat: Get it in writing (on a piece of paper or even recorded in an email). Keep a copy of exactly how much you owe them.

  2. Do not give them electronic access to your checking account—they’ll clean you out. After you’ve agreed to paying a certain amount, they’ll want to draft your account for that amount. But remember, they lie. They’ll take more out than they agreed to and call it a “fee.” If you even try to get it back . . . well, good luck with that.

  3. Do not send a personal check—they can use the routing and account numbers on your check to access your account. When you pay, send them a money order or cashier’s check—these will not have your routing and account numbers on them. You could also send a prepaid debit card. If you’ve already given a collector access to your checking account, open a new account to pay bills and deposit your paychecks into. Yes, it’s a pain—but it’s better than letting them snatch your paycheck before you can pay the rent.We truly can’t stress this enough: Don’t have automatic payroll put into an account that a collector has access to.

  4. Rinse and repeat. Work the debt snowball to clear up all these little inactive accounts or debts. Remember: They’ll settle with you if you offer them cash on the spot . . . even at a small percentage of your total balance. 

Debt Collection Scams

Sadly, debt collection scams are just one of the many ways someone can try to steal your identity . . . and your life savings. That’s why it’s important for you to know exactly who’s calling and what to look for when you’re sent to collections or are contacted by a collector.

If a collector continues to break the rules we’ve outlined above, it’s time to start sleuthing!

  • Ask for their name, phone number and address. If you’re talking to a legitimate debt collector, they’ll be happy to share where they’re calling from.
  • Don’t give out or verify any of your financial information over the phone unless you know exactly who you’re talking to.
  • If you’ve never heard of the debt they’re describing, ask for a letter with account numbers and details listed.
  • Send a certified letter to let the caller know they can’t contact you. If they’re a real collector, they have to listen.4

Protecting Yourself

If you believe you’re being contacted by a scammer, don’t wait to report them to the Federal Trade Commission and your Attorney General’s office. Always make sure you contact the original creditor of the debt in question and ask what companies they’ve authorized to collect the debt on their behalf.

This is a sure way to know if you’re dealing with a fake debt collector. We repeat: Never give out your personal or financial information without verifying who you’re talking to. This will save you money and headaches in the long run.

Debt collectors break the rules, and they’ll try to break you in the process. It’s important to collect yourself and get your budget and finances in order before you go making any deals with collectors. Book a free coaching call with a Ramsey Preferred Coach to get motivation and money advice we stand behind. They'll help you start figuring out a plan to get rid of debt (and collectors) for good.

It’s not easy dealing with debt collectors. But there’s still hope. If you know what they can and can’t do, and deal with them in the right way, you can get back on the path to debt freedom and some peace and quiet.

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About the author


Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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