What Can Debt Collectors Do to Me?

A debt collector has the right to collect for unpaid bills.  That makes sense, but misunderstanding about what a collector can and cannot do causes stress and fear. 

 

Fear-1If you find yourself unable to keep up with at least the minimum payments due on your credit accounts, before long, those accounts may be turned over to a DEBT COLLECTOR!

This may cause FEAR or STRESS, which is natural, but often unfounded!

Someone has called F.E.A.R. :

  •         False
  •         Evidence, that
  •         Appears
  •         Real

 

You may be in this situation as a result of...

  • Unemployment
  • Divorce
  • Serious illness or Disability
  • Trying to make ends meet on a limited, FIXED INCOME of retirement
  • or other reasons beyond your control

cartoon_about_stress

 

What happens when you start missing the minimum payments due?

The original creditor will start trying to get you to start making payments again.

Each creditor (Visa, Master Card, Discover, Capital One, etc.) has slightly different processes for recovering past due debts, but all take pretty much the same approach:

They send out letters encouraging you or kind of demanding you to start making payments or even warning you that unless you do "such-n-such", they will escalate their collection efforts to the next level.

And then the calls start.  Lots of calls!

If you somehow have the funds available to catch up, then you may want to contact them and see what can be done, but.......

DO NOT GO INTO MORE DEBT TO PAY OFF THESE DEBTS!

"Robbing Peter to Pay Paul" just results in more and more problems!

However, if you don't have the money to pay your debts (and you probably are in this situation because you just can't keep up), then it is usually best not to bother contacting them and trying to explain your situation.

NEVER FORGET...

Credit card companies are in business for one reason and one reason only, and that is to make HUGE PROFITS!

These profits come from:

  • INTEREST
  • ENROLLMENT FEES
  • ANNUAL FEES
  • OVER-THE-LIMIT FEES
  • LATE FEES

...and about anything else they can tack on to get more money from us!

 

OK, then what happens next?

After about 3-4 months, if the calls and letters don't work to get you to start sending them money, they will usually:

  • Charge the account off as a loss
  • Assign it to a collection agency
  • Sell the account to a DEBT BUYER   (Yes there are hundreds of companies that BUY Millions if not Billions of dollars of debt!), or...
  • Retain a LAW FIRM that specializes in debt collection

 

Now these other agencies begin to contact you by mail and phone.

While your account is still with the original creditor, they have the right (in the fine print of the application) to call you.

But once these accounts are transferred or sold to another party,  you have the legal right to stop them from calling 

STOP Collection Calls Free Sample Letter

 

But, whether these companies are working on a commission basis or have purchased the account, their goal is the same...

GET YOU TO PAY THEM $$$$ !

Depending on your particular situation, you may be able to accept or negotiate a SETTLEMENT.

In fact, they may mail you an offer or you can call and try to negotiate.

A SETTLEMENT is an agreement to accept an amount less than the full balance.

Once this settlement is completed (lump sum or in payments), the account is deemed "settled-as-agreed" or "settled for less than the full balance" and it will be reflected as a ZERO or $0 Balance on your CREDIT REPORT.

If you'd like to know more on how DEBT SETTLEMENT affects your CREDIT SCORE, CLICK HERE:

What Can You Do to Improve Your Credit Score?

But what if you don't have the funds necessary to accept to negotiate a settlement offer?

The collection agency may be patient and keep the account on file for several months.

Or...

The original creditor may RECALL the account and RE-ASSIGN it to another collection agency.

If this happens, then the LETTERS and CALLS will start again.  You'll have to follow the same procedure to STOP THE CALLS.

But...

Sometimes your account lands with a Law Firm that specializes in DEBT COLLECTION.

This firm will send the letters and make the calls, but if no agreement can be reached, they may start the LEGAL PROCESS to collect.

A CLAIM will be filed with the COURT in the county where you reside.

A SUMMONS will be delivered to you.  It will state that you have 20 or 30 days (varies by state) to APPEAR and give an ANSWER to the court.

Sounds like you have to go to court within that time-frame or else!!!!

Good time to give disclaimer:

I am not an attorney and am not nor cannot give legal advice. My comments are just my opinion gained over many years of helping people deal with debt.  If you have concerns, please consult an attorney.

"Appear and give and Answer":

If you have clear proof (payment stubs, bank records, etc.) that prove that you DO NOT owe the debt that the PLAINTIFF (creditor or owner of the debt) CLAIMS you owe, then you have the 30 days or so to file your ANSWER with the court.

This ANSWER must be in the proper, legal form your county court demands and usually it is best to have an attorney prepare it and file with the court.

Of course, this takes more money, so don't even start if you cannot prove (no question) that you DO NOT OWE THE DEBT!

But what if you owe the debt the SUMMONS says you owe?

Then you need to contact the attorney's office and try to negotiate either a SETTLEMENT or a REPAYMENT agreement! 

DO NOT IGNORE THE SUMMONS ! ! !

If an agreement cannot be arranged in about 2-3 months, then the attorney will probably apply for a JUDGMENT by DEFAULT. (No one filed an ANSWER), so they win by default.

Many people think that if you get behind on your bills that a creditor can just TAKE MONEY OUR OF YOUR BANK ACCOUNT, GARNISH YOUR WAGES or put a LIEN on your home or other property.

NO,         NO,        NO ! ! !

A creditor, debt collector or attorney cannot just take your money or property!

I hope you are starting to understand that there is a whole lengthy, legal process that has to take place before that could possibly happen! 

 HOWEVER, VERY IMPORTANT...

If you owe taxes, child support, alimony or some other debts, then your bank account, wages and liens can be done without all the above process! 

If your creditor (plaintiff) has been awarded a judgment, now they can apply for a wage garnishment, bank levy or place a lien on your home or other property.

 

WAGE GARNISHMENT

If you have EARNED INCOME (not Social Security or other Retirement income) then it can be subject to garnishment per the judgment.

In most states, this is usually about 25% of your net (after tax) income. 

 

BANK GARNISHMENT

Once the plaintiff is awarded a Judgment, they can search for you bank accounts. 

This is usually done by using your social security number.

In 2011,  a law was passed to protect consumers from incorrect bank levies.

If you bank receives a court order to "freeze" you bank account due to a judgment, the bank is required to follow laws on what they can and cannot do.

However, not all banks do so and this can result in a very frustrating situation.  To learn more, click here:

Bank Laws Concerning Levies and Garnishments

 

PROPERTY LIEN

One of the most misunderstood options a creditor has for collecting a debt (REMEMBER: ONLY AFTER A JUDGMENT IS AWARDED!) is a LIEN.

If a lien is placed on your home, is DOES NOT MEAN that you have to sell your home to pay the debt!

A LIEN is basically a plaintiff taking a position (usually behind a first or second mortgage) on your home.

If you home is paid for, then they would have first position.

What does this mean?

It means that when you go to sell or transfer ownership (give to your children after your death as an example), the amount of the judgment must be paid.

Example:

If you sell the house for say $250,000 and the judgment balance is $20,000, the title company will have to send $20,000 to the plaintiff at closing.

That's why they do a "Title search" when you are buying/selling/refinancing a house in order to see if there are any LIENS.

In this example, you would net $225,00 and the Lien is removed from court records.

 

OK, let's review:

Can a creditor take anything you own without being awarded a judgment?   

  NO!

 

If you receive a SUMMONS, do you have to go to court?                                 

NO!

 

If you receive a SUMMONS, can you still negotiate a settlement or a repayment agreement to stop any other legal options a creditor may have?   

YES!

 

Can a creditor take money out of your bank account without being  awarded a judgment?                                                                                                           

NO!

 

Even after being awarded a judgment, can a creditor take money from your bank account that comes from:

  • social security
  • disability
  • retirement
  • child support, or
  • alimony.                                                                                       

No ! 

 

Hope this helps.

 

FREE  Debt Elimination Summary

             

                                                                                                                                                                                     

Pic Credit

pic 2 credit

 

 

 

 

 

 

Tags: debt collector, how to improve your credit score, impove your cedit score, settlement, mimimum payments

Why Do Some Creditors Go After a Judgment?

A creditor has the right to file a claim, seeking a judgment if credit cards and/or other debts and loans are not repaid according to the agreement.

Some do and some don't.....WHY???

32458360454_79054e6f63_n

If you have too much debt and because of circumstances (usually beyond your control) you just can't keep up with the minimum payments, a creditor has several options to collect, including legal options.

Why some do and some don't is not clear.  

I've been helping people deal with having too much debt and not enough income to repay for almost 17 years now.

Usually, when an account (for this blog, I'm talking about unsecured accounts like credit cards, personal loans, medical bills, etc.) becomes delinquent, a creditor will usually do one or more of the following:

  • Have an agent or computer call you.  Sometimes several times a day!  Although ultimately you can stop these calls later, as long as the account is still with the original creditor, they have the contractual right to call.
  • Send out letters trying to get you to catch up or start repaying.
  • Assign the account to the creditors internal collections or recovery department.  The calls and letters start again.
  • Assign or sell the account to a collection agency or debt buyer (sometimes they can be one in the same.)
  • Place the account with a Law Firm that specializes in debt collection.  This firm will contact you, but if you cannot repay they may decide to start the legal process.

If you have some funds available or are able to make a reasonable monthly payment, a repayment agreement or settlement usually can be negotiated.  A creditor would rather get you "back on track" to keep that interest going rather than "give up" and "charge off" the account as a loss.

The point of this blog is to try and understand WHY some creditors will be patient and work with you and some won't.

Although I don't claim to understand why and/or when a creditor chooses to seek legal options to collect, this is what I've learned over the years:

Never forget...a lender is in business to make money/profit! 

This profit comes from the interest and fees they charge us for the use of their money!

Certain creditors have a set of rules/guidelines of how the seek the loss revenue of these delinquent accounts and they change for year to year.

Few examples:

When we first started our company in 2003, American Express was one of the easiest companies to negotiate settlements for our clients.  We could get them to settle for 30% -40% and let us set up monthly payments as $0 interest over a long period of time!

But over the last couple of years, American Express has determined that will not negotiate directly with like ours and will only discuss settlements or repayment plans with the client.

We have to coach or American Express clients, and although we still help them, it is very frustrating and time consuming!

One more...

Discover Card has starting going after judgments very quickly over the last year or so.

Now, if we can't negotiate a settlement, most of the Discover accounts are being placed with debt collection law firms to start the legal process within a few months!

WHY???

I think (and this is just based on my experience over the years) that certain companies go through leadership changes and/or profit-loss margins that force them to become more aggressive, more quickly.

Why can't a Consumer or Debt Settlement Company negotiate with a company like Discover right away and avoid the legal process?

That depends on the circumstances of the consumer and the creditor!

Let me give you a hypothetical example that may help you understand:

Mary goes through a nasty divorce and ends up with a lot of credit card debt and a lot less income!

At first, she does the best she can to make as many minimum payments she can, but after a few months, realizes there is just not enough money coming in to keep up.

She calls the creditor and explains her situation, but even though one or two are willing to adjust her payments, there is still not enough to satisfy all of them.  AND THEY ALL WANT THEIR MONEY!!!

She doesn't want to file for BANKRUPTCY PROTECTION from her creditors now, so she calls a Debt Settlement Company like us and after going over her situation, budget, etc. we agree that her best option now is debt settlement, she enrolls.

She has a total debt balance of $27,000 spread over 5 credit cards.

They total monthly minimum payments they want is about 2.25% of the total or in this case, about $600/month, but her budget (even with making cuts as much as possible) only allows her to commit to $350/month (and that is going to be really hard to do).

She has:

  • Walmart                       $3,500
  • Citibank                        $4,500
  • Discover                       $5,500
  • Bank of American         $6,500
  • Lending Club                $7,000

We knew that our client had not made payments on her accounts for 3-4 months when she contacted us and that some of the accounts were in the process of being charged off.

In fact, a couple of the accounts (including the Discover account) had been placed with a debt collection Law Firm!

One evening, the doorbell rang and she was served a SUMMONS for her Walmart account.

She sent it to us and to avoid the possibility of this going to judgment and potential garnishments, we negotiated a STIPULATED AGREEMENT.

This is an agreement (usually filed with the court) that says basically that as long as she/we pay the agreed amount according to the terms negotiated, they (the Plaintiff/Creditor) will not pursue legal options such as garnishment, bank levies, or liens.

Even though this stopped the potential garnishment (25% of her net take-home income), the terms of the stipulated agreement called for a down payment of $1,000 (she had about $1,300 in reserves) and monthly payments of $200 until the total of $2,400 was paid.

Since we had to take care of the immediate problem with the Walmart Summons, their wasn't enough to negotiate on the other accounts for a few months.

The creditors were all contacted and we explained where she/we were at.

All of them agreed to be patient except Discover!

Recent Settlements See what we have  done for our clients!

After a couple of months, they/Discover placed her delinquent account with a Law Firm/Debt Collector.

This firm sent letters and we contacted them to explain her situation.  They would not agree to a small monthly payment until the Walmart was completed and they filed a COMPLAINT and a SUMMONS was served.

Why were they not willing to wait a few months?  It all depends on their profit/loss or margins at that time.

Bottom line...

Most creditors/collectors are willing to negotiate settlements and/or work with a client or us, but depending on various circumstances, some decide to seek legal options quickly.

WHAT CAN YOU DO?

Make sure to make sure to communicate with any creditor/collector sooner or later.

If you are using a company like ours to help, send all letters received IMMEDIATELY!

Hope this helps!

FREE  Debt Elimination Summary

 

 

 

 

Photo Credit

 

 

Why Would Creditors Settle for Less Than the Full Balance?

The average person is carrying so much debt that they just cannot keep up with the minimum payments due if any financial or other hardship hits!

What will a creditor do to collect or are they willing to settle for less than you owe?

It has been estimated that the average American is carrying over $30,000 of various "unsecured" credit card debt!

CNBC Article

Missing a scheduled payment sets in motion a lot of things.

What are we going to do?

As the accounts become "past due", creditors can take several steps to collect:

  • Letters and calls
  • Assign to Debt Collector
  • Assign to Law Firm that specializes in Debt Collection
  • Sell the account to a Debt Buyer
  • Agree to Settle the debt for Less than the Full Amount

LETTERS AND CALLS

If you have ever missed a payment or have fallen behind in making the required minimum payments for your credit card accounts, then you know that about 30 days after the missed payment, the calls and letters start!

The letter says basically that you must make a payment within a certain time frame or they may decide to take further actions to collect.

If you don't or can't catch up, then the calls start!  Not just a call now and then, but lots of calls.

Yes, there are ways to stop the calls, but while the account is still with the original creditor, they have a right to call.

Although there are laws that are supposed to protect consumers from annoying calls, most collectors ignore them and call via computer or "robo dialers" several times a day!

DEBT COLLECTORS

There are all kinds of estimates of how much debt is in the hands of debt collectors, but I think it has to be in the BILLIONS!

Once a creditor (Visa, Master Card, Discover, Capital One, Chase....) have tried to get you to catch up or start making payments again for about 3-4 months, they usually assign the account to a debt collector.

After dealing with debt collectors for about 17 years now, I've found that contrary to popular beliefs, most of them are professional and will try to help you take care of the debt.

However, there are always the exceptions!

They send letters and make calls (lots of calls), but now you can put a stop to the calls:

STOP Collection Calls Free Sample Letter

After a month or so of attempting the collect for their client (creditor) if there is not success, the account may be recalled and assigned to another collector.

This may go on for a few months or even a few years.

Debt Collecting Law Firms

Depending on a lot of circumstances, the original creditor may decide to retain a Law Firm that specializes in debt collection.

The calls and letters start again and if there they cannot get you to pay the balance, then they may decide to start a LAWSUIT.

Here is a blog I've written that explains that process and will help you understand:

Summons, Judgments, Garnishments....What You Need to Know!

DEBT BUYERS

When there are Billions (if not Trillions) of dollars of debt out there, you can understand that there are companies that do nothing more that buy huge lots of debt that has not been collected for "pennies-on-the-dollar"!

Experian, Equifax and TransUnion are the top three credit reporting agencies and they sell debt (yes our information) to debt buyers all the time!

You thought they were in business to help you, well think again!

The "Big 3" collect information from all of us and SELL to lenders, companies running background checks on potential employees, insurance agencies and many more.

Once your account is SOLD, the owner has the right to collect.

Sure, they want to get as much as possible, but since they only spent say...$100 to buy an account balance of $5,000, they may be willing to negotiate the final balance due or a settlement.

Debt Settlement

Most people do not realize that at some point along the collection process a creditor, debt collector, law firms or debt buyer may be willing to accept less than the full balance.

This is called a SETTLEMENT.

To give you an idea of what a settlement looks like, click below:

Recent Settlements See what we have  done for our clients!

Not every debt can be settled, but most can.

The debt settlement process is time consuming and frustrating for the average consumer, but can save you thousands of dollars and help you start fresh or even avoid bankruptcy.

Hope this has helped.

FREE  Debt Elimination Summary

 

Photo Credit

 

Can a Debt Collector Take My STUFF?

When we enroll a new client for the Debt Settlement Program, most of the time they are confused about what a debt collector can and cannot do.

Although the whole experience of facing severe financial circumstances is stressful, let me help alleviate your fears.

cartoon_about_stress

OK...

For all kinds of reasons or circumstances, you just cannot keep up with the minimum payments required on your credit card accounts.

The annoying calls and letters come many, many times a day!

The last call left a message and the guy said that unless you contact them right away, they may decide to start legal processes to collect the money you owe.

Your mind starts fearfully asking:

  • Can they take money out of my bank accounts?
  • What about my paycheck?  Is it safe?
  • Will I have to sell my house or car?
  • What about my jewelry, tools, or other things I value?

Let me walk you through the debt collection process so you can start to understand what a collector can and cannot do:

Once you miss a couple of months of the required payments due, you'll start getting letters saying something like...

"Mr. Jones, your XYZ Account is seriously past due and unless you call us immediately, your account may be turned over to an attorney for collection."

If you've just had a temporary financial setback and have enough money to catch up or start making payments again, you may want to call and see what they will do to help get you back on track.

They should be willing to work out some kind of plan to start taking your monthly payments again.

But if you find yourself with just too much debt and not enough money coming in to keep up, then what should you do?

It really depends on a lot of circumstances:
  • How delinquent is the account?
  • How much do you owe?
  • What kind of account it is?
  • Who the creditor is (some will work with you and some will not).

If it comes down to paying the rent or mortgage, utilities, groceries, etc. (the really important bills) and making credit card (unsecured) payments,

PAY THE IMPORTANT BILLS FIRST!!!!!!

Usually a creditor will try to get you back to paying monthly payments (they need that interest!) for a couple of months.

If unsuccessful, they will either send to their internal recovery department or to a debt collector or even sold to a debt buyer.

An account is deemed "CHARGED OFF" when the creditor decides that they are not going to spend any more time trying to collect and are going to write the account off as a loss.

Yes, there are companies that buy millions of dollars of debt for pennies on the dollar in order to try and collect.

Either way, now you can do a couple of things:

1) PUT A STOP TO THE CALLS!

STOP Collection Calls Free Sample Letter

2)  You may be able to negotiate a SETTLEMENT for less than the balance.

Your account may now be with the original creditor's internal recovery department, a debt collection agency or a Law Firm that specializes in debt collection.

HERE'S WHAT YOU NEED TO KNOW...

At this point, creditor, debt collector, debt buyer or law firm CANNOT:

  • Garnish your wages, retirement income, disability income (an several other exempt income sources).
  • Levy your bank account
  • Repossess your TV, stereo, furniture, jewelry, tools, etc. (unless they were used as collateral)
  • Arrest you or most any other thing you may think!!!!

BUT... (very important you understand the following!):

If no agreement can be reached, the creditor or collector may decide to file a CLAIM.

CLAIM is a legal document filed with the court of the county of your residence. 

You will be delivered a SUMMONS.

Basically is says that XYZ is claiming that you owe $$$$ and that if you want to dispute the CLAIM you have (avg.) of 30 days to file an ANSWER with the court.

A ANSWER is a legal document (usually prepared by an attorney) that PROVES that you have paid or why you do not owe the debt.  There is a fee for filing the ANSWER and fees for the attorney who prepares it.

Most people know they owe the debt so they don't file the ANSWER.

NOW WHAT???

At this point, an agreement can still be negotiated to stop the legal process, but is it VERY IMPORTANT that you DO NOT IGNORE the SUMMONS!!!

If an agreement cannot be negotiated, the the PLAINTIFF (the creditor or one filing the claim) may move forward for a DEFAULT JUDGMENT.

You don't want this to happen!

If a JUDGMENT is awarded to the PLAINTIFF, then now the PLAINTIFF has the right to apply for a WRIT OF GARNISHMENT OF WAGES OR BANK LEVY.

To prevent this, a SETTLEMENT or STIPULATED AGREEMENT may be negotiated.

A SETTLEMENT is an agreement whereby the PLAINTIFF agrees to accept an amount less than the balance due.  It may have to be paid in a LUMP SUM or in many cases, a LONG-TERM PAYMENT agreement.

Either of these is usually much better than a WAGE GARNISHMENT!

A WAGE GARNISHMENT is usually (in most states) 25% of you net (after tax) paycheck!

Let's say you earn $5,000/month.  If State (if you have) and Federal tax withholding equals 35%, you net take home would be about $3250.

25% of $3250 equals $812.50 ! ! !

If you're facing a financial crisis now, how could you survive if your income was cut by over $800 more!

Again... DO NOT IGNORE A SUMMONS!

SUMMARY:

A creditor or debt collector cannot just "take your stuff" when you don't pay your required payments due.

There's a whole process that must be completed first.

However, YOU HAVE TO TAKE ACTION!

It is not easy dealing with collectors and attorneys. 

Time consuming and frustrating, but absolutely necessary to prevent GARNISHMENTS!

This may help:

FREE  Debt Elimination Summary

Recent Settlements See what we have  done for our clients!

 

Photo Credit

 

Tags: stop wage garnishment, credit cards, BBB, PORTLAND, settlement, mimimum payments

Debt Collection and Debt Settlement, How Does it Work?

When you fall behind in making at least the minimum payments due on your credit cards or other personal loans, here's what happens...

LETTERS AND CALLS

Your original creditor wants to keep you as a long-term, minimum payment customers!

Have you looked closely at how the charges are calculated on your credit cards?

 

If not, you are in for a shock!  bunch_of_credit_cardsYour monthly statement will give you a breakdown of how the minimum payment is calculated.

Let's say your minimum payment is $50.

How much is going to the PRINCIPAL (the amount you actually charged/borrowed) and how much are you paying in INTEREST! 

Don't be surprised to learn that almost HALF or $25 is being taken as interest and only $25 is paying down the PRINCIPAL!

At this rate, (and they are supposed to show you an estimate) it may take 20-25 YEARS to pay off this debt!

No wonder they want you to keep this up. 

This is how they make their BILLIONS in profits!

So now you see why they send letters and call many times a day?

WHAT CAN YOU DO ABOUT IT?

While your account is still with the original creditor (Bank of America, Chase, Discover, etc.) they have the legal right to call you. 

Once your account is charged off and transferred or sold to a collection agency, then you can stop the calls.  I'll show you how to do this later.)

SETTLEMENT OFFERS

You may get a letter that will OFFER TO SETTLE your account for LESS THAN THE BALANCE.  This is called a SETTLEMENT OFFER.

Sometimes they can be very good, but usually, they only offer to reduce the balance by 20%-25% and often they want it paid in a LUMP SUM within 30 days or so.

If you have the funds, then it may be a good deal, but if you can be patient, the account will ultimately CHARGED OFF and transferred or sold to a collector.

NEW ROUND OF LETTERS AND CALLS

Now you will start getting letters and more calls from a debt collection agency. 

Yes, it is annoying to get all those calls, but now you can STOP THE CALLS:

STOP Collection Calls Free Sample Letter

SETTLEMENT OPPORTUNITY

The Debt Collection company has either had this account assigned to them by the original creditor or have purchased it.

Either way, now they should be open to SETTLEMENT.

We negotiate with debt collectors on behalf of our clients every day.  Here is a sample/example of what a SETTLEMENT AGREEMENT looks like:

Recent Settlements See what we have  done for our clients!

HOW WILL THIS EFFECT MY CREDIT SCORE?

If you have fallen behind on your payments, your credit score will go down.

There are a lot of factors that go into calculating a credit score (very confusing), but late payments makes up a large percentage.

If you'd like to learn more, click:

How to Improve Your Credit Score

The most important factor to improve your credit score is to pay off balances, old and new!

To a lender, even if you have had a time of late payments or "settled-for-less than the full balance", the fact that you took care of is VERY IMPORTANT!

I've had clients that completed the Settlement Program  go from a credit score of 580 to 700 within 3 months!

FREE  Debt Elimination Summary

 

 

 

Photo Credit

 

 

 

 

Debt Settlement May Be Just What You Need!

When you have too many credit accounts and cannot meet the minimum payments required, then it may be time for you to consider a DEBT SETTLEMENT PROGRAM.

22853064975_8c547f714f_m

There are many reasons a financially stressful situation like this can happen, but some of the most common are:

  • Loss of employment or layoff
  • Too little income in retirement
  • Unexpected medical bills
  • Increasing cost of medications
  • Divorce
  • Disability
  • Loss of spouse or partner

 

 

These are just some of life experiences that can financial hardship.

If one or more of these sounds like what you are going through, you may have several options:

If you have enough equity in your home, a refinance or equity line of credit may be a solution.  

If you qualify for a consolidation loan or balance transfer and the interest rate is not too outrageous, then that may work.

You may qualify for a Credit Counseling or Debt Management Program.  But if you are having a hard time keeping up with the total due for all of the minimum payments now, most likely this type of program will not help.

What about BANKRUPTCY?

I believe bankruptcy can be a viable option if you have tried all other options.  Bankruptcy laws have changed over the last few years to prevent someone from trying to use bankruptcy to discharge debt when they possibly could meet their promised to repay!

So how does a DEBT SETTLEMENT PROGRAM work?

If you have missed a couple of months of making the minimum required payment due on all of your accounts or cards, they are probably getting close to being "charged off".  

When this happens, the account will most likely be transferred or sold to a third party debt collector or debt purchasing company.

Most people are not aware that there is a multi-million (or most likely) billion dollar industry that purchases old, delinquent debt for pennies on-the-dollar for collection!

Let's say you have a credit card and due to circumstances beyond your control you just cannot make the payments.

The original creditor will call and send letters trying to get you to start making payments again.  But after 3-4 months, the account lands with a Debt Collector.

Now the Debt Collector starts calling, and calling, and calling.....

The good news is that now you can put a stop to those annoying calls!

STOP Collection Calls Free Sample LetterBut the letters keep coming!

These letters will try to get you to pay or in some cases, they may offer to SETTLE THE ACCOUNT for less than the balance due!

This offer may be anywhere from a small reduction or possibly a very good reduction.  

You may also be able to contact the debt collector to NEGOTIATE a better settlement or perhaps to let you take advantage of the settlement offer by making a series of monthly payments that you can afford.

Negotiating with debt collectors can be very time consuming and stressful.

I've been helping people deal with the stress of too much debt and negotiating with debt collectors (many time attorneys) for many years, so I know from personal experience!

The agent for the debt collector's job is to get as much money out of you as possible!  In many cases, their income, commission or bonus depends on being very inflexible.

The agent will try to intimidate you and in many cases try to shame you into getting you to pay back all of the balance!

There are laws that protect consumers from illegal collection tactics, but most people are not aware of them.

I've written several articles about dealing with debt collectors.  Here's one that may be especially helpful:

 

Debt Collectors, the FDCPA and Your Rights

 

For the sake of this blog, let's say that you negotiate a settlement for less than the balance due...NOW WHAT?

DO NOT, I repeat, DO NOT make any payment (by phone or mail) without a WRITTEN SETTLEMENT AGREEMENT!

A settlement agreement is basically a modified contract from the original contract (application) you signed when you took out the card or loan.

If the agent will not email, fax or mail the written agreement, then no settlement/no payment....PERIOD!  It is your only proof of payment once the agreement is completed.

Here is link to what a settlement agreement looks like:

Recent Settlements See what we have  done for our clients!

Once the settlement agreement is completed, you can request a letter or statement showing a $0 balance, but if they will not comply, then your cancelled check or bank statement showing payment along with the settlement agreement will suffice.

Over time, you can get yourself back to being DEBT FREE! 

If all of this sounds like a little too much for you to handle, let us know:

FREE  Debt Elimination Summary

 

Photo Credit

 

 

 

 

 

Tags: what can a debt collector do, stop debt collector calls, Credit Card Debt Negotiation, debt settlement help, Oregon debt collection, settlement, mimimum payments

Dealing With Debt Collectors....No FEAR!

When a debt collector calls, it can be not only annoying, but also a little scary!  But dealing with debt collectors does not have to be something you fear.  Let me show you what to do...

 

Man_stress_over_money

No matter how serious you financial and/or debt situation is, there is  a solution.  DON'T BE AFRAID!

  • Debt collectors are people just trying to earn a living.  

I've been dealing with them for many, many years and most of them are not hard to deal with. If, you know a few things about them.

Usually, the debt they are calling about is one that you owe.

 

Of course, if you can prove that you don't, you can always demand that they "validate" the debt by providing documentation.

The Fair Debt Collection Practices Act (FDCPA) gives us protection from illegal debt collection practices.

Basically, it spells out what a debt collector can and cannot do in attempting to collect debt.  It allows a consumer to question the validity of the debt they are calling about. 

There are also many "credit repair" companies that advocate using the validation process to remove debts from our credit report.

While you should challenge or dispute errors on our credit report, beware of opening a validation dispute on accounts you owe as it might backfire on you!

Unless you can prove beyond a doubt that you never had or have paid the debt with proof in writing, don't send the letter!  Why?

A debt collection company has been retained by the original creditor or the owner of the debt.  Yes, creditors buy and sell debt.  In fact, it is a multi-million dollar business.

Anyway, while a request to validate the debt may work, it could cause the debt collector to become very aggressive in their collection efforts! 

This may include filing a CLAIM, resulting in a SUMMONS, that may lead to a JUDGMENT, which could lead to WAGE GARNISHMENT, LIENS and BANK LEVIES!

 

So, before you "jump into" debt validation...You need to contact the collector, but before you do, get prepared:

1)  First, you'll need a BUDGET:

 Budget Worksheet FREE Download here!This will not only let you know how much (if any) money you can offer to SETTLE the debt and the debt collector will most likely ask about your situation.

2)  Call the collector:

Be calm and respectful! 

Trying to act "tough" or being disrespectful will NOT HELP!

While you'll need to explain your situation, don't "over do it".  The collector may need to submit your settlement offer with some budget information to the owner of the debt or they may be able to discuss and negotiate a settlement right now.

Always ask them what it would take to settle the debt! 

They may come back with, "How much do you have to offer?"  

Say something like, "I don't know, I am barely making it now.  What will it take?"

In negotiations, the person who gives out an amount of money usually loses!

Let's say you owe $5,000  and they say they can settle for $4,000. While that is a nice $1,000 reduction, you should be able to do a little better.  Say something like...

"I just don't have $4,000, but I may be able to could come up with $2,000 if you could give me a little time."  That's it...stop talking...wait for a response.

They may or may not accept, or they might come back with a counter offer.

You're trying to get somewhere around 50%.  Here's a few examples:

Recent Settlements See what we have  done for our clients!

Negotiating a settlement is not easy! (I know!  I've been doing this for about 17 years now!)

If you are successful in negotiation a good settlement, you MUST GET THE AGREEMENT IN WRITING!!!!!!!!!

Let me state that again....NO AGREEMENT IN WRITING....NO DEAL!

If you are unsuccessful, then just tell them that you'll have to get back to them and politely hand up.  They may or may not follow up with you.

FINALLY, the worst thing you can do is to ignore the debt.

If you do, while the account may be pulled back to the owner of the debt and transferred to another collector, it cause the collector to become too aggressive and possibly initiate legal action by the collector!

By dealing respectfully and confidently with the debt and the collector, you may be able to settle the debt or if necessary, just set up payments to repay the entire debt.

Hope this helps!

FREE  Debt Elimination Summary

 

Photo credit

Tags: illegal debt collection pracitces, mistakes dealing with collectors, garnishment, Oregon debt collection

Will a Debt Settlement Program Lower My Credit Score?

Debt Settlement is a great way to pay off old, delinquent debts.  But, will it hurt or help your credit score?

Fresh_StartIf you find yourself with too much debt and not enough money to keep up with at least the minimum payments, a debt settlement program may just be what you need to get a fresh start!

But, I'm always asked, "Will debt settlement lower or raise my credit score?

Let's be honest....

The reason you are considering debt settlement is most likely due to the fact that you have accumulated so too much debt and your credit score had gone down already!

Maybe you...

  • Lost your job.
  • Are retired and living on tight, fixed income from Social Security and/or other retirement income.
  • Had a serious illness or possibly a career ending disability.
  • Went through a divorce.
  • The death of a spouse or partner.

How are Credit Scores determined?

There are basically 5 things that go into making up your credit score:

Payment history ...

  • This makes up about 35% of your credit score!
  • How have you been handling credit? 
  • Do you make payments on time?
  • Have you been late too often?
  • How long have you been using credit?

Balance-to-limit ratio...

This accounts for 30% of your credit score and in my opinion, actually carries more weight!

Add up all of your balances and the total credit limits you have.

Divide the total balance by the total limit.

Example:

You have about $25,000 of total credit card balances on 5 different cards.

Your total credit limit (each card is different) adds up to $35,000.

$25,000 divided by $35,000 = 71% !!!

When your ratio is above 30%, lenders think that you are over-extended and are not a very good risk to pay back a loan, etc.

This balance/limit ration is very, very important!

*Hint:

Many people make a serious mistake in trying to improve their credit scores by closing credit accounts or cards after paying them off.

Let's continue the example above and see what really happens:

Before:         $25,000 of $35,000 of available credit (credit limits) or 71% (too high!)

After paying off a couple of cards, the ration looks like this:

Total account balance         $ 10,000

Total credit limit                   $  35,000

Ratio:    $10,000 divided by $35,000 = 28% !!! (Looking good!)

Thinking that getting rid of a couple of cards will help his credit score, he calls and closes 2 accounts and his credit score goes back down!

Ratio:    $10,000 divided by only $25,000 (closed 2 accounts with $10,000 limit)

Now his ration is back up to 40%.  Yes, better than 71% before, but still over the 30% goal!

Length of Credit History...

This accounts for about 15% of your credit score.

Younger borrowers have not established a "credit use history" and fair or not, are punished in their credit score.

Lenders are looking for seasoned credit users who have proven they can handle credit.

It will take some time for this factor (only 15% weight) to improve.

In the meantime, don't run out and start opening up several credit cards thinking this will help!

This takes us to the next factor:

New Credit...

If you try opening several credit or store cards, it suggests to the lenders and the credit bureaus that you may be in financial trouble and are trying to "borrow your way out"!

Even though new credit accounts for only 10% of your credit score, it is still very important!

There are no "short cuts".  It takes time and a good payment history to improve your credit score.

Credit mix...

A good mix of revolving credit (credit cards) and installment loans (auto loan) looks better and is viewed as a good risk to lenders and the credit bureaus!

Although accounting for 10% of your score, this is still important!

OK, now you see there are several factors that go into making up your credit score.  So will a debt settlement program help or hurt your credit score?

There are no "quick fixes" so beware of ads that say they can remove negative items from your credit report, etc.) is to pay down and or settle balances.

If the only way to start improving your credit score is by paying down the balances, what if you just don't have that much income?

If your total minimum payments requires $500/month and you only have about $200 (if there are no emergencies, etc.), what are your options?

Debt Management (used to be called "credit counseling")

In this program, each of your creditors agrees to lower your interest and possibly waive some late or over-the-limit fees.

Your total monthly payment is usually about 2.4% of the total balances, which may be the same or even higher than the total of all of your payments now!

Let's say you have $25,000 of total credit.

At 2.4%, that's a payment of abut $600 a month!

If you are having trouble making the required total monthly minimum payments now, most likely a Debt Management Program will not help.

Debt Settlement

Once your accounts start going to collections and you start getting letters and calls (lots of calls!), it's time to face the hard facts!

STOP Collection Calls Free Sample Letter

You're in real trouble and if you don't do something quickly, creditors may start to file claims which leads to a summons, which can lead to judgments.

After a judgment is awarded, a creditor can apply for wage garnishment and/or a bank levy!

Serious stuff!

When a borrower is in serious trouble, they may be thinking about looking into BANKRUPTCY as their only solution.

Creditors will usually be willing to accept a settlement or reduced amount to avoid this.

Settlements can run from 40% to 70%, depending on several factors.

Recent Settlements See what we have  done for our clients!

The bottom line is that once a settlement is completed, even though your credit history shows late or no payments for awhile, now you have repaid or "settled-as-agree" the account and you have a $0 balance!

To potential lenders and the credit bureaus, this looks good and your credit scores will start to improve!

Bottom line...

Debt Settlement will help improve your credit score over time!

FREE  Debt Elimination Summary

 

 

Tags: your debt relief options, credit card debt help, your fico credit score, settlement

Received Summons! Kinda Freaked Out!

If it's not bad enough having too many debts and bills, receiving a SUMMONS is especially stressful!

One of our clients sent me an email this morning and said...

"I received this subpoena last night.  Kind of freaking out.  What do I do!"

woman_on_floor_with_all_her_bills

We've been helping people deal with the stress of having to much debt and just not enough money to keep up for many years.

 

I've written many blogs about what to do with or how to prevent a summons, but wanted to give some insight that may help.

 

WHY DID YOU RECEIVE THE SUMMONS?

When you miss payments due on your accounts (I'm only talking about unsecured accounts like credit cards, medical bills, etc.) the original creditor will start calling and sending letters.

They may offer a few options for getting you "back on track", but for most people, these don't help or are possible due to your circumstances.

Trying to explain to the agent is usually a waste of time, so I don't advise trying.

If you do, just say something like...

"I've had some things happen and can't make payments right now.  I intend to get caught up soon and would appreciate it if you'd stop calling."

After a few months, most likely your account will be transferred, assigned or even sold to a collection agency.

Now you can at least put a stop to the calls:

STOP Collection Calls Free Sample Letter

 

DEALING WITH DEBT COLLECTORS

There are thousands of companies that make a lot of money collecting bad or old debts!  These companies may take accounts on consignment, in order to earn a portion of the money they recover.

Or, they may have just purchased the account for pennies-on-the-dollar from creditors who have given up on trying to collect and have just written off the debt as a loss.

The debt collector most likely will be open to a SETTLEMENT.  The amount of settlement is determined by many factors, but on the average, a settlement of 50% to 70% (more or less) may be available.

Recent Settlements See what we have  done for our clients!

 

 DON'T IGNORE A SUMMONS !

To many people take the "hide your head in the sand" approach to their financial crisis.  Although I certainly understand and appreciate how they feel, the debt is not going to go away!

If the calls and letters from a debt collector go unanswered or returned, after a few months, the debt may be:

  1. Recalled back to the original creditor
  2. Transferred to another debt collection agency
  3. Sold or transferred to a Law Firm that specializes in Debt Collection

If your account lands with #3, and if they cannot reach you or an agreement or settlement cannot me negotiated, they may decide to FILE A CLAIM.

Once a CLAIM is filed with your local county court, a SUMMONS is prepared and sent out for delivery.

The delivery may be by a COUNTY SHERIFF or COMPANY PAID TO DELIVER the summons.

Either way, receiving a summons is (like my client said), kinda "FREAKS YOU OUT!"

Although a summons (or small claims order) may differ, most of them state something like the one my client received:

     "YOU ARE HEREBY REQUIRED to appear and defend the Complaint filed against you in the above-entitled cause within 30 days from the date of service of this summons on you, and in case of your failure to do so, Plaintiff (creditor or debt collector you owe) will apply to the court for the relief demanded in the Complaint."

Well, it sure sounds like you have to go to court within 30 days, doesn't it!

But, if you kept reading, it would explain.  (I'll paraphrase and explain to save time:)

It says you must "APPEAR".  Notice the word "appear" is in italics.

It then goes on to explain what "appear" means:

It basically says that if you wish to give proof of why you do not owe the CLAIM being made, you have 30 days to provide the court with a legal document called a "motion" or "answer".  You also have to pay the required filing fee ($165 in this particular county court).

The summons goes on to say that if you have questions you should see an attorney immediately and usually gives a phone number for your state's Bar Lawyer Referral Service.

NOW WHAT?

OK, so you have the summons and understand that you don't have to go to court.  What should you do?

The worst thing you can do is ignore the summons!!!!!!!

If you ignore the summons, a JUDGMENT will most likely be awarded to the PLAINTIFF.

If this happens, the attorney for the plaintiff will seek the legal options available to get funds awarded in the judgment.  These include:

  • Wage Garnishment
  • Bank Levy of your bank accounts
  • Placing a lien against your home or other property

I don't have the space here to address each of these, and there are things you may be able to do if you are facing one or more of these due to a judgment.

The important point is....

DON'T LET IT GET TO THIS POINT!!!

In most cases, some kind of agreement or solution can be negotiated before or even after a JUDGMENT has been awarded.

You may have to repay the entire balance due to avoid a garnishment, levy or lien.

This will most likely be a STIPULATED AGREEMENT that will be filed with the court.

This basically will say that as long as you make the required payments specified int he Stipulated Agreement, the Plaintiff will not continue to seek the legal options described above.

Once the Stipulated Agreement is completed, a LETTER OF SATISFACTION will be mailed to the court and the judgment is removed.

Now, I've explain a lot. What's the main points?

You have several options to prevent your account from ever getting to becoming a judgment.

  • You can't ignore the debt.
  • It will not go away!
  • If you receive a summons, don't panic!

If you are overwhelmed, we may be able to help:

FREE  Debt Elimination Summary

 

Photo Credit

 

Tags: stop wage garnishment, summons, debt collector, receive a summons, credit cards, judgment, settlement

Summons, Judgments, Garnishments...What You Need to Know!

If you have received a summons for an unpaid, unsecured credit debt, you know how intimidating it is!

In order to help you understand why this has happened and what your options are now, I'm going to walk you through the basic process and give you ideas on how to prevent in the future.

22853064975_8c547f714f_mDealing with the stress of having too much debt and not able to make the minimum payments due is a terrible experience.

Then, you get a knock at the door and are handed a SUMMONS!

Now what?

Do you have to go to court?

Are they going to garnish your paycheck or levy your bank account?

Most likely, the answer is NO!

Let me walk you through the basic litigation process and I think you'll understand more and hopefully feel better!

When you applied for the credit card or unsecured loan, you were making a promise to repay the debt per the payment and interest of that account.

But, things happen in life and you most likely have had one or more of the following events cause this:

  • Unemployment
  • Illness or disability (medical bills!)
  • Death of a spouse or partner
  • Divorce
  • Retired on a very limited fixed income!

 

 Letters and calls

 

When you don't make the minimum payments required by your credit account agreement, you'll start getting letters and calls.

The letters will warn you that you missed a payment and now you must make up the missed one, pay the late fee and add the next payment due!!!!

The calls usually come after a couple of months of missed payments.  Unfortunately, the original creditor has the contractual right to call you.

Once these accounts are charged off and/or sold to a collection agency, you can put a stop to the calls.

(I'll show you how to stop calls from collectors in just a minute.)

I've been helping people deal with credit issues for over 15 years and have not found it very helpful or productive to try to explain yourself to the agent making the call.

If you feel like you just have to...try saying something like:

"I've had some things happen and can't make the payments now.  I intend to get caught up soon, but would appreciate it if you would stop calling."

This may work, but don't be surprised if it doesn't.

Collection Letters and Calls

After 2-3 months of non-payment, your credit card or unsecured account will most likely be transferred to a DEBT COLLECTION AGENCY.

If the calls had stopped, they will begin again.

But, now you can stop the calls.  Here's how:

STOP Collection Calls Free Sample Letter

The calls will stop, but the letters will continue.

You may get a letter with a SETTLEMENT OFFER

It will say something like...

The current balance is $$$$$$$, but we are making a one-time settlement offer of $$$$$.  This must be received in our office by (date).

 Sometimes, these are not bad offers!  I've seen some at 40% or so of the balance (yes with all of the added interest and late fees), but for example, a $4,000 settlement on a balance of $10,000 is a pretty good deal!

However, I'm guessing that if you had that kind of money, you wouldn't have gotten behind in the first place!

Debt Collection Agencies (sometime attorneys who specialize in debt collection) have either purchased the debt or have taken it on a kind of consignment.  The debt collector will get a percentage of what they collect.

So, they are going to play "HARD-BALL" and try to get as much as possible out of the debtor (you).

You can negotiate a settlement, but the final settlement will be determined by several factors:

How much the collector paid or stand to earn on this particular debt.  Different creditors (Capital One, CitiBank, etc.) each have their own parameters of what they will or will not take as a settlement.

Your particular financial circumstances also play a very important part of the negotiating process!

If you are employed and are paying a mortgage, the collector may not be willing to come down much as they may decide to file a claim hoping to get a judgment in the future.  I'll explain more about this later.

But, if you are unemployed, disabled, retired, renting and just barely getting by, they will be more willing to accept a good settlement (40%-50%).

Before you make the call, it is a good idea to have "all your ducks in a row" so to speak!

You need to have completed a budget (what's coming in and going out each month).  The collector will need to provide this in order to present you offer to the original creditor or their manager.

Here's a FREE BUDGET WORKSHEET to help:

Budget Worksheet FREE Download here!

Now that you know where you stand financially, you can make the call.

Most debt collectors are surprisingly professional and even polite, so you do the same!

Being aggressive or having a "take it or leave" attitude will not help!

But on the other hand, don't beg or show weakness either.

Just explain your situation and that you are trying your best to work out settlements rather than being forced to seek BANKRUPTCY PROTECTION.

Although bankruptcy is an option, you should do everything you can to avoid it as it stays on your credit report a long time and makes it difficult when applying or credit in the future.

OK... Let's say you negotiate a good settlement....Now what?

Before you set up or make any payments, you MUST....ABSOLUTELY MUST have the agreement emailed, faxed or mailed IN WRITING!

Once you have the written agreement, you can either call to set up automatic payments or mail them per the agreement.

To give you an idea of what a real settlement agreement looks like, click below:

Recent Settlements See what we have  done for our clients!

If you are mailing the settlement, make sure it arrives on or before the due date!  They can and will void the agreement if you are late!

If you cannot reach a settlement agreement, the collector may opt to go for a judgment.

I've written several articles about this process.  Rather than go into it in this blog, check out:

What To Do If You Receive a Summons

I hope this has helped. Let us know if we can help...

FREE  Debt Elimination Summary

 

 

Photo Credit

Tags: consumer debt collection, credit card hardship plan, summons, stopping debt collection calls, avoid before filing bankruptcy, credit card debt help, settlement, mimimum payments