Dealing with Your Creditors before Bill Collectors Deal with You
Posted: Thursday, January 01, 2009
by Teresa Ortiz
Freelance writer/Speaker
For many people, this past year brought about financial difficulties they would have never dreamed they would have to deal with.
Gone are the days when a bad credit rating defined those who did not know how to manage their money or those who simply did not care.
If you find yourself in foreign territory when dealing with such people, I have some tips that might spare you such an experience. Perhaps you already have, and are currently putting your answering machine to good use. In any case, it's never to late to learn to have confidence in approaching your creditors by putting these tips to use.
WHEN YOU ARE PAST DUE 2 MONTHS
1. Make a list of all unsecured credit (credit cards), adding the current monthly minimums due.
2. Make a list of secured credit (vehicles, house payment) monthly minimums due.
3. Subtract the secured credit from your current income.
4. Add your living expenses--such as, food, utilities, car insurance, and medications together and subtract them from the balance after subtracting the secured credit.
(This can be discouraging, but trust me there is a purpose. You will need this information when you begin to work with your creditors, especially if your accounts are already 90 days past due and scheduled for charge off--which means the credit card companies are closing the account and sending it to a third party collection agency.)
After steps three and four are completed, you should have the total of remaining usable income.
Chances are you do not have enough to pay all of the minimum payments due on your unsecured credit. If your loss of income was temporary and has been restored to its normal level, you may only need a temporary solution in returning to a current status.
In this case, instead of stressing about the doubled minimum payments, call your credit card company immediately and tell them you had a temporary situation that has caused you to go past due and that you would like a repayment arrangement for the next three months. Most credit card companies will work with you by dividing the amount past due into three equal payments and they will stop the late fees from accruing on your account. In addition, this will keep them from reporting a negative on your credit report. Your account will remain in good standing with them, and you will have stopped collection calls from coming your way. Problem solved.
ACCOUNTS THAT ARE 90 DAYS AND IN COLLECTION STATUS
At this point, you have received several phone calls and threats. If you have yet to return phone calls, don't do it until you have followed all of the steps above--this time, looking at a long term solution and repayment plan. Do not let the collector bully you into making a commitment you cannot keep, and never give them your checking account number for auto deduction unless you can keep their proposed arrangement. This will only come back to haunt you later. Again, knowing what will work for you ahead of time is crucial:
Take your remaining usable income and divide it by the number of credit card bills you have--this being the amount you can send each creditor--now you can make contact with the company.
1. Write a letter to the credit card company or collection agency. State the reason for your delinquency. Be sure to tell them this is a permanent situation and you are contacting all your creditors to tell them you are committed to paying your debt and tell them the amount you are able to pay. Include your first payment with the letter. Conclude your letter by thanking them for their understanding and that by cashing your check; they are acknowledging acceptance of your repayment agreement. It is important that you state this in the letter as well as writing the following statement in the upper corner of the endorsement side of the check: "The endorsing party accepts the monthly repayment agreement of $______ per month."
2. Keep copies of your letter and each check you send. Some collection agencies will contact you and tell you this isn't enough and they will threaten to sue you. Do not be swayed by these threats. Even though they have the power to place a judgment against you, the courts will see your efforts and consistency in payments and will keep the monthly payments the same unless there is a change in your income.
3. If you choose to contact the collection agency by phone, be ready for them to do all they can to get more from you. Stand firm and tell them you can't give more than what your budget allows. You do not have to listen to their threats. Tell them you will mail the payment you proposed, say goodbye and end the conversation.
4. If you are receiving collection calls at your workplace, tell them they cannot contact you there, as it will jeopardize your employment. If they continue to call, tell them you will report them to the Better Business Bureau and follow through.
5. NEVER ignore a credit card company or collector. If you do, you are sure to have a judgment placed against you. At this point, the courts will not be as sympathetic and they have the power to approve a payroll deduction (Your entire paycheck less 25%) and/or a bank account freeze--which means any funds deposited will go directly to the creditor.
Going back to the list of expenditures, notice I did not include cell phones, cable, internet, or satellite. This is because these are things you should consider cutting out the moment you see trouble.
Do not be fooled by debt consolidation companies--these should be used with caution, if at all. Many will ask you to provide them with your budget, then tell you they can help you. They give you a figure before contacting any of your creditors and they charge you a fee for doing what you can do on your own. Check with the Better Business Bureau before using one of these companies.
If you find yourself in a crisis with little or no income, contact a bankruptcy lawyer and inquire about Chapter 13. This is a pre-approved repayment plan set up through the court and the law firm. Your lawyer will go over your debt to income ratio and work out a plan for you. You pay the trustee the agreed upon amount and the trustee will pay the creditors. This stops all collection calls, late fees, and collection fees. This remains on your credit report during the course of the repayment plan but is not viewed as negatively as a chapter 7, which is complete relief. A legitimate bankruptcy law firm will offer a free consultation.
Incidentally, this same process can be used in working out an arrangement with your mortgage company.
Being the first to make contact is the key to a peaceful and fruitful resolution with creditors.
Above all, do not let this situation define you. Keep moving forward, this too shall pass. Trust me, I am not only a collector, I am currently a collectee.
(C) Teresa Ortiz
This Article has been viewed 1,882 times. (Not updated in real-time.)
Top-level comments on this article: (10 total)Hi Teresa.What a stroke of genius. I'm glad you wrote this article. It will certainly help a lot of people. Luckily, Bernd and I are not there yet. You are the perfect person to write this with your knowledge and compassion. Great job! I'll be keeping this in my favorites.Hugs,DianneHi Dianne, Thanks! I have been thinking about it for a long time. It is out of my comfort zone as far as writing style. This is needed more than ever and since I have been doing credit counseling and helping people with payment arrangements on the phone for a long time, I thought I would try putting it in writing.I am trying to exand my horizons so to speak in the realm of writing informative and helpful articles.I sure hope it helps! And thanks for the kind words, I hate when collectors treat people horribly. They should be careful, because they never know where life might take them. I love helping people who feel hopeless during tough financial times.
Teresa, this reply, as you know me, is not personal and hopefully it iwll not be taken that way. You know my sentiments concerning this topic. I have written to this fiasco of greed multiple times without really any reposnes so I expect none now. The information you provided great for many, but in my opinion we disagree on some aspects. It will not help anyone who does not have the means to pay and that is a fact by first hand experience. I have been lied to, told fabrications and then advised "we have no record" of any arrangement even when I have documented it, made the payments and tried to be forthright and moral. Somehow it always gets lost and I have to start all over again. Sending confirmation of our agreement in writing another hoax. Pay first. Hey you even say don't make an auto deduction but that is what they demand. They send you an agreement to make payments on a specific date but never their obligation as agreed to and stated they would do. As for "threats" this is a violation of the FCRA which is as worthless as the paper it is written on. In business when you enter into an "unsecured loan" which this is there is no recourse. Yet our in my opinion immoral leadership has deemed it important these lenders get their ounce of blood even while they bail them out, wipe them clean of their hardships. My God what can one say? Yes and we elect them, like them, defend them, while we ruin good people who fell on hard times. No there is no moral answer but sin. They win, people lose, it is simply speaking reality. Yes and that judge who places a judgment on people, he has to worry as do all who are involved with their soul. It is the first lesson of business and called assigned risk. It always was until now a risk business accepted, not people, where have we gone wrong? In this case our leaders like I stated in my opinion have immorally passed that onto the backs of the consumer. No Teresa like I said, in my opinion, it is all about legalized usury, a sin, no matter how one states it. Fee's and the placing of people into financial hardship via higher rates, doubling monthly payments all add to the problem. Like I said good advice for some, for others accept the inevitable. They will crush you.Hi Robert, don't worry, I don't take it personal. I agree with you. But knowing the problem with usury and greed from these companies does not change a consumer's situation any. I also agree that there are extreme cases, much like yours where these tips will fail. However, for the majority, they will work. I have been in this business a very long time and have seen many situations. If you notice, at the end of the article I recommend a bankruptcy consultation for those in cases where there just isn't any money. Chapter 7 is a last case scenario, but for some it is the best option. I know people like you have a good conscience and want to pay all their bills, but unforseen events happen. Medical bills and caring for elderly parents are a definite burden on fixed incomes, and no payment arrangement will work because there just isn't any income. If I were in your shoes Robert, I would consider this option. At a future date, you can always go back, one creditor at a time and pay them back. But bankruptcy protects you from all the phone calls and ridiculous fees.Also, I know that collectors demand auto deduction from bank accounts, but you do not have to give in. You can send your payments in on your own. Like I said, they will say anything to get people to agree with them. But the consumer has the power to end the conversation and mail payments in. They will be persistant and possibly excersise their right to issue a judgment, but your consistent payment history with them will make a difference in court. The old saying is true, "you can't get blood from a turnip."This article is intended for those who are at the beginning stages of this problem where the power is still in their control. When I talk with clients I constantly tell them communication is the key. I always work out what is best for them and even take offers of settlement.You may not be in this position, but some people can opt for a settlement. Usually offering 60% in full to your creditor will be accepted when they know there is no way they will get the money in full. A quick credit check/income verification will cause these collectors to accept. Again, not all, but the majority. I still believe the best defense in this situation is to make the first move.As always, thank you for your input. Blessings to you, TeresaThanks Teresa, great finish to a great article. Bankruptcy. Well complicated and not right in every situation. Bottom line for any company zero, plus zero is still zero. Yes and why do many tend to forget usury and unsecured debt, why, because by truth that is what it is? Yes Mr. Obama, Congress, you who profess, why? Righteous indignation is acceptable in this case toward them and those who spread this immorality. Best wishes, as always Robert.Thanks Robert. Bankruptcy is a personal decision. All the best to you as well! Your friend always, Teresa
Hi Teresa,My goodness, you have just written one of the best article I've ever read. I happen to know most of that but how well it is explained! Great. I was blessed from marriage, through our child bearing years, to hold a good job and had no problems, no credit cards, just doing fine...bought a home, etc. But some 25 years ago, the bottom fell out. My employer closed shop and moved to Mexico. I started an appliance sales and repair store, partially on credit, and fell on my face. After several months, I landed a great job but starting level pay was not so great.Then I started having chest pains, when I went to the doctor, he wouldn't even let me go home, but straight to the hospital. The next 14 months, I lost 3 months from work, had 3 angioplasty procedures and finally bypass surgery. So I was in a mess. We lost our home in the country, moved into a rental house and I followed most of what you have written. I contacted the hospital and all others that I owed and, fortunately they sympathised with me and they made me an offer to pay what I could, and I did. The only thing that hurt my credit record was the repossession of my home. I had to live with that until it was removed from my credit record, 7 years later.Since that time, I have always paid my bills (all of them) when I get paid and we live on whatever is left...be it hard living or good.Great article fine lady, even if it did bring back bad memories.Hi Joe, thank you for sharing your personal experience here, I know it will encourage others to take that step and to show this does work.Sometimes we get overwelmed and don't want to open our mail, I did that when I got caught without insurance about 20 years ago had to have surgery.Unfortunately, there are more and more people in this situation and they feel things will never turn around. But they will in time.I woke this morning with another article in my mind regarding bankruptcy and I am writing about it now. Your comment has confirmed that I am responding to what God has laid on my heart.Thanks again Joel,Teresa
Teresa, Very well written and a good guideline for those in need.Hi Nancy,Thanks for reading, I'm so glad it is understandable. I appreciate the encouragement. My heart goes out to those who are struggling with this issue. Some for the first time and others for far too long. I do hope it helps.Blessings,Teresa
What a great, timely and well-written article! I've heard plenty of horror stories about debt collectors and am glad you are teaching yours a kinder, gentler way.Hi Val, Unfortunately all those horror stories are real. Thanks for the encouraging words and I do feel blessed that I have had the opportunity to train others to act with respect and not rob people of their dignity. One rule I made for myself early on, was that I would never work for commission and I am glad I stuck to it after all these years.
Thank God, I have never been in this situation. Yes, I have debt like everyone else, but have so far been able to keep it under control.I did have one small incident many years ago, when my wife and I started a small business with very little money. One supplier back east sent me stock on credit, without really checking my credit rating. For a while I fell behind on payments. Everytime they would call me, I would answer the phone with a cheerful greeting, then before they could say anything, I would say, "I believe I owe you some money." This would catch them right off-guard. Then I would explain that I am trying my best and would send them something as soon as I can. This usually satisfied them and I would then try to get something to them. Business finally improved and all was good, but I found that admitting that I owed them before they could mention it, always seemed to put them in a good frame of mind, and they became understanding, not demanding.Hi David, thanks for sharing your experience. It really does make a difference. From the collectors perspective, this makes our job easier and we like that. It's difficult when we are dealing with people who are already overwhelmed and discouraged by the time they hear from someone like me, I always try to be friendly, and try to avoid the "how are you today" question. When I made my first few phone calls years ago, I asked that question trying to start the conversation off politely. WOW! Did I hear an ear full-Well how in ..... do you think I'm doing. Okay, bad call on my part. Still all in all, I do love how God has put me in a position to be a good listener and has given me big shoulders. I have been called some nasty names over the years!I know you will appreciate this story---one guy was a Vietnam Vet and was already bitter. We had a 2 year collector/collectee relationship. He would curse at me and I would just listen and give him encouragement. I always felt God gave me the grace to take the abuse. Then one day he softened and he got quiet on the phone. When I was ready to end the call, he said something that made me laugh and cry: "You're one of those reborns aren't ya'? WOW! We talked about God and grace and forgiveness, he even let me send him some tapes of my church services! That was about 3 years into my job and from that point on, I knew it would be my career. I often think of him and pray. I wonder how he is. God knows. I have had lots of opportunities for this kind of interaction and by God's intervention, I have never gotten in trouble at work for it.Anyway, thanks again for affirming my tips here. Blessings to you!Wonderful story, Teresa. I had an experience somewhat like that, but more on the sinister side. A young fellow walked into the first business we had started and stopped right at the front door and wouldn't come in any further. He said to me, "A Christian owns this store, am I right?" I introduced myself and told him I was that Christian, but what made him think a Christian owned this store. He told me that he dabbles in the occult and he could feel a presence in the store that conflicted with the occult that he was involved in. He said the presence made him nervous and uncomfortable. I invited him in so we could talk about it, but he left instead.Thanks for sharing David, a true case of "Greater is He that is in me, than he that is in the world". A shame the guy didn't come back, but who knows, it could have just been the little seed that told this man Who is King and reigns.I have had many circumstances like this were I could discern evil spirits and have been a part of praying for those strongholds to be broken. It's all in the hands of the Spirit.
Great article and great advice, Teresa. I am a bit perplexed at some of the comments left, though.Hi Ken, thank you for the kind words. I suppose you never know where an article like this might take a person's thoughts :-)I appreciate your reading.Blessings to you, Teresa
hi t,this was a very well written, thorough and helpful article.i hope everyone has a chance to read it. you never know when you'llneed the info.my best to you,sueThank you Sue, unfortunately, you are right.Have a wonderful week!t
Hi. Im a 19 year old young woman already drowing in debt. I have stressed about my debt, and its taking a serious toll on me stability. After reading this article, it inspired me to get myself back on track, not be scared of the evil phone harrassment, and make a plan. Thankyou.Linda B.Hi Linda, I am so glad you found this helpful. You really can turn things around. Even if it means giving up some luxuries. The best thing to do is cut those credit cards up and learn to live with cash on hand.If you need some more help, feel free to contact me. I will do my best to help you out. The most important thing is not to let them force you into anything. I will be praying for you!Thank you for reading and commenting. I appreciate it.
thank you for your message because I'm single mother believe in Jesus Christ last month I lost my job and I want to get the creditors off my back God BlessHello Cynthia! I am so glad this is helpful to you. If you have any questions in this process, please write. I will help you. This is what I do for a living every day. May God strengthen you for your task ahead and give you favor with your creditors so that they will work with you. Continue to trust Him and stay close to Him. I will keep you in my prayers. God bless you!
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