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Tips for Dealing With Debt Collectors

Dawn Kuczwara
Dawn Kuczwara

You want to meet your obligations while also protecting your business.

If your business is going through tough times or if you forgot to pay a vendor or a bill, there is a chance you may hear from a debt collection service. 

Business debt collection is different from debt collection for a personal account. It's important to know what you should and shouldn't do, and what rights you have, to protect yourself during the process.

The risks of ignoring debt collectors

If you are being contacted by debt collectors, don't ignore them. The last thing you want to do is make a debt-related problem worse by pretending it doesn't exist. 

Here's what can happen if you ignore a collections letter. 

  • You will hurt your credit. Ignoring debt collectors and not addressing the debt will negatively impact your credit score. Debt collectors report delinquent accounts to the credit bureaus, a move that will hurt your credit score for several months – if not years. This is in addition to credit damage that has likely already occurred due to late or missing payments. 
  • Your debt could grow. If you ignore debt collectors, you'll have additional interest or collections costs tacked onto your existing debt. Responding to initial calls or letters, however, prevents that debt from growing. 
  • You may not owe a debt. At the very least, respond to debt collectors to determine if the debt is legitimate. If you don't recognize the debt or the amount isn't accurate, you can dispute it. But you'll never know this information unless you speak with the debt collectors in the first place. 
  • You could be sued. Debt collectors can file a lawsuit against you for ignoring them, and ignoring the subsequent lawsuit can give the collections agency power over your money. The court may order wage garnishment, in which a portion of your paycheck is withheld to pay off your debt. The collections agency may also go after the funds in your bank account. 
  • It won't prevent debt collectors from contacting you. Those who ignore collections agencies typically do so in an attempt to make them go away. However, debt collectors don't make money unless you pay them, and they're likely to keep trying to contact you. 

1. Don't ignore the collections agency.

If you're getting calls and letters from a collections agency, ignoring them won't make them go away. It could make the problem worse. A collections agency can continue to call you and may report the unpaid debt on your business credit report. Those debts will appear on your credit report for up to seven years. 

If an agency is trying to reach you, talk to the representative. Ask them to mail you validation of the debt, which the law allows for within 30 days of being contacted by a collections agent. This should give you the date of the debt and the name of the creditor so that you can investigate the issue. 


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Harassing and nuisance phone calls with abusive language are illegal. You can report violations to your state attorney general's office. You can also report them to the Consumer Financial Protection Bureau online or by phone at (855) 411-2372.

2. Don't acknowledge fault.

In your first conversation with the agency, don't say anything that would indicate you accept the debt or acknowledge it's yours. You don't want to put yourself in a situation where you agree to pay a debt that has been attributed to you erroneously. In your first contact, simply ask for validation. 

Some collectors may try to get you to verbally agree to a payment or ask that you pay at least part of the debt immediately. Resist doing so. There are several more steps you need to take to protect yourself, and even a small payment may be seen as an admission that the debt is yours. 

It's a good idea to record your conversations with the debt collector, if it's legal to do so in your state. Inform the collector that the call is being recorded.

3. Research the debt.

Once you've received the information from the debt collector, investigate. Is the debt yours? Is the amount correct? Is this something that really wasn't paid? Overdue accounts may be sold multiple times to different debt collectors, and errors can make their way into the files as they pass from one company to another. Depending on which state you're dealing with, the statute of limitations may have expired on the debt. [Interested in working with a debt collection agency?]

4. Hire help.

Find an attorney who specializes in consumer law. Chances of a lawsuit being dismissed may be higher if you show up with a lawyer. The National Association of Consumer Advocates has a search page to help you find such representation.

5. Dispute the debt if it's wrong.

If you find something wrong – such as the debt amount or to whom the debt belongs – notify the collector that you are disputing the debt. You'll need to provide substantial proof – canceled checks for payments, business name papers if the debt belongs to someone else, copies of the original invoice if the amount is wrong. Send copies – not originals – of your documents supporting your dispute via registered mail.

6. Keep copies and records.

There's no consensus on how long your company needs to keep documents. Some say that it should line up with how long you keep tax records. 

The statute of limitations for credit card debt varies by state. In Alabama, Alaska, Delaware, Kansas, Louisiana, Maryland, Mississippi, New Hampshire, North Carolina, South Carolina, Virginia and Washington, D.C., it is three years. In California, Nebraska, Nevada, New Mexico, Pennsylvania and Texas, it's four years. 

Debt expires after five years in Florida, Idaho, Illinois, Iowa, Kentucky, Missouri and Oklahoma, but it's six years in Arizona, Colorado, Connecticut, Georgia, Hawaii, Indiana, Maine, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Ohio, Oregon, South Dakota, Tennessee, Utah, Vermont, Washington and Wisconsin. Debt sticks around for eight years in Montana, and 10 years in Rhode Island and West Virginia.

7. Pay the bill.

If you receive the documentation and find the debt is legitimate, you should pay it. Contact the collector to discuss payment arrangements. You may be able to negotiate for a lower amount if you agree to settle the debt. Ask what the collector can do to lower the amount you owe or if any late fees and finance charges can be removed. This is also the time to find out if a payment plan is possible. 

Once you reach an arrangement, do not pay until you have the agreement in writing. Your agreement should include all of the terms you've agreed to, such as settlement amounts and payment dates. 

When you have the agreement in writing, only then should you pay the debt. Any correspondence you have with the agency should be sent via certified mail, and get a return receipt as proof that your letters or payments were received. Once the debt is paid, request a closed account statement so you have proof of the debt being paid in full. 

Mistakes happen, bills get forgotten, and businesses go through rough spots. This doesn't mean you can walk away from your responsibilities to another company, but it's important to know your rights and how to deal with debt collectors to protect yourself. 

Sean Peek also contributed to the writing in this article.

Image Credit: lightwavemedia/Shutterstock
Dawn Kuczwara
Dawn Kuczwara
business.com Contributing Writer
Dawn Kuczwara is a former executive with more than 17 years of experience in technology. Now, as a professional writer, Dawn uses that experience to write about business, technology and leadership. When she isn’t wordsmithing, she spends her time doing improv comedy, reading, playing video games and hanging out with her family and two dogs, Pip and Zoe.