Owing on a debt is depressing. Falling way behind is scary. As this past year has shown, a lot of people have had problems keeping up with their bills. It’s nothing to be ashamed about; it’s better to try overcoming the debt instead.

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Many people have had at least one credit card or something go to a collection agency. Sometimes it’s legitimate, sometimes it’s not. We’re going to talk about the legitimate ones, where you know you either fell behind in payments or stopped making payments, and now a collection agency has tracked you down and is trying to get you to pay it off.

Here’s the deal. Credit card companies, or whomever else, will do what they call a “charge off” of the outstanding amount you owe on a claim. When you fall behind on your payments, they attach all these fees to the original balance, usually around 15 to 50% a year. But when it finally gets reported to the credit reporting companies, the amount they’re allowed to charge off is the actual amount you owe, not all those fees. So, if you owed them $2,000, even if they tacked on $1,000 worth of fees, they can’t report all that and won’t get paid for it either.

Why is it important? Because they have these collection agencies known as “scavengers”, that buy all this debt at between 5 and 8 cents on the dollar, look at what the amounts were with all the interest, then start pounding your phone trying to get you to start paying on all of that. Turns out that’s not illegal, but it’s sneaky.

If you’re ever contacted by a collection agency about an outstanding amount, you need to take a couple of steps before you agree to anything.

The first step is to ask them to provide proof that you owe an outstanding balance to begin with. Even if you know you owe something, by law collection agencies can’t proceed until they give you proof via regular mail showing you all the information that was provided to them by the creditor.

The second step is to immediately get a credit report of your own. Every person in the United States is allowed one free credit report a year from annualcreditreport.com, which is part of the federal government’s plan to help all consumers be able to check on their financial status. This is another reason you ask for proof of an outstanding debt, because often they’re coming after you on an account that’s been paid off, which you can verify via a credit report.

A credit report will also show you what the charge off amount was from the company you owed money to. As long as you know that, you have a starting negotiating point that the collection agency can’t legally force upon you.

The reason you want to do this is if you make even one payment, or set up an agreement, on the amount that the collection agency tries to get from you, by law you’re now responsible for all of it. Don’t get fooled into their telling you that they’ll make a deal with you. Their deals will still be higher than what you actually might owe.

You could end up paying thousands less based on having this information, but it also gives you a major negotiating point. Sometimes if you can pay the entire amount quickly you can get them to reverse the negative note on your credit report, which is important because otherwise it can stay on there for up to 7 years and give you grief if you try to get a loan of any kind.

They don’t want you to know this, obviously, but we’re telling you how it is. If you want more information on it, read the Fair Debt and Credit Collections Act; it’s there for your protection. Make sure to always know your charge off amounts; you could save a lot of money and grief on the back end.