Dealing with Uncollectible Debt: A Guide to Protecting Yourself

If you are having trouble paying your bills, you should contact your creditors as soon as possible and let them know about your situation. Many companies are willing to work with you if you notify them immediately and are honest about your finances. Although you can conduct this kind of business over the phone, a letter provides evidence of your correspondence that protects you from unscrupulous creditors who may agree to one thing over the phone and then change the agreement later.

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Start the letter by putting the date, your name and your address at the right corner. Type the creditor's name, address and your account number in the right corner. If you know the name of the person in charge of your account, address the letter to him.

If You Cannot Pay Right Now

If you can not make any payments now but your financial situation will improve in the near future, tell the creditor when you think you can resume making payments. If you can afford to make smaller payments until your situation improves, suggest a monthly payment amount you can afford.

If You Cannot Pay at All

If you are unable to repay the debt and will not be able to pay in the foreseeable future, you can state that to the creditor. Explain how your circumstances have changed that prevent you from paying your debt. Stating you will not pay the debt may cause the creditor to sue you in court and enact income garnishments and property seizures. However, creditors cannot garnish income from sources such as social service programs, Social Security benefits, unemployment payments or workers' compensation. Creditors also are restricted from seizing property with value under the exemption amount for debt collection in your state. If your financial situation is permanent, your only income comes from sources the creditor cannot garnish, and if the value of your property is under the exemption amount, the creditor may simply give up on the debt and stop costly collection activities.

Apology

Tell the creditor you are sorry in the last paragraph. Don't be overzealous but give an honest apology for being unable to pay as agreed. Thank the creditor for its willingness to work with you if you proposed a lower payments or temporary forbearance on payments. Sign your name at the bottom.

Mailing

Create a paper trail to establish dates of correspondence. Send the letter by certified mail so you have proof of when you sent it. Request a return receipt so the creditor has to sign for the letter. This gives you the date the creditor received the letter.