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.


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:

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...

Personalized  Program Comparison Click here!



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

Are Hardship Programs Offered by Creditors a Good Idea?

hardship programsHere you are again.  You just deposited your pay check and it is time to pay the bills.  As always, you are just barely getting by.  You are juggling your bills, your due dates, and your grace periods each and every month.  You have so many balls in the air, you can't keep them straight.  Sooner or later, one of the balls will drop and your financial "plan" will come toppling down.

In desperation, you start calling your creditors to see if there is anything they can do to help, and they offer you a Hardship Program. 

What is a Credit Card Hardship Program?

If you have tried in the past to enroll in a Hardship Program with one or more of your creditors, you may have been disappointed to find our that they are not eager to help out when you are current with your payments.  However, if you have fallen behind on your monthly payments, your creditors will be more receptive to offering you a deal. 

The plan that your creditors will offer you will differ depending on the bank and  how far behind you are.  Here are some examples of what a hardship plan might look like:

  • Temporary Hardship Program - Your monthly payment is reduced to around 2.5 percent of your balance, usually for anywhere from 6 to 12 months. Your interest rate is reduced, and penalties and fees are often waived. When your temporary hardship program expires, your account will go back to the pre-plan arrangement.

  • Long Term Hardship Program - With this type of plan, your accounts are generally closed and the interest rates are reduced.  You will most likely be put on a payment plan to get the full balance paid off within 5 years.  If you default on any payments while in a Long Term Hardship Program, your interest rate, payment, and fees will go back to the pre-plan arrangement.

Are Credit Card Hardship Programs a Good Idea?

These Hardship Programs might be just what you need to get you over your financial hump.  However, never forget that the goal of the credit card industry is to make money!

When your creditors offer you a Hardship Plan, keep in mind the saying...

"If it sounds too good to be true, it probably is"

  • First, there is no guarantee that you will be able to enroll in your creditors Hardship Program.  Once your lender finds out that you are struggling, they may decide to reduce your credit limit or even close your account all together.
  • Next, enrolling in a Hardship Program will usually be noted on your credit report as "Hardship Payment Plan". This could cause problems and even increase your interest rates with your other credit card accounts.
  • Finally, these Hardship Programs are just short term solutions to what is most likely a long term problem.  If you default even once during your Hardship Program, you interest rates and payments will go up to the same or even more that before you got "help".

Enrolling in a Hardship Program with your creditors should always be a last resort. If you don’t want to go it alone, look for a Debt Relief Company, which can help you develop a debt payoff plan. Trained Debt Solutions Specialists can negotiate with lenders on your behalf to lower both your interest rate and monthly payments and even the total amount of debt that you owe.

hardship programs

Tags: credit card hardship plan, debt relief programs, hardship programs