How to handle a collection mistake

Don't let a collection foul-up disrupt your life.

Buying and selling old consumer debt has become big business and aggressive tactics and flat-out mistakes happen all the time.

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These days, a debt collector will try to collect on just about anything, including a debt you've already paid off, a debt you discharged in bankruptcy and even a debt you don't owe at all.

It's important to know your rights and how to stand up for yourself.

If you've already paid it
What should you do if a debt collector starts hassling you about a debt you've already paid off?

Fight back by firing off a dispute letter.

Under the Fair Debt Collection Practices Act, a debt collector must send you a written notice telling you the amount of money you owe and the name of the creditor.

If within 30 days of receiving this collection notice, you write a letter back disputing the debt, a debt collector may not contact you.

Once a collector receives the letter, all those annoying collection calls should cease.

It's a good idea to send this letter via certified mail so you'll know when a debt collector receives it.

If you've got proof that you've already paid off the debt, such as a payment notice from a creditor or a letter acknowledging a pay-off arrangement with another debt collector, be sure to include a copy with your letter.

This should do the trick.

Under the law, a collector may only renew collection activities if proof of the debt, such as a copy of a bill, is sent to you.

And this will be awfully hard for a debt collector to do once you send proof of the payment of the debt.

But not all debt collectors obey the law. If you send a dispute letter and those annoying collection calls keep right on coming, it's time to contact a consumer attorney.

"They have 30 days to come up with proof and the law says they're not supposed to collect during that time," says John Ventura, a consumer attorney in Brownsville, Texas, and author of the e-book "Stop Debt Collectors Cold."

"If they're still calling they're actually breaking the law. That's when you need to get in touch with an attorney that specializes in debt collection cases."

To find an attorney near you, visit the Web site of the National Association of Consumer Advocates and search for an attorney with expertise in debt collection in your area.

For more details on your rights under the Fair Debt Collection Practices Act, check out this Bankrate article.

If you don't owe it
If the debt is not yours, the best way to deal with errant collection calls is to fire off a dispute letter.

Explain that you don't owe the debt and ask the debt collector not to contact you again. If a debt collector can't come up with proof of the debt, the law forbids them from contacting you again.

If it's a pre-bankruptcy debt
To ward off collection calls on a debt that you discharged during bankruptcy, you may need to enlist the help of your bankruptcy attorney.

First, try to tackle the matter on your own by firing off a dispute letter to the debt collector. Be sure to include a copy of your discharge order, which lists the debts discharged in your bankruptcy.

If a debt collector ignores your letter, it's time to contact your bankruptcy attorney.

"The remedy is to go back to bankruptcy court and file a complaint for violation of the bankruptcy discharge order," Ventura says.

"We probably file two or three of those a month."