How to Dispute a Debt Successfully With Your Creditor
Debt, or even money in general, can be a touchy subject. That being said, financial literacy is underdiscussed in society, which has led to two main issues. First, this lack of discussion regarding financial management is one of the reasons people don't know how to manage their personal finances. This just leads people to make simple financial mistakes.
Second, this lack of discussion makes people feel alone in their financial woes. But you are not alone. The average American household debt is a whopping $96,371.
The first step is determining if you have a problem or not. While debt is not a problem in itself, debt can lead to problems if it isn't managed properly. If you're here, then congratulations. You're taking the first step to taking back control of your debt. Read on, and I will explain to you not only how to dispute a debt, but also what debt is, how you can manage it, and how you can get out of it.
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Getting out of Debt
Getting into debt can be easy, it's the getting out of debt that takes a bit more effort. It's not as simple as waving a magic wand, but it could be as simple as finding ways to dispute a debt successfully with your creditor or finding was to pay off your debt.
How Can You Dispute a Debt Successfully with Your Creditor?
If you've ever asked (or let's be real, Googled) how to dispute a debt, then you're not alone. Follow these steps to dispute a debt successfully with your creditor.
1. Don't Ignore a Letter from a Collection Agency
It may make you feel better to just throw a letter from a collection agency out without reading it or to read it and then ignore it. Don't do this. It is important to be proactive when you receive a letter from a collection agency, and that means knowing exactly what is being claimed. A few things to pay close attention to are:
the original creditor's name
the balance that the letter says you owe
2. Learn Your Rights
The first step after finding out what the claim against you is is to learn your rights. You can find your rights within the Fair Debt Collection Practices Act (FDCPA) under § 809. Validation of debts (5)(b) Disputed debts, which can be found on the Federal Trade Commission's website.
If the original creditor's name and address are not included in the original letter from the collection agency, then you have the right to request this information from the collection agency. During this time, the debt collection agency must cease further action until verification is mailed to you, the consumer.
It is also important to keep these three rights in mind:
1. Right to notice of the debt
2. Right to dispute the debt
3. Right to verify the debt
3. Write a Letter to Dispute the Debt
Make sure to send this Debt Dispute Letter within 30 days of the receipt of the debt collector's letter to you.
Things to Include in the Debt Dispute Letter
In the header (below your contact information and above the collection agency's contact information), write CERTIFICATE OF MAILING (see below, under ‘Things to Keep in Mind When Sending the Letter’) — only if you send as Certificate of Mailing.
Your personal identifying information should be included.
Include important identifying information, including the name of the company you are said to owe debt to and the account number. If this information is not included in the collection agency's letter(s) to you, then remember that you have the right to verify the debt by requesting this information from the collection agency.
The most important thing to include in this letter is your reasoning for why you believe you don't owe the debt. This is important because the debt collector will then be required to prove that you actually do owe the debt before they are allowed to proceed or take any actions against you.
At the bottom of letter, write in a cc: and the name of the original creditor's name (as well as anyone else you are officially sending the letter to).
Things to Keep In Mind When Sending the Debt Dispute Letter
Mail your letter with a Certificate of Mailing or, better yet, as Certified Mail, which will provide proof that the mail was both shipped and delivered.
You could also request a return receipt, so that you have proof that the debt collector actually received your letter.
Send the original copy of the letter to the collection, but also keep a copy for your records.
You may want to consider sending copies of the letter to the Consumer Financial Protection Bureau and your local Department of Consumer Affairs. (If you do this, make sure they are included after the cc: [original creditor's name] (see above).)
Attach any copies of documents that support your dispute.
This may include a proof of payment (if you already paid), a police report (in the case of identity theft), etc.
4. Send a Second Debt Dispute Letter to the Credit Reporting Agencies with the Same Information
This will make sure that they are also aware that the debt is in dispute. This will hopefully ensure that the debt in dispute does not affect your credit score or show up on your credit report.
However, it may be the case that the collection agency already sent the information to the credit reporting agencies before you had a chance to send them a Debt Dispute Letter. If this is the case and the debt is negatively affecting your credit score and is showing up on your credit report, then you may want to send the credit reporting agencies another Debt Dispute Letter.
5. Contact an Attorney
If you aren't having success disputing a debt on your own and the collection agency is harrassing you, then it might be time to call in the big guns. You could contact an attorney to go over your options and see if a lawsuit is the right answer for you.
A lawsuit may be a good option for you if a collection agency is talking to others (your friends, family, boss, etc.) about your debts or if the collection agent is pretending to be an attorney themself, which is against the law.
It never hurts to contact an attorney for legal counsel to discuss your situation.
6. Negotiate the Debt
If you aren't able to successfully dispute the debt, then it may be time to consider negotiating the debt. Even if it is proven that the debt claimed is valid, it is still possible that you may just not be able to pay it.
If you negotiate the debt with the collection agency, you may be able to achieve debt settlement, or at the very least make a payment arrangement.
A free debt counseling service or debt counselor may even be able to help you in your negotiations with the collection agency.
Paying off Debt
There's no one best way to pay off debt, but if you want to get rid of debt, then paying it off is a must. This may seem overwhelming and impossible, depending on your situation, but it is important to remember one thing: You can do this.
Here are a few tips for paying off debt faster:
Pay more than the minimum
It may seem easier to just pay the minimum every month, but you won't get rid of your debt quickly by only ever paying the minimum — just think about how quickly interest adds up.
Increase your income
This may be easier said than done, but if you want to pay off your debt faster, then you need to earn more to spend on paying off debt. Side hustles can give you a bit of extra cash without taking up too much time.
Budget!
Tracking your money and having a budget — that you stick by — will help you pay off your debts faster and reach your personal financial goals.
You can also read this article on how to get out of debt and stay out for additional tips on how to pay off your debt. And now, let’s cover some debt basics, to make sure you have all the information you need!
What is Debt?
What even is debt? A debt is just money owed from one party to another. However, when people say they're "in debt", it's usually because they have one of the following types of debt:
Credit card debt
Student loan debt
Mortgage loan debt
Auto loan debt
Business debt
As I mentioned, not all debt is bad. Some debt may be necessary. For instance, if your parents could not afford to put you through college, then maybe borrowing student loans, and thus putting yourself into student loan debt, may be worth the higher salary and ability for job advancement than not getting your degree. The same goes for auto loan debt: Depending on where you live, you may not have a good public transportation network in your city, and you may need a car to get to work, the grocery store, etc. If you can't afford a car on your own, an auto loan may be an important investment.
On the other hand, if you have credit card debt because you spend too much on shopping for non-necessities, then that debt was not really essential to rack up. Don't worry though. If that's the case, you can still work towards getting out of debt, and awareness is the first step to making new, smarter personal finance habits.
The first step to taking control is by doing research and educating yourself on the topic. Here is a great guide to understanding debt to go through if you still have questions about debt or how debt works.
Debt Management
Debt management means being aware of your debt and taking control of your personal finance. If you want to get out of debt, then you will need these four elements:
Information and Education
This is what you're doing now. You're gathering information and educating yourself on the topic. This valuable information will then enable you to take control and manage your debt on your own terms.
Tools and Connections
You're not alone, and you don't have to manage your debt all on your own. Just like you may rely on a plumber to fix a burst pipe or an electrician to figure out why your fuses keep blowing, you may benefit from relying on the tools and connections available. There are debt counseling services and even debt apps that can help you manage your debt.
Emotions and Commitment
Making a plan doesn't help if you don't stick to it. Once you start tracking your debt, you may find yourself facing an unwelcome reality check. Once you know where you stand, you may not be happy with all the new responsibilities you have to face. It will take commitment to follow through.
The Money
You can plan and plan, but without the money, you can't get rid of your debt. This is why it is important first and foremost to make sure that the money you bring in is more than the money that goes out.
Tracking Your Debt
You can't make a plan before you know where you stand with your debt. First you need to make a budget and see where your debt fits into your overall collection of personal finances. Then, once you have this screenshot of what your personal finances look right now: it's time to start tracking your debt. You can track your debts on your own with a spreadsheet or with the assistance of a debt tracker app.
Regardless of what debt management plan you decide to follow, it is important to continue to track your debt over time. If you don't, then you won't be able to see how, or even if, your debt management plan is working for you.
Visit the Debtry Store
If you're looking for a debt tracker, then look no further. Goalry Mall and the Debtry Store can help with your debt management.
The Debtry Store is a store of free debt tools, which can help you organize your personal finances. The Debtry Store does this by connecting your accounts all in one place, allowing you to more easily review your current debts. You'll also be able to use The Debtry Store to review your options for refinancing your debts, as well as access real advice on debt management and repaying your debts faster.
The Debtry Store is just one of many helpful Stores within Goalry, your Financial Goal Mall. Goalry allows you to reach your financial goals and comparison shop for any money matter — all in one place. Whether your financial goals have to do with creating a budget (Budgetry), finding the right loan for you (Loanry), or get information about taxes and compare tax offers (Taxry), Goalry can help. Goalry also has an app that can help you track your debt.
Making a Plan
After you know how much debt you have, it is time for your personalized debt management plan.
Do it yourself
Hire a Financial Advisor
If you're seeking help from a financial advisor, it's important to find a debt management program you can actually manage, one that fits your own needs and goals. One benefit of utilizing a counseling organization is that a counseling organization may have some kind of leverage with creditors. This may allow them to renegotiate with and attain special compromises on payment arrangements, penalties, etc. They can also educate you on issues you may face, as well as help you achieve personal financial literacy, which will help you make wiser choices in the future.
However, creating a debt management plan on your own is also a good option for many people. You can start off small, just reading an article or two a day for a few weeks, educating yourself. You can read Debtry and other blogs across the Goalry family, as well as other reputable financial sites on the Internet. Once you have an idea of what you need to do, you can make a plan and track your progress. If you're still not seeing progress (don't expect optimal results immediately), you can make small changes and try again, until you find a good plan for you.
It's never too late to change your mind on which option is better for you. You may decide to create a debt management plan on your own and then realize you need an expert to help you. That's totally fine. Instead, you may create a debt management plan with the help of a financial advisor and, once you have your plan and are on a path to success, you may realize that you can handle the rest on your own. That's totally fine too. This is a personalized process, so what works for others may not work for you and vice versa.
Conclusion
Now that you know how debt works, you can start making your debt work for you. Knowledge is power, and knowing how to dispute a debt means that you can finally take control of your finances. Hopefully you now feel empowered to take your debt on, but if you need some additional support and resources, Goalry can help.