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.

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.