A sure sign that you are in financial trouble is harassment by collection agencies. Whether you receive daily phone calls or get letters demanding payment in the mail, the stress can cause you to lose sleep, create strife with your spouse or other family members and make life miserable.

The worst thing you can do is to ignore the situation. If you don’t respond, they will assume you have no intention to pay and the pressure will just escalate.  However, when you do communicate with a debt collector, it is important to be careful about what you say and do. Some tips include:

  • Respond with an action letter — if you’re not sure where to start or what to say, the U.S. Consumer Financial Protection Bureau has a site that allows you to download a carefully-worded letter on everything from requesting additional information to disputing the debt. Also, make sure that any written correspondence is sent via certified mail with a return receipt.
  • Be careful about how you pay a collection agency — if you plan on making a payment, do not use a credit card, debit card or personal check. Instead, pay by money order. Make sure you keep the receipt in a safe place as ironclad proof that you paid.
  • If you agree to a repayment plan, get it in writing — this will ensure that everybody is on the same page regarding how much and when payments will be made.
  • Keep records in a safe place — nothing is worse than knowing you have paid off a loan and not being able to prove it.
  • If you are being sued, hire an experienced attorney — it may surprise you to learn that you are being sued by debt collectors (especially those who deal in time-barred debts) who have little or no proof of what was originally owed, or even to whom. If you have no representation and don’t show up in court, chances are that the collector will win by default.