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

             

                                                                                                                                                                                     

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

Should I Close Credit Card Accounts to Improve My Credit Score?

close credit cards to improve credit scoreAs strange as it seems, closing credit card accounts will actually hurt your credit score. 

Why does closing credit card accounts hurt your credit score?

As crazy as it seems, the credit rating agencies like to see several open accounts with balances and payments under control.

They actually penalize you if you close accounts because it now looks as though you have "less established credit" and are more of a risk! It doesn't make logical sense, but that's the credit rating/scoring game we all have to play!

For Example:

Let's say you have 5 credit cards

Account Credit Limit Balance  

Visa

$5000 $2,500 making on-time payments
Master Card $5000 $1,500 making on-time payments
Sears $1500 $0  
Kohl's $1500 $0  
Discover $2500 $0  

As far as the main credit reporting agencies (Experion, Eqiufax, Transunion)are concerned, your RISK RATIO looks like this:

Total Credit Available $15,500
Total Balances $4,000
Ratio 26%

In this example, you are a good credit risk, pay on time and therefore should have a good credit score. But, let's say you decided to cancel the Sears, Kohl's and Discover cards since they have a zero balance and you are trying not to charge up too much credit.

Now your RISK RATIO looks like this:

Total Credit Available $10,000
Total Balances $4,000
Ratio 40%

Now you are a greater risk as you are using almost 1/2 of your available credit! Make sense? 

What is the best way to manage your credit score and risk ratio?

It might seem foolish, but from a credit score perspective, the best way to improve your credit score is to "lightly" use several cards."Lightly" means charging less than 10% of the available credit.

Next, you need to PAY OFF THE FULL BALANCE EACH MONTH!

Sound dangerous?  You are right!  If you aren't disciplined, you could end up charging up your cards again.  However, if you can keep on task, your credit score will improve over time.

Not sure what your credit score looks like?

Go to www.creditkarma.com to see your score for free.

Want to see what is showing up on your credit report?

You can get a FREE COPY OF YOUR CREDIT REPORT FROM ALL THREE MAJOR AGENCIES once a year!

ARE THERE ERRORS ON YOUR CREDIT REPORT?

You can fix those errors and improve your credit score.  Check out this post --> 3 Tips on How to Repair Your Credit Report.

 


Tags: credit card debt, Credit Score, credit repair, how to improve your credit score

How to Improve Your Credit Score

how to improve your credit scoreHow to Improve Your Credit Score

When many people think of credit reports and credit scores, they see them as important if you want to apply for a loan. And of course they are important when you apply for a loan. But your credit report and score are also absolutely critical to getting rid of debt. With a good credit score, you qualify for lower interest rates that can help bring down your total interest charges. With bad credit, you’re stuck paying double digit rates. So let’s look at some tips and tools that can help you:

#1 Understand Just How Important Your Credit Score Is!

As I explained above, your credit score is an important tool in getting out of debt as quickly as possible. Don’t believe me?  Check out these statistics from myfico.com for individuals with a FICO score of 660 (fair credit) versus 760 (excellent credit):

  • Mortgage: The average interest on a home loan today is about 4.766% for excellent credit, but 5.379% for fair credit.
  • Car Loan: With a credit score of 760, you can expect a car loan interest rate of about 6.3%. With a score of 660, the rate increases to about 9.8%.
  • Home Equity: Excellent credit can expect a rate of around 8% or lower, while fair credit borrowers will pay as much as 11% or higher.

As you can see, your credit score matters!

#2 Get Your Free Credit Report!

The starting point is to get your FREE CREDIT REPORT and check it for errors.

#3 Get Your Free Credit Score!

Next you should get your FREEE CREDIT SCORE. You can get this from annualcreditreport.com., but you will have to pay for it.

#4 Pay Your Bills On Time!

There are a number of factors that go into a credit score, but one of the most important is paying your credit bills on time. (such as credit cards, mortgage, and car payments) Do whatever is necessary not to forget a payment, and make sure you make the payment far enough in advance of the due date so that there is no chance it will be late.

#5 Don't Close Credit Accounts!

As a general rule, don’t close credit card and other revolving accounts. One of the factors in determining credit score is the amount of debt you have in comparison to the amount of available credit. The greater the available credit, the better. You can always cut up some of your cards if you don’t want to risk using them, but don’t cancel them.

 FREE GUIDE to

Tags: best way to eliminate credit card debt, credit repair, credit report, how to improve your credit score

Low Credit Scores Raise Insurance Rates - WHY?

There are only three states, Claifornia, Hawaii, and Massachusetts, that prohibit insurers from using credit information when calculating premiums.  If you live in one of the other 47 sates, your low credit score could affect your insurance premium. 

Why does your credit score affect your insurance premium?

The answer is simple.  Insurers have found a strong correlation between credit scores and insurance claims. It turns out, people with low scores are more likely than people with high scores to file claims. And when insurers looked more closely, they discovered that people who made late payments were the ones who tended to have more claims.

They didn't find as strong a correlation with other factors, such as taking on too much new credit, which other lenders care about because they worry that you won't be able to keep up with your payments.

Insurance companies use a different credit score to determine your premium

The version insurers use is slightly different from the one that lenders use. Both types of scores are based on information from your credit report, but insurers weigh the items differently. For example, insurers look a lot more closely at how you've managed credit over time rather than how much credit you've applied for recently.

Your insurance score can vary from insurer to insurer, based on the company's claims history. Insurance companies won't reveal all of the details of what goes into their scores, but you can get a version of your insurance score from TrueCredit, available through TransUnion for $9.95. The site provides separate scores for auto and homeowners coverage, which weigh the factors a bit differently, plus advice for improving your insurance score.

Even though your insurer may use its own calculation, the general advice can help anyone improve his or her score. Because each insuance company uses it's own calculation, it is important to shop around occasionally.  You can often find a better deal if you look.

Improving your score can make a big difference in your auto insurance premiums. If you need help eliminating your debt, there are several options available to you.  The Solutions Specialists at Debt Relief can discuss your situation with you and help you find the best option to get out of debt fast!

Give Us a Call --->>>   1-877-492-4109

how your credit score affects insurance

Tags: low credit scores raise insurance rates, credit repair, credit report, how to improve your credit score

5 Tips: How to Improve Your Credit Score

how to improve your credit scoreHere are 5 tips that you can use to improve your credit score:

1. Check the accuracy of your credit report

Did you know that by law, you have the right to obtain a FREE credit report from each of the three national credit reporting companies every 12 months?

To have the best credit score possible, you must make sure that your credit report does not contain errors.  This is your responsibility!

To get your Free Credit Report:

  • Or, you can call 1-877-322-8228 to request that your report be mailed to you.

2. Pay your bills on time

Although there are several factors in determining a credit score, one of the most important is making regular, on-time montly payments.  Most banks have automatic online payment, so take advantage of the service!

3. Understand how your credit score is determined

Basically, your credit score is base on how you answer these five questions:

  • Do you pay your bills on time? If you are consistently late paying your bills, your credit score will suffer.
  • How much outstanding debt do you have? If you have too much outstanding debt compared to your ability to repay (based on income, debt limits, etc.) then your score will suffer.
  • Have you applied for several new accounts recently? Filling out several store card applications or trying to establish new credit with several charge cards in looked on as a negative for your credit report.
  • How long is your credit history? Even thought you may never have had bad credit because you have never really had a loan or credit card, this is considered a negative on your credit report.  Try to establish one or at the most, two accounts and pay them on time and possibly pay them off in a few months.
  •  What types of credit accounts do you have? Too many finance companies or high interest credit cards may hurt your score. On the other hand, a mix of installment loans (auto, home, etc.) and a credit card or two is much better for your score.

For more information, check out the Federal Trade Commission's website at Facts for Consumers.

4. Take the time and effort to legally improve your credit score

It is well worth the effort to improve your credit report and score!

Click on this link for step-by-step instructions on how to repair your credit report.

5. BEWARE OF CREDIT REPAIR SCAMS!

There might be a few legitimate credit repair companies, but I haven't ever found one!

You can find all you need to know about how to legally correct or repair your credit report at the FTC's site "Credit Repair: How to Help Yourself"

If you have some questions or need some more information, our Solutions Specialists are here to help.  Give us a call!

1-877-492-4109

OR, Click on the link below for a FREE PERONALIZED DEBT ANALYSIS!

how to improve your credit score

photo by: kanonn

 

 

Tags: credit repair, credit repair scams, how to improve your credit score