When it comes to debt collections, creditors have a wide array of tools at their disposal to recoup what a debtor owes. One of these tools is collection letters, which come in three stages; a third stage collection letter is the last notice before the debtor faces a lawsuit.
What Triggers Stage 3 Collection Letter
Stage 3 collection letters are generally a last resort for creditors in their attempt to collect a debt. The debtor likely received at least two other letters informing him of his delinquent account status. By the time the third letter goes out, the debtor is usually anywhere from 90 to 180 days late in making a payment.
Typical Stage 3 Letter Language
While the previous two letters sent to the debtor may be friendly, but stern in tone, the stage 3 letter minces no word. The debtor receives a formal warning that the account is turning over to a collection agency, which will hurt the debtor's credit rating and his ability to borrow money in the future. The letter will also note that the company plans to sue the debtor to collect the debt.
Responding To Stage 3 Letter
If the debtor has yet to contact his creditor, he should do so upon receipt of the third letter. Placing a phone call to the business is convenient, but due to the dire situation of an impending lawsuit, a written letter to the business helps document correspondence and the debtor's willingness to cooperate. If you are the debtor, you will be able to explain how you came to be delinquent, and offer some reason as to why it took so long for you to respond to earlier mailings from the business. If you disagree or dispute the accusation that you owe anything in the letter, the onus is on you to promptly document your evidence and submit it to the business. If the creditor provides no resolution, you may have to go to court to settle the matter.
Work Out Payment Terms
The Stage 3 letter will likely spell out the terms in which the business wants you to comply by. The goal is to collect balance in full since you are significantly late in payments. While paying off the debt in full is ideal, your financial circumstances may not always allow this. Being delinquent on a bill for months typically indicates financial hardship. If you can't pay off your debt in full, your correspondence should include a clear plan about how you plan to pay off your debt. It should state how much you can pay on a regular basis and over what period of time. If the business rejects the offer, as it will state as an option in its stage 3 letter, you will have to prepare for court.
Stage 3 Letter Legality
The Stage 3 letter is perfectly legal in all states as long as it complies with the Fair Debt Collections & Practices Act, or FDCPA. The letter can not mislead or lie to the debtor about the consequences of failing to respond.
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