Debt Consolidation

What a Debt Validation Letter Is, And How to Request One

debt validation letter

You received a phone call from a debt collector who states that you owe $532 from a previous creditor. The creditor’s name doesn’t sound familiar and you don’t remember owing $532. The collector is adamant that the debt is yours and wants payment immediately.

Stop. Before making any payment arrangements, you have the right to ask for a debt validation letter from the collector, which shows proof that the debt is yours. Or, if you can obtain the name and address of the debt collection agency, you can write your own memo to them requesting verification of the debt.

What is a debt validation letter?

When a debt collector makes contact with you about an unpaid debt, you may request a debt validation letter be sent to you that explains the due amount. This letter will include:

  • Name and address of the creditor
  • Debt amount
  • Explanation that unless you dispute the debt within 30 days, it will be considered valid
  • Notice that if you dispute the debt within the timeframe allowed, the collector will obtain further verification of the debt and mail it to you

Once you have requested a debt validation letter, the debt collector must send it to you within five days of first contacting you. If you dispute the debt, the collector must then stop all collection activities during this 30-day period until the debt is validated.

3 reasons why you should request debt validation

  1. It verifies the debt is yours. Mistakes can be made. A debt might be listed as yours, but perhaps you’re a victim of identity theft or an error in record keeping. A debt validation letter should provide enough proof that either the debt is yours or that, indeed, a mistake has been made.
  2. It helps you better understand the debt. Companies buy and sell debt all the time, so even though the debt collector might be calling under one creditor’s name, the original creditor might be the one you recognize. By understanding how debt is repackaged and sold, you will understand why it’s important to ask for additional information on the original creditor.
  3. You want to clean up your credit. If you decide to make a big purchase, such as to buy a home, you may first want to clean up your credit so that the credit approval process runs more smoothly. Eliminating incorrect debt on your report is a great first step because it can improve your credit score.

Sample letter requesting debt validation

If a debt collector has contacted you and you want to determine whether the debt is yours or not, you can also send a letter to the company by mail or email mail requesting a validation of debt. This provides a paper trail for you. You can find a sample letter by clicking below.

Sample letter to request debt validation

What to expect after you receive a debt validation letter

Once you receive your debt validation letter from the debt collector, you have 30 days to respond to it in writing. You can:

  • Confirm or deny that the debt is yours
  • Explain why you should not be required to pay it (if applicable)
  • Ask for additional information

Once the debt collector responds to your request for more information or you or the agency has validated that the debt is yours, they are allowed to begin contacting you again to make payment arrangements.

4 ways of dealing with unexpected debt

  1. Determine whether the debt is within your state’s statute of limitations
  2. Arrange a payment plan
  3. Consider ignoring the debt
  4. Look into debt consolidation and other loans

1. Determine whether the debt is within your state’s statute of limitations

Debt collectors only have a certain period of time, called a statute of limitations, to collect on unpaid debt. The statute of limitations varies from state to state.

If the debt falls past this statute of limitations, it will be considered time-barred and you cannot be sued for it. Be careful, though. If you decide to pay anything on a time-barred debt, you have given the debt life again and the clock on the statute of limitations restarts.

2. Arrange a payment plan

If it has been confirmed that you owe the debt in question and you want to pay it off, consider asking the debt collector for a payment plan. The debt collector will work out an arrangement that is acceptable to both parties. Get this arrangement in writing and, most importantly, confirm that the debt will be removed from your credit report.

3. Consider ignoring the debt

If you don’t have the financial means to repay the unpaid debt and the debt collector isn’t willing to work with you, you might consider ignoring the debt altogether. The damage to your credit is already done, after all. But be warned: Once a debt is validated, debt collectors can continue to contact you for payment or sue you. (If you are sued, do not ignore it and make sure you or your attorney shows up to court.)

The Fair Credit Reporting Act (FCRA) determined that negative accounts will remain on your credit report for seven years from the original delinquency date. Having a time-barred debt on your credit report can affect your credit rating and your eligibility for credit, so keep that in mind if you choose not to pay.

4. Look into debt consolidation and other loans

If you plan on repaying the debt and you also have other debt that you are trying to pay off, consider a debt consolidation loan. By combining several debts into one loan at a potentially lower interest rate, you can save money and simplify repayment. Or, if you need to free up cash flow, you can opt for a loan with a longer repayment term for lower monthly payments. (Though you’ll pay more in interest charges over the life of the loan.)

Depending on the amount of your debt and the other debt you owe, you may also consider tapping into your home’s equity if you are a homeowner. You can use the cash to pay down any debts, which in turn will improve your credit rating. Remember though that a home equity loan is secured in your real estate, so do not falter on paying it back or you could lose your home.

 

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