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How To Deal With Debt Collectors (When You Can’t Pay)

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In a Nutshell

If you’re being contacted by debt collectors for a debt you simply can’t repay, it’s important to know your rights to protect yourself from harassment and validate the debt. Once you know the debt is valid, look into your debt relief options. Getting a free consultation with a nonprofit credit counselor can help you understand your options and make a plan to deal with your debt.

Written by the Upsolve TeamLegally reviewed by Attorney Andrea Wimmer
Updated August 9, 2023

What Can You Do if You Can’t Pay Debt Collectors?

If you don’t have the money to pay your debts, getting calls from debt collectors only heightens your stress. The good news is that there is a way forward. 

First, know your rights. Federal law protects you from being harassed or treated unfairly during the debt collection process. 

Then, make sure to validate the debt. Validating the debt simply means you request details about the debt to ensure that you actually owe it and owe the amount in question.

Next, explore your debt relief options, including debt settlement, a debt management plan with a credit counselor, and Chapter 7 bankruptcy. Nonprofit credit counseling is always a good place to start. These counselors can help you understand what debt-relief options make the most sense in your individual situation.

Know Your Rights

Third-party debt collectors and debt collection agencies must abide by the federal Fair Debt Collection Practices Act (FDCPA) and any relevant state laws. The FDCPA does not apply to the original creditors unless it poses as a debt collector.

Under the FDCPA, debt collectors are required to inform you of your right to dispute the debt within 30 days. You can also ask for the original creditor’s contact information. Also, debt collectors can’t harass, annoy, or threaten you to collect debt. They can’t use unfair or deceptive practices either.

You can take legal action against debt collection agencies that violate the FDCPA. To learn more, read our article on FDCPA violations.

Research the Statute of Limitations for the Debt

It’s important to know the statute of limitations for your debt. This is the length of time a creditor or debt collector has to sue you for a debt. It varies by state and the type of debt, but debt collectors often have 3–10 years after the last payment was made to sue you.

After the statute of limitations has expired, the debt is considered time-barred. If a debt collector contacts you about an old debt, be careful what you say. If you admit to owing the debt or make a payment on it, you may restart the statute of limitations, depending on your state’s laws. 

Insist that the debt collector sends you a debt validation letter before you speak with them further. This will allow you to make sure it’s a legitimate debt and give you the information you need to see if the debt is time-barred. (More on this below.)

Know that even if the statute of limitations has expired, the collection company may still contact you or send information to the credit bureaus about the debt.

Report Debt Collectors That Break the Law

If a collection agency violates the FDCPA, report it. You can do this through several avenues:

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Validate the Debt

Some debts get sold multiple times. Along the way, it’s easy for information to get lost or distorted. This is why it’s important to validate the debt, even if you’re sure you owe it. The amount, payment history, interest rate, or fees could be incorrect. You can do this by writing a simple letter. 

Writing a letter may feel old fashioned, but it’s important to keep a paper trail in case you end up in court. Having documentation can help you win a debt collection lawsuit against you.

Here’s everything you need to know to write a solid debt validation letter.

Explore Your Debt Relief Options

Thankfully, you have several potential debt relief options to help you deal with a debt you can’t pay all at once.

Some of the most common options include:

  • Credit counseling

  • A debt management plan

  • Debt consolidation

  • Debt settlement

  • Chapter 7 bankruptcy

Start With Credit Counseling

When you’re in financial distress, talking with a credit counselor is a great place to start on the path toward better personal finances. Nonprofit credit counseling organizations offer free consultations. In the consultation, they’ll look at your financial information to decide which type of repayment option will work best for you.

A credit counselor may suggest a debt management plan, debt consolidation, or debt settlement.

What’s a Debt Management Plan?

In a debt management plan, the credit counselor (for a small fee) will renegotiate your interest rates and monthly payments with your creditors or lenders on your behalf. They make a plan to repay your debt over a certain period of time. During this time, you deal with the credit counselor, not your creditors. You make one monthly payment toward your debt. 

To learn more, read: What Is a Debt Management Plan? 

What’s Debt Consolidation?

If you have good credit, you may be able to take out a consolidation loan. This allows you to repay all your debt and then make one monthly payment on the consolidation loan. 

To learn more, read: Debt Consolidation: What Is It & How Does It Work?

What Is Debt Settlement?

A debt settlement allows you to pay less than the full amount you owe in exchange for making a partial lump-sum payment on your debt. Though it’s less common, you may be able to set up a payment plan instead of paying a lump sum. Financial advisors report that people using the debt settlement option pay anywhere between 50% to 80% of their total debt. That’s the good news.

The bad news is that your credit report will show that your debt wasn’t paid in full, which won’t be great for your credit score. 

If you make a debt settlement agreement with a collection agency, be sure to get the agreement in writing. While negotiating a settlement, it’s a good idea to send a letter outlining your proposal. Send this letter via certified mail with a return receipt requested. Here’s a free template you can use to get started.

You can negotiate a debt settlement on your own or with the help of a credit counselor. Be wary of any for-profit companies that offer debt settlement. If they ask for payment upfront, it’s probably a scam.

Should You File for Chapter 7 Bankruptcy?

If you’re struggling with multiple debts in collections that you can’t figure out how to repay, it may be time to consider bankruptcy.

Filing Chapter 7 bankruptcy provides protection against debt collectors immediately (thanks to the automatic stay). This means no more debt collection phone calls, wage garnishment or bank account levies.

If your bankruptcy case is successful, you’ll get a fresh financial start with a bankruptcy discharge. This is the order that wipes out all your eligible debt, including past-due medical bills, credit card debt, personal loans, and more. If you want to erase your student loans, you’ll have to take additional steps and prove that the loans cause undue hardship.

If you think Chapter 7 might be right for you, see if you’re eligible for free help from Upsolve.

Written By:

The Upsolve Team

Upsolve is fortunate to have a remarkable team of bankruptcy attorneys, as well as finance and consumer rights professionals, as contributing writers to help us keep our content up to date, informative, and helpful to everyone.

Attorney Andrea Wimmer


Andrea practiced exclusively as a bankruptcy attorney in consumer Chapter 7 and Chapter 13 cases for more than 10 years before joining Upsolve, first as a contributing writer and editor and ultimately joining the team as Managing Editor. While in private practice, Andrea handled... read more about Attorney Andrea Wimmer

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