Ask Jack About Debt

Debt Collection: Unsecured Debt of Over $1,000

Debt Collection is a Dirty Business

If you owe money, the creditor will make some effort and then turn it over to a debt collection agency. Traditionally collection agencies went after the bad debt for a percentage of the amount collected, often 50%. No collection, no fee. The original creditor would not write it off until the collection agency failed.

More recently, a new system has become common. The original creditor writes off the debt and then sells it (for pennies on the dollar) and the collection agency then keeps anything it collects. This debt may already have been through a collection process. It could be old. It might even have been eliminated by bankruptcy but kept on the books anyway.

Once they have paid for it, debt collection agencies get nasty. They ignore the law in many cases. They do anything they can to collect. They do not care if you have paid the debt, if the debt is a mistake or if you have been through bankruptcy. They will often say anything they think will get you to send them a check.

If your debt is below $1,000, you can usually just blow off the collection agency using the CEASE AND DESIST letter shown below. It is not worth the money for them to chase you into court. Above $1,000 it starts getting iffy. The lower the amount, the more likely you can send them a cease and desist letter and forget about it.

If you do decide to do something about the debt, I do not think you should deal with the collection agency. My advice is that you do not talk to anyone from a debt collection agency, ever. Debt collectors are experts at double talk and separating people from their money. You cannot trust anything they say. You should never deal with them.


The good news is that collection agencies are federally regulated and you can stop them from contacting you. For details on what collection agencies may do, see “Fair Debt Collection Practices Act".

To stop them from contacting you, send them the letter below. You can copy it here and paste it into your word processor to fill in the necessary details. Keep a copy and send it certified mail, return receipt requested. This will cost a few dollars but in most cases it will work. And if it does not, the collection agency is very likely to be in violation of federal law.



TO: [[ name and address of collection agency ]]

FROM: [[ your name and address ]]

RE ACCOUNT NUMBER: [[ account number if relevant. It should be on any letter you have received from collection agency ]]

BALANCE DUE: [[ amount ]]

You are herby notified, under provisions of the Fair Debt Collection Practices Act [15 USC 1692c], that you must cease and desist all communications with me after being notified in writing that I no longer wish to communicate with you. Therefore I demand that you stop calling me at home, at work, on my cell phone or any other location.

In accordance with the federal FDCPA, now that you have received this letter, you may contact me only to inform me that you are terminating further collection efforts; invoking specified remedies which are ordinarily invoked by you or your company; or you intend to invoke a specified remedy.

1. You and your organization must CEASE AND DESIST all attempts to collect the above debt. Failure to comply with this law will result in my immediate filing of a complaint with the Federal Trade Commission and the Attorney General of [[insert name of your state]].

2. Let this letter also serve as your warning that I may utilize telephone recording devices in order to document any conversations that we may have in the future.

3. Furthermore, if any negative information is placed on my credit bureau reports by your agency after receipt of this notice, I intend to pursue any and all remedies available to me by law by means of civil suits against you and your organization, both personally and corporately.


  1. Since it is my policy neither to recognize nor deal with collection agencies, I will discuss this account only with the original creditor.
  2. This debt is under dispute. I do not think I owe what you claim.
  3. This debt was settled. Your records are incorrect.
  4. This debt is beyond the statute of limitations.
  5. This debt was discharged in bankruptcy.
  6. I have never been sent reasonable evidence showing that I owe this debt, as is required by law.


[[ your name and signature]]

This should stop all contact with the collection agency. The only things they can legally do are tell you that they will no longer contact you or call you into court. [Click here for Fair Debt Collections Practices Act info.]

The less the debt, and the older the debt, the less likely they are to pursue it in court. (For one thing, they have to produce "reasonable evidence" of the debt to go to court and they often do not have it, especially for older debt. Often they just have a list with your name and an amount which they got from the original creditor.) I have seen a couple of cases where they set up a court date to put some pressure on the debtor but they never bothered to show up, so the case was dismissed.

If you do decide you want to settle the debt, you should work with the original creditor or do a Debt Management Plan

Start with the original creditor. They may not even want to talk to you or not know what you are talking about, especially with old debt. If you cannot deal with the original creditor, or if you have multiple debts you cannot deal with, I suggest you see if you can set up a debt management plan, or look at bankruptcy.

Some suggestions:

  1. Original creditor: If you can raise any cash by borrowing from family or from a bank or other institution, make them an offer to settle now, for cash, for no more than 50 cents on the dollar. They will almost always give you some sort of discount for cash up front. Ask them to make sure they tell the credit reporting agencies that the debt was settled. (You can be sure that they have already reported your delinquency, which has a significant negative impact on your ability to get credit.)
  2. Debt Management Plan: If you do not know how you will ever pay it, and especially if you have debts like this with more than one creditor, the best thing to do is go to a good, non-profit credit counseling agency. But be careful!!! Some of these agencies, including some that advertise on TV, are, in my opinion, not very effective at what they do. A few are outright frauds.

Go to this national chain of credit counseling agencies, with which I have had experience. I have found them to be very competent and effective in what they do.

Here is what they will do for you:

  1. They will go over your income and expenses and help you figure out how much you can afford to pay monthly to settle your debts. (If the numbers do not add up, call a bankruptcy lawyer and see if they cannot make a better deal for you.)
  2. The credit counseling service will contact all of your creditors and make arrangements to pay them over time. In most cases they can stop all interest and late fees on the existing debt. In some cases they can reduce past interest and late fees.
  3. Every month you will send them a check for the agreed upon amount and you will then divide it up and send a portion to each of your creditors until everything is paid off.
  4. As long as you make payments the creditors will not bother you.

Some things you should NEVER do when dealing with creditors.

  1. Give them your checking account number. Even if they tell you they will take only one payment, they are very likely to keep drawing out money until their dent is paid. This can wreak havoc with your finances. Your checks will start bouncing.
  2. Make a payment without a deal. They give you the impression that if you just send them $50 or $100 now, they will go away. Nothing could be further from the truth. Once they know that a phone call can get them cash, they will start calling more often.
  3. Never send money. Always offer to negotiate a payment plan. Push for stopping of interest and late fees in return for a monthly payment. Tell them they will get NO money unless they make a reasonable payment plan deal with you. They don't legal fees any more than you do, and if they think can settle the account without doing calling the lawyers, they will do so.

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