How to deal with debt collection

How to resolve debt collectionWhile nobody wants to be contacted by debt collectors, there are ways to make the process less stressful — and help you clear your debts.

Why a debt collector might contact you
A company may refer your debts to a debt collection agency if you fall significantly behind on your bills and repayments — then ignore their requests to work out a repayment plan with them.

The debt collector’s main reason for contacting you is to recoup the money you owe. They may also want to explain to you the consequences you may face if you don’t pay your debt. These can be quite serious — for example, you may have to appear in court, your goods could be repossessed, or your electricity or phone may be cut off.

Understand the legalities of when a debt collector can contact you
Debt collectors do have the right to contact you in regards to legitimate overdue debt. In doing so there are guidelines that they must work to and at no time should they harass, intimidate or threaten you. If you feel a collector is exhibiting these types of behaviours, you can report them.

There are 3 main ways a collector should engage collection of debt: Firstly by phone, mail or social media and face to face. With these methods of contact, there are also time of day and frequency in which they must abide by. Review times here.

How to deal with debt collectors – Negotiate a repayment plan
Dealing with a debt collector can be an intimidating and stressful experience. However, by ignoring them, you can make matters even worse. That’s why it’s important to remain calm — and be prepared to deal with your debts.

Before talking to them, prepare a detailed budget. This will help you determine exactly how much you can afford to pay on your debts without adversely affecting your other financial commitments. It will also give the debt collector a better understanding into your financial situation.

Once you’ve worked out an affordable amount, make an offer for a monthly or fortnightly repayment schedule. If they agree to your payment plan, get written confirmation from them. This will ensure that they can’t renege on the agreement at a later date. You will also need to ensure that you stick to your side of the agreement.

If the debt collection agency fails to agree to your suggested payment plan, show them your budget to help them understand how much you can afford to pay. But if you still can’t negotiate repayments, or you fall behind again, it may be time to seek professional advice.

A financial counsellor or debt management expert can help by giving you some options to clear your debt and help you develop healthy financial habits.

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