Can You Tell Debt Collectors That You're Dead?

Debtors have a myriad of ways to avoid paying collection agencies, but being dead has to be one of the most effective. Out of the myriad of ways debtors have to avoid having to pay debt collectors, being dead has to be one of the most effective. A debt collector could come knocking at the pearly gates, sure, but nobody would let him in.

He'd be directed to the other line...you know, the one peppered with lawyers, IRS agents and everyone who has ever worked at a DMV?

Yep. That line.

All kidding aside, if you're carrying a heavy debt load there are some definite benefits to being dead. Depending on your state of residence, death hinders the collection process considerably--making it an appealing excuse for frustrated debtors. Although the excitement is practically oozing out of your ears at the prospect of creating your own online tombstone, you should probably take the following into consideration before you break the news of your untimely demise to any debt collectors

Debt Collectors Probably Won't Believe You're Dead Without Proof

A seasoned debt collector has heard it all. Any excuse you can come up with, he or she has already fielded. The "death" defense isn't as brilliant or unique as it may seem in your head. But sometimes the story is true. After all, people die every day (40,000 if we're to believe Blue Oyster Cult). To weed out the fakers from the actual deceased, the collection agency will probably request a death certificate. And don't bet on them waiting a reasonable amount of time for the elusive death certificate to arrive. They'll likely just continue calling and asking for you--dead or undead. 

Note: Family members of actual deceased debtors are not required to send the collection agency a death certificate. Many just send a "my loved one passed away, do not contact us again" sort of letter which falls into the "Cease and Desist" category. So, theoretically, your failure to send the debt collector a death certificate isn't proof that you're actually still alive. 

Telling Collectors You're Dead May Constitute Fraud 

Nobody wakes up in the morning, stretches and then says, "Today I think I'll go commit some fraud so I can get me one of them swanky rooms at the County jail." Unfortunately, your seemingly innocent tactic for avoiding debt collectors could potentially land you in some serious legal trouble. 

Just to clarify, I'm not saying that telling a debt collector that you're dead is blatant fraud and will land you in jail. The chances of that are painfully slim. Debt collectors hear the "I'm dead" excuse more often that you think. Even if the collector, upon finding out that you are very much alive, calls the authorities and throws a Miss-Piggy-backstage calibur hissy fit, any evidence the collection agency has against you is circumstantial at best. But I have to make you aware that the possibility exists. It is possible that the debt collector can make a fraud claim and it is possible that the D.A. would move to prosecute. It is very unlikely, but it is possible. 

You're not truly tap-dancing with trouble unless you've created a forged death certificate to "prove" your alleged death to the collection agency. The irony here is that the consequences for the collection agency believing your story and writing you off as deceased are just as foul as the consequences you'd face in front of a judge. 

Bad Things Happen When the Credit Bureaus Think You're Dead

Once a creditor receives confirmation from your family members that you've died--usually via a death certificate--the creditor will notify the credit bureaus. The credit bureaus will then note that you are deceased. Once this occurs, you can't pull your credit and neither can lenders. All credit activity stops. I've never tried convincing the credit bureaus to bring one of my clients "back to life," but from what I've heard, reclaiming your credit when the credit bureaus think you're dead is a frustrating and nightmarish process. 

Stop Collection Calls Without Claiming to Be Dead 

No matter how simple the idea sounds in your mind, telling debt collectors that you're dead and convincing them of that fact takes some serious planning on your part. The end result? They start doggedly pursuing your next of kin (or in this case, they're doggedly pursuing you who have been, up to this point, pretending to be that next of kin). So the debt collectors are still calling and, since they've reported your death to the credit bureaus, your credit report is POOF! Gone. 

That's not the scenario you were hoping for, is it? Nope, didn't think so. If the collection calls are truly driving you insane, you can make them stop simply by sending the collection agency a cease and desist letter. (If the debt in question is still within the statute of limitations for debt collection lawsuits, make sure to only restrict debt collectors from calling you on the phone, not from contacting you in general. If you give a collector no way to contact you, its only option is to sue.) After receiving a Cease and Desist letter, federal law requires debt collectors to back off and let you rest...in peace. 

Related Posts:

The Partial Cease and Desist Letter

Collecting Debt From the Dead: Survivors' Rights Against Collectors

How to Stop Collection Calls at Work

Why Paying Off Collections Doesn't Improve Your Credit Score

Debtors are often shocked to learn that paying off collections doesn't improve credit scores. Your credit

report will reflect the payment, but a collection is always a negative entry regardless of how much--if any--of the debt you've paid off. Understanding how the credit scoring system works is crucial to understanding why paid collections are just as bad as unpaid collections.

Credit Scoring and Why Paying Off Collections Doesn't Matter

The FICO scoring system--the most widely used by lenders in this country--exists solely to help lenders evaluate an applicant's level of risk. Can you imagine how much money banks and credit card companies would lose if there was no credit scoring system in place? Every single time they wrote a loan or extended credit to an individual they'd be playing financial Russian roulette. The FICO credit scoring system was born to help lenders maximize profits by lowering risk.

The logic works like this: You wouldn't have a collection on your credit report if you were financially reliable (mistakes happen, this is just the general rationale). A collection indicates that you're having money troubles or are unreliable in general. If either of those assumptions are true, that makes you a much higher risk to new lenders and creditors. In order to provide lenders with the most accurate risk-assessment possible, the FICO credit scoring system docks your credit scores accordingly.

Paying off collections doesn't improve your credit report because collections are always negative. Unlike a credit card or loan account which can be a positive credit entry if you pay your bills on time or a negative credit entry if you don't, a collection account can't swing either way. Once it hits your credit report it deals the maximum amount of damage it can, and paying it off doesn't help you. You could argue that the very act of paying off the collection debt demonstrates responsibility and that your credit scores should increase as a result (and I'd agree with you), but that simply isn't the way the system works.

Credit Scores Improve Over Time Whether You Pay Collections or Not 

Fortunately, this dark cloud of debt collection has a silver lining. Collections don't hurt your credit forever. The FICO credit system takes the age of your credit report entries into account. The more recent an item is, the more relevant it is to your current creditworthiness. As time passes, both good and bad habits can change. This makes the most recent credit entries the most accurate. As such, they carry a greater weight during the scoring process.

This is good news for you if you're trying to rebuild your credit after a collection. Time is your friend. As long as you practice good debt management habits and keep your debt in check, your credit scores will gradually improve in time--whether you pay off the collection agency or whether you don't.

Credit Scores Improve After Collections Are Removed From Your Credit Report 

Once the credit bureaus remove collections from your credit report, you'll generally see a marked increase your credit scores. The FCRA states that collections must be removed seven years from the date the original creditor's debt went delinquent. The delinquency date is usually considered to be the day your original debt went unpaid for 180 days. It doesn't matter how long the collection has been on your report. It's removal rests on the original debt's delinquency. The credit bureaus can remove collections, however, for any of the following reasons:

• The 7-year credit reporting period has expired
• The collection is the result of identity theft
• The consumer successfully disputes the debt's accuracy with the credit bureaus
• The collection agency removes the entry in exchange for payment
• The consumer sues the collection agency for reporting incorrect information and wins 

How Collectors Use the Threat of Credit Damage to Make You Pay

If most consumers realized that paying off collections wouldn't improve their credit scores, many would opt to withhold those payments and put them to better use. Collection agencies are all too familiar with this fact. Because of this, collection letters often note that, if you pay the debt, "your credit report will be updated." This is misleading. The average consumer believes that this means paying the debt will improve his credit rating. In reality, all the collection agency does is update the debt's status to "paid" or "settled." This doesn't improve your credit scores.

Debt collectors also use this angle on the telephone. It isn't uncommon for a debt collector to try to convince a debtor to pay up by using a "but what about your credit?" argument. If the collection agency has already reported the debt to the credit bureaus, the damage is done. The "but what about your credit?" angle deceives the debtor into thinking that paying off the collection will lessen or even undo credit damage that has already occured. This, of course, is untrue.

When Paying Off Collections is a Good Idea

Although paying collections doesn't improve your credit score, your credit report will reflect the fact that you paid the debt. While some lenders see collections as negative no matter what, others will see the fact that you paid the collection as positive evidence that you're making an effort to keep up with your debts and be more financially responsible. Certain mortgage lenders will even require you to pay off collections before approving your mortgage loan. Paying off collection debts also prevents a whole host of negative consequences such as:

• Debt collection lawsuits
• Bank account garnishment
• Wage garnishment
• Civil Judgments
• Property liens
• Asset seizure

This doesn't happen to everyone. Unless the collection agency is working to collect debt on behalf of the government, the agency must sue you and win a judgment before it has the right to utilize more extreme collection methods. 

In the long run, its up to you how to manage your debts in the way you see fit. If that means ignoring collections in order to put food on the table or working overtime to pay your debts in an effort to alleviate your moral compass, so be it. Just remember that whether or not you choose t pay off collections, doing so doesn't improve your credit score. 

Related Posts:

Signs That a Collection Agency is About to Sue You

Improving Credit Scores After Collections

How Much Does One Collection Affect Your Credit Score?

Can a Collection Agency Charge Fees and Interest?

It isn't uncommon for a person to owe a debt for a certain amount only to find that amount has increased significantly after the account goes into collections. Just because a debt collection practice is common, however, that doesn't mean its legal. Collection agencies can only add fees and interest charges to your debt under very specific circumstances.

What the Law Says About Collection Fees and Interest Charges

Many consumers are under the mistaken impression that federal law prohibits a collection agency from demanding fees and interest charges from the debtor. This isn't always the case. Let's take a look at Section 808 of the Fair Debt Collection Practices Act, which details collection practices that are a violation of federal law:

"The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law. "

We can see here that a collection agency cannot arbitrarily decide to charge you a random fee just to pad its profit margin. Nor can it have a policy of charging fees for the same ridiculous reasons that debt settlement companies do, such as charging a fee to set up or update your account information.

Collection Agencies and Interest Charges 

We know that debt collectors cannot charge arbitrary fees, but that doesn't mean that they can't charge fees at all. A collection agency's right to tack on additional charges to your debt depends on the agreement you signed with the debt's original creditor.

If you're like most Americans, you probably don't read the fine print when you apply for a loan or credit card, or use financing to obtain goods and services. The fine print, however, almost always addresses how much – if anything – debt collectors can add to your debt.

Take credit cards for example. Credit card account agreements sometimes stipulate that interest will continue to accrue should the account fall into collections. This means, simply, that when you don't pay your credit card debt and the credit card company charges it off, the collection agency that receives the debt will pick up right where the credit card company left off – charging you interest.

Credit cards often pass collection fees on to you.

As illogical as it may seem (because, lets face it, if you couldn't pay the original debt, odds are there's no way you're going to be able to afford an even higher amount), this practice benefits both the creditor and the debt collector. If the creditor hired the collector on a contingency, the collection agency receives a percentage of the amount it collects. The higher the debt, the higher the amount the credit card company recovers and the higher the debt collector's profit. A higher debt also ensures that a debt collector can offer you a debt settlement without losing money.

General Debt Collection Fees

Collection agencies don't collect debt out of the goodness of their hearts. Quite the contrary. Creditors pay dearly for the service. Well....they used to. Recently more and more creditors are including provisions in their contracts with consumers stating that, should the debtor default, the debtor will be responsible for paying the total cost of collection. Just look at this snippet from Capital One's cardholder agreement:

"You must pay us all of our collection expenses, attorneys’ 
fees, and court costs unless the law does not allow us to 
collect these amounts. "

By passing the debt on to the consumer, creditors can save money and further increase their profit margins. Unfortunately, this also means that you may end up owing a much higher debt to the collection agency than you did to the original creditor.

Related Posts: 

Bill Collectors Demanding the Wrong Amount

Improving Credit Scores After Collections

Fighting Collection Agencies

If you, like so many Americans, are fighting collection agencies and suffering from undue emotional and financial hardships as a result of collector harassment, take heart – you hold the cards. No, I'm not trying to sell you anything. What I want to do is give you the information you need to fight the good fight and demonstrate to the debt collectors hot on your tail that they need to find easier prey.

As a professional, its incredibly disheartening to stumble upon websites that claim to offer valuable advice on how to fight collection agency debt yet instead instruct readers to do things that will either make the situation worse or get them sued. Granted, risks are an inherent part of this industry, and some methods are riskier than others, but consumers deserve to know just what they're up against with certain debt avoidance tactics.

Before we Begin: The Disclaimer

I am not an attorney. I am a consumer advocate and a credit specialist. The information I provide is not to be considered legal advice nor do you and I share any variety of attorney-client privilege . My posts are a compilations of years of experience and a nose-to-the-grindstone study of the law. Anything you choose to do, you must do at your own risk (but I promise to explain those risks to the very best of my ability).

What Is Collection Agency Debt?

Collection agency debt is any financial obligation owned by a collection agency. Don't get these companies confused with collection departments. They are very different beasts. I will explain the difference in a later post. As a general rule, if you're getting telephone calls and letters concerning a debt you haven't paid in over six months, you're dealing with a collection agency.

Collection agencies buy debts from hospitals, credit card companies, utility companies, mortgage companies and rent-to-own facilities for much less than the debtor actually owes...much, much, much less. The company then adds some outrageous fees and goes after the debtor for the balance. The majority of these agencies will continue to add "late fees" (yes, I'm laughing) and interest to your debt so that they can eventually offer you a settlement and make it appear to be a good deal. Thus, your unpaid debt increases for a while before sharply declining.

While all this is going on behind the scenes, you're getting inundated with phone calls and letters from debt collectors trying to extract even the smallest payment from you. Paying even a penny, however, is usually one of the worst mistakes you can make when fighting collection agency debt. Don't do it!

Fight The Debt Collectors 


Luckily, you have a plethora of consumer protection laws backing you up. No matter how you may have criticized your government in the past (and lets face it, we all have) they've done some real stand-up stuff for you in this area. Your job now is to take advantage of the numerous protections that are in place (and yes, a few of the loopholes) in order to escape the situation you're currently in without having to work yet another debt payment into your already strained financial budget. I'm going to show you how to do that.

Not only do I hope to teach you the skills you need to start fighting collection agency debt and breathe easy once again, I hope that you'll take this information with you and inform others so that they too can remove the noose and get their lives back.