It would be wonderful if creditors and collection agencies never billed people for more than they owed, but that's not the world we live in. After you pay your creditors, a billing error or sloppy record-keeping -- or sheer crookedness -- could have one of them insisting you still owe the money. That's why a paper trail proving you paid off the debt is important.
Proof of Payment
Instead of relying on your creditor to acknowledge your payment, document it yourself. Send a check in a certified letter: Your creditor will have to acknowledge receiving it, and your bank can confirm it's been cashed. If you use online bill-paying, you can track your payments that way too. Although you can pay debts with a money order, it's difficult to prove the creditor cashed it, though your certified-mail receipt will help. If you have to use cash, never walk away without getting a receipt in return.
Before You Pay
Get the size of your debt in writing before you pay it: That way, your creditor can't turn around and claim your check only paid part of the bill. Ask the creditor for an exact, written statement of how much you owe, broken down into the original debt and any added interest and fees. If you're ready to close the account, get your creditor to say in writing how much you have to pay to wipe it out completely.
The federal Fair Debt Collection Practices Act says that once a collection agency contacts you, it has five days to tell you in writing how much you owe. If you're dealing with the creditor and you think he's made a billing error, the Fair Credit Billing Act says that if you write asking him to document the debt and show proof that you owe it, he has to comply. Save the documentation so that after you pay, you can prove the debt is gone.
If a debt collector refuses to tell you what you owe, in writing, you can sue her in federal court. You can sue your creditor if she refuses to respond to billing inquiries, or doesn't credit your account with your payment once she receives it. Even if your creditor provides you with a receipt, you should look at your credit report to confirm that she's officially closed the account. If not, you'll need your receipt, check and the creditor's letters to prove the report is wrong.
A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.