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How to verify whether a bad debt is really yours

Erica Sandberg

October 6, 2015

QHi Erica,

A lawyer is calling me on my home phone leaving messages saying that if I don't call him back and pay in 30 days time, a lawsuit will be filed against me. I don't even know what this is for.  I never had a credit card, only a car loan that ended in 2013. What is going on and what should I do?  — Kip

ADear Kip,

The person who is contacting you is trying to collect on a debt that may or may not be correct. To find out, go to annualcreditreport.com and pull your reports from each of the three credit reporting agencies (TransUnion, Equifax and Experian). There is no cost for checking them once per year, and it's always a good idea to keep watch over what is being reported about you.Ask Erica

Credit card companies, banks, credit unions, finance companies, the courts and more all send the credit reporting agencies a constant stream of information about people who owe or have owed them money. Collection agencies purchase delinquent accounts from the aforementioned, as well as utility companies, hospitals, health clubs and any place else that might generate an unpaid bill.

These collectors also notify the credit reporting agencies, and as they do, will usually reach out to the debtor to demand money due. Collection agencies may have attorneys on staff, but  lawyers also can be working as collectors. When the debt is substantial and is within the statute of limitations, a lawsuit may follow — particularly if the person seems to have the means to pay. That can result in the filing of a judgment, which would be listed on the credit reports. Post-judgment collection action also may be taken, such as wage garnishment and seizure of property.

It is essential that you determine the legitimacy of this debt. If you don't see anything amiss on your reports — which can be a series of missed payments on a loan or credit card, charged-off accounts or the name of a collection agency — you should be in good shape. Call the collector and tell him that your credit report indicates no such bill and if he can't prove it's yours, to stop calling immediately. All third-party collectors are required by law (under the Fair Debt Collection Practices Act) to provide this information.

If in checking your credit reports you do see the account in question, don't panic. Reflect. What could it be for? Maybe you had a medical procedure and forgot about the bill. That happens more often than you might think. If the collector can take you to court (check the statute of limitations for your state), deal with it, either with full payment or a settlement, and you'll be safe from legal repercussions.

If the collector can no longer sue you (which does not prevent some collectors from trying — after all, it's still an unpaid balance), you're free to send a cease-and-desist letter to stop all communication. After that, the worst that can happen is that the account will show up on your credit report until seven years have passed since the debt first went bad.

Try your best not to be intimidated. When you know your rights and responsibilities, you can deal with this lawyer claiming a debt and threatening to sue in a cool, businesslike manner, which is exactly what this situation requires.

Got a question for Erica? Send her an email.

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