Ease the stress of dealing with debt collectors

After struggling with credit card debt for years, the Pasadena social worker answered an advertisement from a debt-settlement firm last December.

She followed its instruction to stop making minimum payments and to let the firm's representatives handle everything.

That's when she started getting calls.

"Debt collectors were calling every day, threatening to sue me and take my wages," she said. "There was no reasoning with them at all."

Ruiz, 40, made a classic mistake, said Gerri Detweiler, co-author of "Stop Debt Collectors: How to protect your rights and resolve your debts."

Instead of dealing with her creditors directly -- or through a nonprofit credit counseling service -- she paid precious money to a settlement firm that gave her bad advice and managed to get her into more hot water.

Unfortunately, Ruiz's experience is more the rule than the exception. Consumers commonly make costly mistakes when dealing with debt collectors.

"Anyone could find themselves on the wrong end of a collection call," Detweiler said. "That's why it's important to remember that you do have rights and you don't need to panic."

Here are some things to do -- and things to avoid -- when confronted by debt collectors.

Don't hide: It's tempting to avoid creditor calls when you don't have enough money to pay, but that's a big mistake, said Bruce McClary, spokesman for Clearpoint Financial Solutions, a national credit counseling service.

"When you duck the calls, the situation gets worse," he said. "You can put yourself in the driver's seat by telling the person what's happening."

If you don't answer the phone or return calls, creditors will call more often and may call your friends and relatives to try to find you.

It's best to contact your creditors before you start making late payments, McClary said. But if it's too late for that, just explain what's happening and what you're trying to do about it.

"A little honesty goes a long way and significantly enhances the chance of a good outcome," he said.

Don't pay dormant debt: If you're being contacted about an old debt, the first thing to do is consider whether you actually owe the money, Detweiler said.

Every state has a statute of limitations that specifies how long you can be hounded about an unpaid debt. Typically, once that limit -- typically three to 10 years -- has been reached, you no longer need to pay.