The tree is down, the cookies are a memory -- the holidays are over. 'Tis the season of trying to pay the bills. But in this faltering economy, many households are falling behind, bringing the headache of debt collection calls.
Dealing with debt collectors can seem overwhelming, especially when more than one bill is late. But experts say it's important to take charge of the situation, know your rights and face debt problems before they snowball out of your control.
"The next step is a summons," said Larry Curtis, director of counseling at the Consumer Credit Counseling Service in West Seneca.
Creditors are sending more overdue bills to court, in order to seize assets and wages, he said. Once a collection action reaches the courtroom, your options become narrow and unpleasant.
Adam Wisniewski of Niagara Falls didn't even know that a collector was after him until he went to the bank and his ATM card wouldn't work.
It turned out that a collection lawyer had obtained a judgment against him for a credit card debt that wasn't even his. Wisniewski had to find a lawyer of his own to fight the case and get his bank account unfrozen.
"Now I go online and check my credit card and bank once a week, to make sure there's nothing going on," the 33-year-old retail manager said.
Fortunately, Wisniewski's story is an extreme example, financial counselors say. Most people slide into collections by avoiding even thinking about bills. Others try asking for an extension but run into problems -- some have difficulty communicating with call center workers overseas -- so they drop it, Curtis said. But instead of going away, the problem escalates.
"The creditor sends [bills] to a collection agency or right to an attorney's office," he said. Most creditors, including banks, credit card issuers, utilities and even doctors' offices, will turn over a bill for collection when it reaches 60 or 90 days past its due date.
Dealing with collection agencies is different than dealing with the creditor. Collectors work on a contingency basis, meaning they get a slice of whatever they're able to collect. While that means they're aggressive, they may also be willing to work out a deal.
"Lenders are negotiating for a lot less than they were a couple of months ago," said David Chadwick, attorney at the Legal Aid Bureau of Buffalo.
In exchange for a prompt payment, collectors are often willing to write off a big chunk of the bill. Some bills that were settled for 60 percent, for example, may now be whittled down to 50 percent, he said, knocking off half the original amount.
Of course, many debtors are too tapped out to take advantage of a settlement, or they would have paid the bill in the first place.
Consumers need to take stock of their situation, debt counselors say. If the financial hole is too deep to pay current bills, they'll have to think about bankruptcy, which will stop collection and may wipe out many debts.
But if there's enough income to meet regular expenses, consumers may work out a repayment plan that salvages their credit history. Paying off the entire debt, even if it takes longer, will look better on your credit report than paying a settlement for a reduced amount.
Consumer Credit Counseling Service, a nonprofit, specializes in setting up repayment plans, some of which extend three to five years, Curtis said.
Unfortunately, even people in hock are being targeted by scams. Ads that promise to magically wipe out debts are circulating, giving false hopes that debt problems will vanish. Beware of debt consolidators that take an up-front fee and fail to begin paying your debts with it right away, consumer advocates say. The state attorney general's office recommends sticking with nonprofit credit counseling agencies that are licensed by the state Banking Department.
Important questions to ask a counselor are: What fees will be charged? How will your information be safeguarded? And will employees earn bonuses if you sign up for extra services?
While businesses have a right to collect legitimate bills, consumers also have rights in the collection process, and knowing the rules of the game will at least level the playing field.
One area woman had fallen behind on a credit card, but she arranged to pay it off in installments of $75 a month. Then the post office box where she sent her checks was closed, and her mail was returned.
"Four years go by -- then, out of the blue, they sue her," said Peter Dellinger, a consumer attorney in Rochester who represented the woman. The collector said that her $873 debt had mushroomed into $7,000 because of interest charges.
Fortunately, she had saved the documents connected with her repayment plan, Dellinger said, including her canceled checks, and even the envelope that was returned to her. With that evidence in hand, she was able to convince the court that the collector was the one in the wrong, not her.
Getting everything in writing and keeping the documents is one good rule of thumb. When a collector calls, you have the right to request proof of the debt. This is a good first step, Curtis said. Even if you are familiar with the debt, getting proof from the collector ensures that the agency is authorized to collect the bill.
If the bill is unfamiliar or the amount is wrong, you have 30 days to dispute it. It's important to do this in writing. Once the agency receives your dispute letter it must provide written verification, or stop contacting you.
Harassment is forbidden. Agencies can't call you before 8 a.m. or after 9 p.m. unless you agree. They also shouldn't contact you at work if you say you're not allowed personal calls.
Collectors may call your neighbors or relatives, but only to find ways of contacting you. It is forbidden for them to reveal your debt to others. It's also forbidden to falsely threaten you, for example by saying they'll seize your wages or bank account, unless they have court authorization to do so.
If you think a collector has stepped over the line, you can make a complaint to the state attorney general's office. The number for help is (800) 771-7755. More information is on the Web site at www.oag.state.ny.us.
The Federal Trade Commission also oversees debt collectors, with information and contact numbers on its Web site at www.ftc.gov.