Tell debt collectors to back off

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NEW YORK (CNNMoney.com) -- According to the Federal Trade Commission, more complaints are lodged against the debt collection industry than any other.

As more and more consumers are falling behind on their bills, the collections industry is trying harder than ever to collect that debt. They're reportedly using technology like social networking sites or cell phone texting to get you to pay up.

In one case we heard about a debt collection company-located outside the U.S. that used a picture of an attractive woman to "friend" a debtor. Now, once these "faux friends" are part of your network, the company can monitor your updates and keep tabs on you - just in case you mention a big ticket purchase online. Make sure you keep on top of your "friend list." Facebook, the social networking site, did not return calls seeking comment.

1. Know the laws

There are strict laws about how debt collectors have to conduct business. They must identify themselves. They can't harass you and they can't talk about your debt to anyone but you or your attorney. You shouldn't be getting phone calls before 8 a.m. or after 9 p.m. They can't threaten to sue you if they don't have any intention to do so. And, they can't misrepresent the amount you owe.

2. Stick with a 401(k)

If you've lost your job, you may consider keeping your money with your old employer instead of rolling it over into an IRA. That's because 401(k) plans are off-limits to creditors. IRAs have more limited safeguards.

For example, your money in an IRA is protected up to $1 million -- only in the case of a personal bankruptcy. Some states may put a cap on how much is shielded from these creditors according to Jay Adkisson, a California attorney who specializes in asset protection.

3. Old debt could be off limits

Yes. You're talking about a statute of limitations.

There is a limit to how long collectors can legally collect your debt. Generally this limit -- called the statue of limitations -- is three to six years, according to Justin Baxter, a consumer protection attorney. You'll want to check in with your state's attorney general to see what laws apply in your state. You can find out who to contact at www.naag.org.

4. Don't file bankruptcy unnecessarily

Sometimes people file bankruptcy in order to get creditors to stop calling them. But this is an expensive and unnecessary step.

Instead, write a letter to the debt collector and send it certified mail and pay for a return receipt so you know the collector received it.

Once they get your letter they can't contact you again except to tell you they won't contact you anymore or they're taking action against you -- say, filing a lawsuit. Remember, just because they're not contacting you anymore doesn't necessarily mean you don't owe the debt.

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