Who knew that there was a season for debt collecting? My friend and colleague attorney Mike Cardoza does. See what he says.
The beginning of the year through about the end of March is the big season for debt collection!
Why? Because collectors are pretty sure that you have some money in your pocket – right now – in the form of your IRS income tax refund.
Collectors want your tax refund
At the beginning of every year, debt collection companies work like the devil to attempt to calculate exactly when the IRS will issue those refund checks so that they can time their collection efforts for that perfect moment after you’ve gotten your refund, but before you spend it.
Since the IRS is close-lipped about its refund operations, debt collectors closely track when you’ll get your check by using other reliable sources of data, like Walmart’s report of how many IRS refund checks were cashed nationwide in the prior week. I’m not kidding about this stuff.
So, from now through the end of March, you’re going to get more phone calls and debt collection notices. You’ll even get offers to settle old debts for dimes on the dollar.
Should you settle with debt collector
A settlement could be a good deal for you – but be careful. I recommend that you don’t make any partial payments – particularly on debts that are getting old.
Any payment on a debt restarts the statute of limitations.
That gives the debt collector a brand new bunch of years to SUE you to collect it.
If a debt that’s been delinquent for more than 7 years ago, by law it can’t appear on your credit report. So you have to ask yourself, “who cares?”
Old debts may still be legally enforceable, even if they can’t be reported on your credit
Same thing goes for debts (in California) that are older than 4 years since delinquency – they can’t get a judgment against you anymore to collect it (unless you make a partial payment), so, “so what?’ (Remember, that paying an old debt WILL NOT remove it from your credit report).
Even though it’s debt collection season, collectors still have to follow the rules – and if they don’t, they may be liable for violating the law. Their missteps could wipe out your debt and entitle you to compensation.
What’s the best use of tax refund
Cathy: So now you know that you are in the debt collector’s cross hairs since they expect you to have a tax refund to “share” with them. What should you do?
Ask yourself the following:
- Is my tax refund earmarked in my budget for some necessary expense? Lots of my clients use tax refunds to pay property taxes or essential bills.
- Will settling this debt solve my debt problems or is this just one of many delinquent bills? Maybe the tax refund should fund a bankruptcy.
In the bigger picture, is your tax refund better spent funding your retirement savings? You do plan on a long, comfortable old age, don’t you? More on whether to pay debts or fund retirement.