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What to do when the debt collector calls

Financial editor Jean Chatzky offers advice on how to prioritize your payments, and what to do to get yourself into a debt management program.

Q: I'm writing for advice on a financial issue I have with a credit card that is at its max — $3,000. Financial charges are stacking on quickly. My last balance was $3,401.61. I've been delinquent for six months to a year. I have not been able to pay them the minimum amount. The company calls me at work. When I tried to arrange a payment of $50 a month, it was unacceptable to them. I want to avoid being sued. Please advise. Thank you — Bev, New York

A: Bev, I'm sorry to hear about the trouble you're having. But you'll be pleased (well, if not pleased, at least relieved) to know that you have plenty of company.

The Federal Trade Commission, which tracks consumer complaints, receives more gripes about debt collectors than about any other industry. The number of complaints has quadrupled since the year 2000, topping out at nearly 60,000 last year. And, yes, there is a strategy to dealing with these people. Here's what you need to know — and what you need to do.

First, understand that there is a difference between your actual creditors (for example, your credit card company or car loan company or mortgage holder) and third-party debt collectors (companies your creditors hire to collect on their behalf).

The Fair Debt Collection Practices Act governs the behavior of third-party debt collectors. They are not allowed to call you before 8 a.m. or after 9 p.m. They are also not allowed to call you at work if they know (because you've told them) that your employer doesn't allow you to receive these calls at work.

It sounds to me like you're dealing with your actual creditor. In this case, unfortunately, federal protections don't apply, but state protections do. Bob Hobbs, deputy director of the National Consumer Law Center in Boston and author of the book "Fair Debt Collection" (National Consumer Law Center, 1997), says New York is one of the "less-protective states."

Nonetheless, he suggests that you tell your creditor that you're not allowed to take calls at work, and then that you follow that up with a letter to that effect. (With debt collection, the more you put in writing, the better.) Still, they don't have to honor that request, Hobbs said.

Hobbs also said he's "surprised" that your creditor won't accept the $50 a month. He suggests trying to deal with the customer service department rather than the collections department. Call the 800 number on the back of your credit card and ask the person who answers that line if they can fix your payments at $50 a month (they'll probably say you have to stop using the card). If you still hit a dead end, ask to speak to a supervisor.

Finally, while it sounds like you are having trouble with a single creditor, many of the other people in your boat have problems with multiple creditors at the same time. They need a three-pronged strategy.

Prioritize your payments. When you can't pay all your bills, the way to decide which ones get paid and which ones slide is to think about what's at risk. Your basic needs — food, shelter, transportation and health care — come first.

If you own a house, you want to do what you can to protect equity in the house. If you also own a car and need it to get to work — you need to think through how to protect it. Make the car payments, and usually nobody else will go after your car. Pay medical bills if you have an ongoing chronic condition.

Consider credit counseling. If, like Bev, you can't get your creditors to accept a negotiated payment on your own, a credit counseling service may be able to do it for you. Look for a not-for-profit counselor with an office in your area (rather than one that is strictly Internet-based) and one that has the recommendation of the Better Business Bureau. Counselors are better for people with multiple bills because they'll consolidate your bills into a single monthly payment at lower interest rates — this is called a debt management program — but they will charge you a monthly fee for doing so (usually $35 to $50 a month). In Bev's case, because she owes money on only one card, the fee probably isn't worth it.

Think about Chapter 13 bankruptcy. If a debt management program isn't enough, Chapter 13 is the next step. In this case, a court tells you how much you have to pay back over the next five years. Unlike Chapter 7 bankruptcy, Chapter 13 offers a way to protect your house and car.

Good luck!

Jean Chatzky is an editor-at-large at Money magazine and serves as AOL's official Money Coach. She is the personal finance editor for NBC's "Today" show and is also a columnist for Life magazine. She is the author of four books, including 2004's "Pay It Down! From Debt to Wealth on $10 a Day" (Portfolio). To find out more, visit her Web site, .