What happens when a negative item on your credit reports is from a company that is no longer around? That’s what one of our readers wants to know. She asks:

A collection agency is listed on my credit report several times. I went online trying to find a way to contact them to make payments but the Better Business Bureau says they are no longer in business. Given that they are no longer around, is there a way to get the credit bureaus to remove the information from my credit reports?

[Credit Check Tool: Try Credit.com's Free Credit Report Card]

You’re likely in luck here, at least as far as your credit reports go. Under the Fair Credit Reporting Act, you have the right to dispute an item on your credit report(s) if you believe it is inaccurate or incomplete. The credit reporting agencies (CRAs) generally have thirty days to investigate your dispute and either confirm the information with the source, or remove it from your reports. While the law doesn’t specifically state that you can dispute an account because the company furnishing the information is defunct, the fact that you can’t pay these accounts and get the balances updated to zero seems like a reasonable reason for challenging them. Since the company is out of business, it’s not going to respond to a request for reinvestigation from a CRA, and the collection accounts will likely end up being removed from your reports.

I’d recommend you:

1. Make sure you have fairly recent copies of your credit reports from all three major credit reporting agencies: Equifax, Experian and TransUnion.
2. Dispute these accounts in writing with each of the CRAs that are reporting them. I’d suggest you do it in writing rather than online because you’ll have better records of your disputes. Send your dispute letters by certified mail.

[Related Article: Tax Help: How to Dispute A 1099-C Form]

Chances are the CRAs will respond by telling you the information has been removed. If not, then you’ll have to challenge the findings of their “investigation,” but I really doubt it will come to that. Keep copies of your credit reports, and all the correspondence involved, indefinitely.

Also keep in mind this debt may be bought by another collection agency, so it may not be the last time you hear about it. By law, collection accounts may only be reported for seven and a half years from the date you first fell behind with the original creditor. That’s true, regardless of whether you pay them or not.

If you do hear from a new collection agency about this debt, you’ll find our infographic, What to Do if A Debt Collector Calls, handy.

[Featured Products: Compare credit score, report, and monitoring plans at Credit.com]

Image: Jasoon, via Flickr

The company that used a fake courtroom to threaten a widow with jail and to steal her son’s car found itself in a real courtroom last week with little to say. Appearing in Erie County Court, an attorney for the collections company Unicredit America offered no defense for the strong-arm tactics it allegedly deployed.

As we reported in March, Unicredit had begun its collection efforts on Erie resident Marilyn Johnson after she was unable to pay the entire cost of her husband’s funeral, leaving her with a bill of $2,142.

[Related Article: "Fake Court" Collections Victim Wants Money Back]

Unicredit invited her to an office building converted into a fake courtroom, complete with law books on shelves and a company employee dressed in a judge’s robe and sitting on a raised bench.

“(I)t looked nicer than some of our real district courtrooms,” Andrea Amicangelo, Johnson’s lawyer, told Credit.com.

Unicredit threatened to throw Johnson in jail during the fake hearing. To keep his mom from going to jail, Johnson’s son, Howard D. Johnson, agreed to pay the company more than $2,000 and sign over the title to his 2002 Chevrolet Cavalier.

Last week in a real courtroom, Unicredit’s attorney, Lawrence D’Ambrosio, declined to explain or defend Unicredit’s actions to Erie County Judge Michael E. Dunlavey, according to the Erie Times-News. Instead, the company dropped its claim against Johnson.

Unicredit still faces a lawsuit by Pennsylvania Attorney General Tom Corbett over its alleged courtroom ruse.

[Resource: Get your free Credit Report Card]

Image: Jonathon Narvey, via Flickr.com

Fear is the worst enemy of the debtor.

Fear allows us to accept false solutions and incorrect thoughts into our consciousness when we are dealing with debt.

Fear is not reality.

Overwhelmingly, a pattern emerges for people facing financial troubles in which they eventually become afraid and paralyzed by their situation. They either leap at any solution or do nothing. They fall for fake promises of help or take action that leaves them only further in debt, without money, and still facing the same debt monster.

I wanted to share with you a different point of view on the whole debt experience, one I wish I had fully realized when I was facing my debt demons years ago. Well, on some level I did.

When you fall behind on your bills and don’t think you’ll be able to meet your obligations it is only natural to be concerned and worried, that is unless you are a sociopath like Dexter on that television show who murders people without remorse.

[Article: Top 10 Most Misunderstood Facts About Debt Settlement]

But the emotional whipping we give ourselves distorts reality and we do much more damage to ourselves than we have to; needlessly and senselessly.

Let’s just take one part of the debtor experience: the debt collection call.

Many fear the debt collection call. They feel they are being judged or viewed with moral disdain for not meeting their obligation on a timely basis. Or at least that’s what the voice in the head says.

The reality is that if you could pay your bill, you would. If it was within your ability to make your payment by the due date you would have made the payment. But sometimes shit just happens.

It doesn’t matter if the reason for your inability to make ends meet is that your home was just wiped off the map by a terrible tornado, or the business you worked for was destroyed by fire. The reason could be as simple as you lost your job or slipped and fell and are now laid up with an injury. Whatever the reason, the outcome is the same: you simply can’t make ends meet. It is what it is—and that’s all that it is.

Debtor Shame

Are victims of a hurricane, tornado, or other natural disaster left in a shameful position? Should they feel guilt or moral embarrassment because they can’t make the next payment, or maybe the one after that?

Let’s put all of this mess into perspective.

Nobody wants to be beholden to another and not be able to meet that obligation. It’s not something most strive for. Sure we can point to scammers, crooks, and flim-flam ne’er-do-wells. But if you are reading this, that’s not you.

Debtor shame makes people do stupid and ridiculous things and have stupid and ridiculous thoughts. From the low end of the spectrum, it makes people agree to payments they just can’t meet; to the high end of the spectrum, they take their own lives in suicide or murder their family in shame.

And that entire spectrum of silly and senseless things is born out of just one issue: we fear the debt instead of embracing it.

Embrace the Debt. Are You Insane?

The actual best move to make when you start to feel the fear of debt creeping into more and more of your waking thoughts is to stop fearing it. The fear harms you more than helps you. It does not change your situation nor does it give you the opportunity to make it better.

The best thing you can do in times like these is to embrace and own the situation, not run from it. If you are in debt and can’t pay the bill, accept it. Live in the moment when you can’t make the next payment but do it from a position of reality, rather than fear.

There is a large volume of travel between being afraid of the phone ringing and the words a strange voice on the end of the line is going to say that will judge you, to welcoming the call and the debt collector.

[Consumer Resource: 11 Ways A Debt Collector May Be Breaking the Law]

You can react in fear or you can live in joy. The choice is absolutely yours. Which do you want to live in? The choice is entirely yours. It is your choice so what do you chose?

As silly as this may sound, being in debt and having the debt collector call is not the worst thing that can happen to you. Don’t get me wrong, it’s unfortunate, but it’s not the worst thing.

On the scale of horrible things I’d much rather get a collection call than be on fire or get jabbed in the eye with a sharp stick.

We allow ourselves to be panicked by the collection call simply out of a poor sense of prioritizing the reality of the event. On the scale of having our neighborhood hit by a tsunami or getting a collection call, the collection call is less than a nothing.

What to Do When You Get Collection Calls »

Photo: Matt Reinbold, via Flickr.com

Graphic courtesy Steve Rhode