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If you can arrange for a payment plan with the company you owe in order to keep the debt out of collection, this is the best option. It’s good for the company, because they’ll take a 30% to 50% loss immediately upon handing the debt off to a collection agency. And it’s good for you, because it keeps the debt off your credit score. You might even be able to settle for a slightly reduced amount.

If you’re already being hounded by a collection agency about a past due debt (or a debt you’re not sure you owe) take the following steps:

Step 1: Ask for details
At a minimum, someone trying to collect on a debt should be able to tell you not only how much you owe, but who you owe, when the debt was incurred and for what. If they can’t tell you these things, inform them that you don’t believe this debt is legitimate, and that you’ll only consider payment when they can produce these details. Beyond this, you might ask for proof that you are indeed the person in question.

It is certainly not rare for errors in any amount to occur, and sometimes even errors of the debt itself.  If you believe there has been an error, you should notify the company within 30 days of being contacted. Although only around 3% of debts that are disputed, of those that were, dept collectors could only verify about half. (Blumenthal, 2013)

Step 2: Know your state statutes
Most types of commercial debt have statute of limitations after which an old debt is considered expired. The statute of limitations on old debt varies from state to state, ranging from as little as two years to as long as 15 years. (Most states give creditors 3 to 6 years to seed a judgment; check with your state’s attorney general’s office.) Once the statute of limitations expire, the individual cannot be sued for collection. Yet many debt collectors will attempt to collect anyway, and will threaten with lawsuits in violation of the law. If you are sued, show up. In most cases borrowers do not, and a default judgment is entered against them.

Worse yet, making even a tiny payment towards an expired debt could revive its status, allowing the agency to sue. So before you make payment on an old debt, do some research about the statute of limitations in your state. It may still impact your credit rating even if you can’t be sued, but depending on the age of the debt and your recent credit history, it might not make any difference at all.

Step 3: Offer a settlement
Especially if the debt is older and has been passed down to one of the bottom feeders in the collection world, offer to settle for a significantly reduced amount. Since these companies have bought the debt for pennies on the dollar and therefore have very little invested in any given account, they are often willing to take a substantially lower amount in order to settle the debt. If you owe $500 and they purchased the account for 1 1/2 percent of face value, they’re into it for $7.50. So it’s in their interest to take a $50 or $100 settlement to close the account rather than receive no money at all. Just make sure that before you send in any money, they provide you documentation in writing that what you pay will settle the account and close it. “You have to get it in writing” says Gerri Depweiler, Director of Consumer Education for “If you don'[t have it in writing you don’t have an agreement.”

How to file a complaint against a debt collector

  1. On the FTC’s home page (, a brown button near the top encourages consumers to ‘Report it to the FTC,’ then steers them through an online form.
  2. Those who file complaints with the FTC will get a toll-free phone number for follow up questions and are encouraged to contact state regulators
  3. The agency compiles data from consumers, the Better Business Bureau, and law enforcement into a database called Consumer Sentinel, which at last check held more than 6.1 million com-plaints.
  4. You should know that single complaints will not result in regulatory action, but you should report abuses anyway. Companies may be investigated or subjected to fines if they receive multiple complaints.

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