Take the Guesswork Out of Debt Collection

Dear Debt Adviser,

I've agreed to pay some of my ex-wife's bills as part of our divorce. But I'm struggling to get a handle on them. The original debt holder says it sold the account to a debt collection company. That collector says he sold the debt to another company. Now, I'm getting calls from several other collectors who claim to own the account. How do I make sure I'm paying the right debts to the right collectors if they keep moving around? No one seems to be able to help. It's very frustrating. Most of these debts are nearing the statute of limitations, and I'm trying to buy a home.

-- Anthony

Dear Anthony, I understand your frustration. As a debt ages it gets sold to more and more collectors for less and less than the original amount owed. Before you pay anyone, you need to verify the debt belongs to you as well as who currently owns your old tab. The Fair Debt Collection Practices Act details how debt collections must be carried out. Section 809 deals specifically with validation of debts.

It requires that a collector has five days after contacting you to provide you with:

How much debt is owed.
The creditor to whom you must pay the debt.
A statement that the debt is assumed valid by the collector unless you, within 30 days after receiving the notice, dispute the validity of the debt or any portion of the debt.
A statement that if you notify the collector in writing within the 30-day period that the debt or any portion is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer. The debt collector also will mail a copy of verification or judgment to the consumer.
A statement that, upon the consumer's written request within the 30-day period, the debt collector will provide the consumer with the name and address of the original creditor, if it's different from the current creditor.

Once you notify the collector in writing (within the 30-day period) that you are disputing the debt, or want the name of the original creditor, the collector must stop the collection effort until the information is mailed to you.

You can verify which company currently owns the debt a couple of ways. You can request verification from the companies when they call or write to collect, and also get the contact information and name of the company. Or you can get copies of your credit reports from AnnualCreditReport.com and contact the collectors that are reporting accounts. You will find the company contact information next to the listing for the account.

Once you have asked for and received verification of the debt, you should quickly decide what and how you will pay. If you pay in full, simply keep copies of the debt verification information supplied by the collector and your proof of payment. This will allow you to dispute any attempts to collect on a debt you have already paid. If you attempt to settle the debt for less than the original amount owed, be sure to get all agreements for the settled amount in writing from the collector before writing the check. Keep copies of the settlement agreement and your proof of payment.

You mention the statute of limitations in your letter. For purposes of refinancing your home, the statute of limitations will not help you. The unpaid charge-off will be listed on your credit report for seven years from the date of the first continuous delinquency. Most lenders take a dim view of lending to a person who has a record of not paying debts. In your case, paying late may be much better than never.

Good luck!

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