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10 blunders in dealing with debt collectors

Dealing with debt collectors rarely is a pleasant activity. They call you up at all hours of the night, send you nasty letters and make your life a living nightmare. Bad as it may seem, you can only make it worse by making one or more of these mistakes:

1. Lying: If you lie and you're caught in a lie, you will most likely be sued. Also, Santa may not bring you all the presents you wanted. So be good!

2. Settling without receiving a confirmation letter: If you pay the debt, make sure you get confirmation that the account is closed. Also, check your credit report two months later to see that the line on your credit report shows "closed" or "settled" or "paid as agreed."

3. Failing to dispute a charge in a timely matter: If you believe you have been wronged, you must file the proper claim as soon as possible. The statute of limitations is very specific depending on your state; if you wait too long, you could lose your legal right to dispute the claim.

4. Selling property: Do not sell the property you bought with the creditor's money when you still owe money. The creditor will have a much stronger case against you because frequently, equity can be protected better than cash.

5. Ignoring the situation: If the collection agency has a legitimate claim against you, especially if it knows you have a job, things can only get worse, not better. Talk to an attorney and start investigating your options.

6. Bouncing checks: This will get your case sent immediately to the creditor's legal department and you will be sued rather quickly.

7. Becoming intimidated: In the words of Eleanor Roosevelt, "No one can make you feel inferior without your consent." Don't let the collection person bully you around. You are human and deserve to be treated with respect.

8. Letting the creditor or collector deduct money directly from your bank account: Never give the creditor your checking account number. I had a client allow two creditors to deduct payments directly from her checking account. She got paid on a Tuesday, both creditors hit her account on Wednesday, and she only had $1 left for the next two weeks!

9. Making promises you cannot keep: Sometimes you will be tempted to just say, "The check is in the mail." But when the check doesn't arrive, they'll call even more frequently. They may even try to sue you for lying.

10. Avoiding the calls: They will only occur more frequently. Keep the advantage, answer your calls, and execute your plan. I discuss this in depth in other columns.

Justin Harelik is a practicing bankruptcy lawyer in the Los Angeles office of Price Law Group. To ask a question of the Bankruptcy Adviser go to the "Ask the Experts" page, and select "bankruptcy" as the topic.

Bankrate experts' advice
Repeating your money errors of the past is a sure way to personal finance wreck and ruin.
Here, Bankrate columnists identify their picks as the worst mistakes you can make when it comes to your finances in the areas of real estate, debt, taxes, bankruptcy and personal finance, along with tips on how to avoid them next year.
Thrifty 60
1. 10 big bankruptcy blunders
2.10 missteps that will plunge you into debt
3. 10 real-estate wreckers
4.10 terrible tax mistakes
5. 10 top money errors
6. 10 miscues when dealing with debt collectors



Bankrate.com's corrections policy-- Posted: Dec. 20, 2005
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