What Debt Collectors Can Do To You Legally

6 things debt collectors can do legally to collect a debt

1. Seek payment on an expired outdated debt

All unsecured debts, like credit cards, cell phone, cable and medical bills, have a statute of limitations. After this date, the debt is “expired” and you can’t be sued for payment. But you still owe it, and debt collectors can still seek payment on these old financial obligations.

2. Pressure you into paying the debt

While debt collectors can’t threaten you or mislead you, they can apply pressure to collect payment. This pressure can include daily calls, frequent letters, or talk about pursuing a lawsuit for payment on the debt — as long as they stay within the bounds of the law.

3. Sue you for payment on a debt if not past statute of limitations

Debt collectors can sue you for payment on a debt as a last-ditch effort. These lawsuits often result in wage garnishment, bank levies or both, because most debtors don’t show up to court and lose by default. So you should always go to court regardless because most attorneys for the plaintiff are lower level attorneys and don’t usually have the information to prove you have to pay the debt.

4. Sell your debt to another debt collector

A debt collector may resell debt it hasn’t been able to collect on, or sell the remainder if only partial payment sometimes unless you had a pay for less agreement that was made. So if one debt collector stops contacting you about a debt, don’t be surprised if another starts. If you do pay off a debt in full, make sure you get the agreement in writing so you can prove it.

5. Negotiate what you owe for a smaller amount

Because debt collectors buy debts for pennies on the dollar, they have fairly large profit margins if they collect the original amount owed. This gives them more flexibility in negotiating payment from a consumer. You may be able to negotiate a settlement for 25% or 75% of what you originally owed. Always, get the agreement in writing, so you have proof the debt was considered paid in full for the agreed-upon settlement amount.

6. Do a 1099 Cancellation of debt to the IRS

This is a tactic that debt collectors are using to get write offs from their federal taxes for bad debt not collected. If you owe $10,000 and the debt collector doesn’t collect the money and they pass it off as a 1099C Cancellation of Debt they can’t sell the debt or collect the debt but they can get a $10,000 tax write off. The IRS will consider the $10,000 as income to you. I don’t think this is fair because the debt collector didn’t actually pay $10,000 for the debt. They probably paid penny’s on the dollar for the debt.

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