What do you do when a collection agency is ruining your life? Today Clark heard from a caller who had a medical procedure and then moved. A collection agency had been sending bills to the old address for the portion that was unpaid by insurance. Finally, they started making harassing phone calls.

The caller genuinely was ready to settle the debt, but the agency was unwilling to send him any paperwork to verify the amount that was owed.

Under the Fair Debt Collection Practices Act, a collector must send a 5-day letter stating what the debt is, why it's owed and how much they believe you owe. The recipient then has 30 days to respond by either contesting it in writing or making payment arrangements.

There's a lot of intimidation in this industry because most people don't know their rights and responsibilities.

Is a collection agency allowed to repeatedly berate you over the phone? No, it's your right to instruct them in writing not to call you again if they're abusive. The sole exception here is if the collector works for a bank that's trying to collect on its own accounts. They can't be made to stop calling.

You may want to use an answering machine to record your phone calls with collectors. Many states require that you disclose that you're recording. Most collectors who sense they're dealing with somebody who knows their rights will not push it. They're just after money, not a court battle.

Here's another tip: Never give them your checking account number if you want to pay. You may verbally agree on partial payment to settle a debt, and they'll turn around and take extra from your account. Get it in writing first. If you really suspect their honesty, pay by money order or use a separate checking account to settle up.

One final note: Under the statute of limitations, you have a right not to pay old debt once it exceeds a certain time limit. What that limit is varies by both state and the type of debt.

However, if you get hit with a lawsuit over an old debt, you must show up at court and declare the debt past the statute of limitations -- or you'll be hit with a default judgment. Then you'll owe money that legally you had no right to be sued over.

Of course, if you owe, the best action is to always to make partial or complete payment as soon as possible.

As people are being financially squeezed, the rate of delinquencies on auto loans, credit cards and HELOCs is rising dramatically. Of course, it goes without saying that the collection agency biz is a huge one. It's also the latest thing to be outsourced, according to The New York Times. Collection agency calls are being sent offshore to countries such as India.

As kind of a corollary to this, you may notice that you'll start receiving collection calls out of the blue if you have old debts. Collectors are looking at the tax rebate checks as money to be tapped immediately on past due debts.

If you do get the call, what are your rights? You have the right to tell them in writing not to bug you. Use Clark's drop dead letter to help. If they don't comply, you can take legal action against them.

There is one exception to this rule. Banks are allowed to use their own in-house employees to act as collectors. They must, however, stop short of threatening you with physical harm.

Collectors are also allowed to call about a debt even if it's very old. In many states, these "zombie" debt calls present a double danger. If you pay them even as little as $1, they can turn around a file suit on the debt to get a judgment against you. Even if it's 25 years old! So watch out…

Finally, Clark always wants you to honor your debts. If you can't do it right now, wait until you get back on your feet financially and then do it.

RIP-OFF ALERT: Zombie debt is a lucrative and illegal part of the debt-collection world that Clark wants to warn you about. Scavenger collectors buy up expired debts that can be up to 30 years old for as little as 1 penny on the dollar. Then they unleash vicious collectors to try to collect, and frequently violate the Fair Debt Collection Practices Act in the process. They may be going after debts set aside in bankruptcy; stemming from ID theft; or that have passed the statute of limitations, which is typically 4 years on credit card debt. There is no legal way they can collect these debts, but that doesn't stop the scavengers from trying to intimidate you.

This is not a discussion about whether or not you should pay your bills; this is about what your rights are on old debts. The scavengers are so good that they typically collect about 13 cents on every dollar. Many of them also engage in illegal activities by wrongfully putting old debts back on your credit report; harassing you over the phone; or secretly taking money out of your account. If you're being harassed by a zombie debt collector, send them a certified letter stating the debt is invalid and instructing them to stop contacting you. But beware that scavengers don't care if the debt is valid. They've declared war on your wallet and will use any tactics. Be tough and know your rights.

Clark has taken about 8 calls over the last several months that he thought were UFO questions with no connection to each other. People have been telling Clark they're getting harassed by collectors over debts that were wiped away when they filed for bankruptcy, or that debts that had been thrown out in bankruptcy court are showing up on credit reports as outstanding. Then Clark read Business Week's recent cover story "Prisoners of Debt" and it all made sense: Certain banks, collection agencies and credit bureaus are working together to undermine existing bankruptcy laws. When you file for Chapter 7, you get a bad mark on your record for 10 years. The tradeoff is that you also get to wipe out any credit card debts clean and clear. You usually first go through an evaluation process to see if you should pay a portion of your debts back under Chapter 13. Today you can only do Chapter 7 if your situation is hopeless.

Business Week discovered that Capital One, Bank of America, Chase and Discover are ignoring these bankruptcy laws -- by accident or on purpose -- and illegally selling debts to collection agencies so they can go after you. This flouts the law of the land, whether you agree with it or not. When a Chase lawyer was questioned by a judge about why they've sold bankrupt debts, the lawyer replied that it happens all the time. The Business Week article says the banks claim this is all an unintentional mistake. But there's a clear pattern here: First the lenders fail to wipe out the debt when you file for bankruptcy. Then they sell it off to collectors and score some cash. Next the collectors try to illegally collect the money. Finally, the credit bureaus act as co-conspirators by listing debts on your report that aren't valid. So if you've filed for bankruptcy and are caught in this vicious circle, contact the banks and bureaus by phone and in writing. Try getting them to update the status of your legally expired debts. If that doesn't work, go back to the bankruptcy court where you filed and talk to the judge.

Did you know there are new requirements for reporting debts or delinquencies? Clark recently had the chance to speak with two experts on the Fair Credit Report Act and the FACT Act (Fair and Accurate Credit Transactions Act). What he learned was illuminating. For example, if you have a credit card debt that went delinquent in January 2000, you might start getting calls from collection agencies in December 2006 -- one month shy of the seven-year expiration limit. What's probably going on is that the collection agency has put a new date on your account. By doing this the agency is breaking the law. If the debt has moved beyond the statue of limitations, you have no legal requirement to pay that creditor anything. Bear in mind that Clark is not talking here about the ethical obligation to pay up -- that goes on forever. He's only talking about your legal obligation.

So what can you do if your debt has passed the statute limit and the collection agency puts a new date on the account just to harass you some more? You can sue them in your own small claims court where you live. They have to come to you and answer for their actions! Just beware that these legal battles can be a two-way street. There are a lot of unsavory characters in the collection business who will try to sue you on expired debts. If you don't show up in court, they get a judgment in their favor when they didn't deserve it in the first place. Meanwhile, Clark also shared some personal anecdotes about working as a bill collector in graduate school, and trying to collect on past debts when he had his travel agencies. To do the latter, he often showed up in person to collect his money! He was always polite and calm. And you know what? It actually worked and he got a lot of money that way.

We are defaulting on our home equity loans more than ever, while simultaneously defaulting less on our credit cards. What's wrong with this picture? Credit card collectors are so aggressive that even if you're one minute late, they're all over you like a cheap suit. They know there's nothing they can really do to you, so instead they use bully psychology to force you into paying up. Contrast that approach with the one taken by your mortgage lender. If you're late on your home payment, they're very non-confrontational. Why? Because they can actually take your house away!!

Human nature dictates that people will pay the person who screams the loudest. But that's the wrong approach. Instead, try thinking about your finances like you would a triage room at a hospital: the doctor sees who has a life-threatening sickness and immediately treats that person. Similarly, it's important to prioritize your monthly bills. Your mortgage should always come first, followed by your transportation bill or car loan -- so you can get to work and keep earning! Try dropping your credit card debt lower on your list of monthly payments. People immediately say, "Well, I'll ruin my credit if I do that." But if you don't have enough money to pay your mortgage, chances are your credit is already being messed up. On a related note, many folks think you can just tell a credit-card collection agency not to call you. Unfortunately there's a special loophole in the Fair Debt Collection Practices Act that the banks got written in. It states that if the collector is an employee of the bank, he or she is exempt from many of the regulations. So they can continue to hound you day and night. If you're getting threatening phone calls where collectors are cussing you out, try taping it. Then bring the tape to your nearest TV station and they'll be more than happy to put the bank on the hot seat.

Northshore Agency has just had a class action lawsuit filed against them in New York for making harassing phone calls. The allegations are that they are attempting to collect debts that are not valid. There are legitimate companies in the debt collecting business and it is a necessary enterprise. If you are being wrongly harassed though, record the phone conversations and do not get taken advantage of. Get the harassment on tape and be ready to take legal action if they won't stop. Stand up for you rights and don't get intimidated.

The debt collection industry has been a steady source of complaints to Clark’s show. That’s due, in part, to the fact that the debt collection industry is in a major growth phase right now. They have new tactics in buying up obsolete and uncollectible debt from banks. They offer those banks money to have the right to collect on debt that’s been around for years. Clark refers to these outfits as scavenger collectors because they end up making 12 or 13 cents on every penny they pay to the banks. The problem is that employees break the law to collect the debt. The law is called the “Fair Debt Collection Practices Act” and it prevents collectors from mistreating you in any way, including calling you if you don’t want them to. Even worse, these scavenger collectors go after people who don’t owe a debt. They simply pick on people who have similar names to those who owe money. So, you definitely should not be harassed by these people in that case. To ensure you are not, record the calls and let the collectors know they are being recorded. Tell them they are in violation of the law by calling you and you will sue them under that law if they contact you again.

Clark is being asked often lately about “debt consolidation” or “debt representation” firms. They all have fancy names, but they do the same thing. They claim they can take your debt and reduce it, as long as you pay them a fee up front. In reality, they are disasters for your wallet. And some are crooked. They are rogue businesses that take you for all you’re worth, even if you don’t have debt. They take money from people will similar or the same names, and it could happen to you. So, if you are contacted by a collector saying you owe money, you must ask for proof of the debt. If they are legitimate, they will send you the 5-day proof letter that they are required by law to send in the mail. So, even if you legitimately owe a debt, never give your checking account number over the phone. Make sure you send a check, and never post date it. Be on your guard.

What’s going on in the debt collection industry has become a national disgrace. Bill collectors are now going after anyone who has the same name or a similar name to someone who owes a debt. The collectors are threatening them and ruining their credit, event though the consumers are innocent of any wrongdoing. Yet, the companies are able to do this because the federal government isn’t doing its job and monitoring these companies. The Boston Globe wrote a story recently about this sham, and the paper got deluged by responses. Reporters could not find a single individual who actually owed a debt. Yet, people keep paying money they don’t owe. Sometimes, it’s because they’re harassed to the point of insanity. Other times, they are told they will not be able to close on their home loan if they don’t pay. But there is a way to fight this. If you get a letter saying you owe money, you must respond. You want to send a certified letter, saying you do not owe the debt and you will sue if you are contacted again or if the debt is reported to a credit bureau. Never pay money you don’t owe. And, if the debt is reported, you sue! For a copy of Clark's drop dead letter, click here.

If you owe a debt to a credit card company and that company uses an in-house collector, that bank can use any tactic to come after you. Aside from harming you physically or threatening to put you in jail, in –house bank collectors can do just about anything to get the money you owe. It’s a special exemption under the rules of the Fair Debt Collection Practices Act. But most debts are turned over to third party companies who use these threatening tactics even though it’s illegal for them to do so. As a result, people are getting scared into filing bankruptcy. Clark saw a sign the other day, saying “Bankruptcy Is Still An Option.” That’s a step most people don’t need to take, but these creditors convince people there is no other way. It’s best to honor your debts and pay them a soon as you are on your feet. But according to the FDCPA, collectors must follow these rules: 1) A collector cannot call you after you’ve told them not to do so. 2) A collector cannot call you at work. 3) A collector cannot tell other people about your debt. 4) A collector cannot threaten you (with court, jail or other). And lastly, please don’t ever give a collector your bank account information or give them post-dated checks. You want a written agreement about how the debt will be paid before you pay a cent.

Bill collectors come in all shapes and sizes. Some play it straight up and follow the law. Others don’t follow the law at all and the number of rogue collectors is growing out of control. The Federal Trade Commission reports that its No. 1 complaint is about scavenger bill collectors, also known as “zombie collectors.” The tactics they use are shocking, according to the Fort Lauderdale Sun Sentinel. For instance, you get a letter or call out of nowhere for a bill that was never yours. The person may have the same or a similar name, but it’s a different person. These collectors try to browbeat the money out of the wrong people by filing suit against them. If those people don’t respond to the court and defend themselves, a judgment is entered and the debt is passed on to them. Yes, even though the debt was never yours, it legally becomes yours. That’s why you have to protect yourself. The only way to preserve your rights under the Fair Debt Collection Practices Act is to mail a certified letter with proof that it’s not yours. You want to keep a copy of the letter in case they come back later and try to pin it on you. If you don’t, the debt will sit there and it could prevent you from closing on a home in the future. If you don’t act, a lie becomes the truth.

Bill collectors are trying to make it legal for them to repeatedly call your cell phone to try and collect a debt. The justification is that people usually give a cell phone number as a contact when they hire a service or conduct business. This law is probably going to go through, so Clark has a suggestion for you. Many people no longer have a home phone number so they give out their cell phones. But there is a way to give out a home phone number that doesn’t cost you a thing. Lycos is offering free home phone numbers that are answerable through your computer. So, check it out and give companies that number instead. Also, if you’re being harassed by a bill collector, your greatest ally is your answering machine. Record these calls and tell the bill collector that because you are required to. And, you can be sure the collector will start to behave or just hang up all together when you tell them that. It is against the law for bill collectors to harass you, so don’t take it.

Have you heard of “debt buyers?” Clark likes to refer to them as scavenger collectors because what they do is wrong. These people go to a credit card company or bank and buy that organization’s outstanding debt. They then contact people who owe the debt and threaten people to pay it back. Some even steal the money directly from your bank account. It’s unbelievable criminal behavior and it’s going on everywhere. According to the FTC, complaints about these unsavory debt collectors have jumped from 13,000 to 60,000 this year. It’s the No. 1 consumer complaint to the FTC right now. They tell people that they owe money on debts that aren’t really theirs. They seek out people with the same name as the actual person who owes the money and scare them into paying money they don’t owe. Another tactic is to contact relatives of the deceased who owed money. They claim it’s your responsibility to pay the debt, which is not true. It’s obviously an industry that is out of control. When you get a call from these people, remember that you do not have to pay the debt. They are not allowed to threaten you verbally or physically, and they can’t use underhanded tactics to get money out of you. It’s illegal. Collectors operate under the law of the jungle and you have to reign them in. You must tell these people that they can’t contact you unless you allow it. But you have to put it in writing. And when they call you, record the message. That is the proof you need to show they have broken the law. And, never ever give a collector your bank account numbers or credit card numbers. It’s time for the federal government go after the scavenger collectors who have infested the collection industry. But until that happens, it’s up to you to put them in their place. Get a copy of Clark's drop dead letter here.

Phony collection agencies are trying to extort money from unsuspecting, innocent citizens. These scam artists will claim you owe money from an upaid bill years ago, and they say your name has been turned over to them. Because collection agencies are so aggressive normally, people believe they must owe the money and they pay it. They are being called “credit kidnappers,” and they’re spreading like wildfire. They even send you a letter saying you need to pay the money within five days. You should send the letter back immediately via certified mail and tell them it’s not you and you do not owe the money. You have to send this letter because a debt is considered valid (even if it’s phony) if you don’t respond and tell the company otherwise within 30 days. It’s ridiculous, we know. But you will be responsible if you don’t respond. The state of Michigan has been going after these rogue companies in hot pursuit. Let’s hope other states catch on and start protecting their citizens.

About a year ago, Clark talked about a new collection tactic used in South America to try and collect bad debts. Instead of harassing phone calls, some South American countries use embarrassment and shame to get people to pay. Now these “shame collectors” have spread to Australia. They travel around in the “Shame Mobile,” which has blinking lights and noise. And, although illegal in the United States, it’s been very successful as a collection tactic in other countries. People in these countries are apparently horrified by the idea that others will know about their bad debt. Shaming works. In fact, it’s gotten so big that there soon will be a reality show about this practice.