Debt Handling - How To Deal With Debt Collectors
By Debt Handler | July 27, 2007
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Debt collectors ringing your phone off the hook and sending intimidating letters can frazzle anyone’s nerves. But you have various forms of protection and many techniques available to deal with them.
The Fair Debt Collection Practices Act sets guidelines for what debt collectors may or may not legally do when attempting to collect a debt. They can’t, for example, call before 8 a.m. Or after 9 p.m., nor threaten to garnish wages in states in which it’s illegal, or harass you with continual phone calls if you tell them to stop.
[For the full text, see: http://www.ftc.gov/os/statutes/fdcpa/fdcpact.htm#801]
As a consequence, you have several options. You can simply refuse to take the call. Most answering machines allow screening your call before picking up and if you have caller ID/call blocking you may be able to filter the call out entirely.
If you choose to pick up, you can insist that you not be contacted any more, and the agency is legally obligated to stop calling - if you’ve sent a ‘cease and desist’ letter. Of course, legal action of that kind can be expensive, so you may want to employ other techniques first.
First, you should consider actually paying the debt, if you can and if you actually owe it. You took on the load, and the creditor is entitled to be paid. But, if you’re seriously short of funds, you can couple this with negotiating for a reduced rate.
If you follow up on the commitment, the phone calls will stop. Bill collectors, despite their sometimes unpleasant attitude, are just performing a service for which they get paid. They will move on to others, once an agreement is in place.
Be sure you keep a diary of any calls made or accepted, and note any terms agreed to. Note if you’ve insisted they stop calling you, especially if you’ve been called at work. You can tape the call if that’s legal in your state. (Sometimes it requires notifying the other party that you are doing so.)
Few debt collectors will make any statement that’s out of line if they know they’re being recorded. That recording or diary can be especially important if you have negotiated a reduction in the debt.
Most debt collectors have the authority to accept substantially less than they’re asking for. Naturally, since they get paid a percentage of what they collect, they’re going to try to keep the amount as close to the original as possible. But they will accept less if you press. They know that 50% of $500 is better than %100 of nothing.
Part of the agreement should involve a commitment on the debt collector’s part not to put any black marks (beyond what may already be there) onto your credit report. You should take that one step further and insist they report quickly any payments you do make and to adjust any amount owed.
Get it in writing before you send anything more than a token good faith payment. It’s ok to send some money to demonstrate the sincerity of your commitment to the agreement. Send too much and they have little incentive to make the effort to comply with the terms binding them.
Patience, realism and maintaining your calm during discussions will go a long way toward making an inherently unpleasant situation less stressful.
Topics: Debt Handling Tips | No Comments »
Debt Handling - Credit Reports and What They Mean To You
By Debt Handler | July 25, 2007
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Credit reports are often regarded with dread, especially by those who have entered turbulent financial waters. But reality is never your enemy, even when it is unpleasant. In order to promote financial health, and resolve any debt problems you may have, it’s essential to have the best information possible about your credit status. That information is found - both by the lender and, more importantly, by you - in your credit reports.
Those reports are maintained - at least in the U.S. - chiefly by the three major credit reporting agencies: Equifax (PO Box 740241, Atlanta, GA 30374; www.equifax.com), Experian (PO Box 2002, Allen TX 75013, www.experian.com) and TransUnion (PO Box 2000, Chester, PA 19022; www.transunion.com).
The reports contain a multi-year history of your credit cards, home loans and other debt. They also record any late payments that occurred and how late they were, 30-day past due, 60-day past due, etc. The reports will list any current and old address, and often your phone number and social security number.
That information is readily available to any qualified party - a bank, a mortgage lender, a credit card issuing company and certain others during legal proceedings. But, though the companies all genuinely try to maintain accurate records, the reports may contain errors.
They may list loans as active that have been paid off. They may list current credit cards you canceled long ago. And, they may fail to list payments made to make up overdue amounts. Often, this isn’t sloppiness on the part of the credit bureaus but simply a reflection of timing and other common human errors in keeping records. The world may be computerized, but those databases still don’t always communicate effectively between companies using different systems.
The only thing an individual can do about this - out of self-protection, if nothing else - is to get copies from all three agencies and review them thoroughly. Make a note of any errors, establish proof of the error, then send a registered letter with the proof to the agency asking them to correct the data.
Thanks to recent legislation, you can obtain one free copy of your credit report per year. There are numerous ways to do that by filling out a form online or calling. One way is to go to: annualcreditreport.com.
On a more positive note, having the information at your fingertips allows you to develop a debt-free plan for your future. Understanding your past credit history is the first step in creating that plan.
Review your history and note any current overdue amounts. Clear those up first, as quickly as possible. One method is to pay off any smaller outstanding amounts first. That frees up funds to be used on the next larger outstanding amount. Working your way up, you will eventually begin to see light at the end of the tunnel.
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Debt Handling - Car Loans - Do Your Homework
By Debt Handler | July 23, 2007
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If you’re considering buying a car, or even just refinancing your current auto loan, you’ll benefit from some simple research before making a final decision.
Know your FICO and other credit report items. The overall number assigned to measure your credit worthiness doesn’t tell the whole story about you or your ability and willingness to repay a loan. But it’s used by every lender you approach and will have a strong influence on whether the loan is approved and what rate you might receive.
When shopping for a car loan, be sure to get current copies of your credit report from the three major agencies and review them thoroughly.
[Equifax: PO Box 740241, Atlanta, GA 30374; www.equifax.com
Experian: PO Box 2002, Allen TX 75013, www.experian.com
TransUnion: PO Box 2000, Chester, PA 19022; www.transunion.com]
Next, consider carefully whether any 0% loan offered by a dealer is the best deal for you. That number certainly looks attractive, compared to the 4% or higher that is often the next best thing. But you might actually be better off taking the immediate cash rebate instead.
For example, at 4% with a $2,000 rebate on a 36-month loan, your monthly payment will be $30 lower and you’ll save over $1,100 on the total cost over a 0% loan. You can run various scenarios yourself by using one of the readily available online loan calculators.
Always be sure to pre-arrange financing before you go car shopping. That has a number of benefits. You’ll find out in advance how much the loan can cost you and what you can afford, both in terms of monthly payment and total cost.
You’ll also have a bargaining advantage negotiating with the dealer, since part of the purchase price they offer is always dependent on whether they will make the loan. Dealers will often accept a lower purchase price if you take their financing offer. Run various scenarios in advance to determine where your trade-off amount starts.
It may well be worth accepting their financing offer if the purchase price is low enough. You can refinance the day after, after all. That too has costs, though, so be sure to include that in your calculations.
Another advantage of having pre-arranged financing is the confidence you get from being able to walk away from any unattractive deal. New cars especially are virtually identical from one dealership to the next. If you get a better deal elsewhere, it may be worth it to go on to the next. Before you do, though, consider not just the immediate or lowest price but also what service you’ll get after purchase.
Last, be sure to calculate the pros and cons of leasing versus a car loan versus another form of financing. Getting a home equity loan, for example, can give you ready cash with tax deductible interest and most contracts don’t require you to spend the money on the house.
Being creative when considering financing options can save you money.
Topics: Loans | No Comments »
Debt Handling - Debt Consolidation – Pros and Cons
By Debt Handler | July 21, 2007
Many people find that over time they have accumulated more debt than they can repay. When that happens, there is a reinforcing downward spiral. The inability to repay the debt leads to additional interest charges and penalties, making it still harder to repay the amount owed.
One common suggestion for breaking this vicious circle is to employ debt consolidation. For thousands, this has seemed like the way out, the way back to financial health. But there are pros and cons to debt consolidation, no matter what form it takes. Being aware of those will help you decide if it is the salvation in your particular circumstances.
First, what is ‘debt consolidation’? At base, it’s a simple proposition. Gather all your multiple sources of debt into one debt and make a single payment every month to a single debtor.
But for that to be helpful several things have to take place at once. After all, whether you pay $150 + $50 + $25 to three debtors or $225 to another it’s the same amount. With online bill payment it isn’t even necessary these days to make out three checks. You aren’t even saving on postage stamps!
In order for debt consolidation to be useful one or more of the following has to occur: (1) either the total monthly payment has to decrease , or, (2) the net amount of interest has to decrease, or, (3) the actual total debt has to go down as a result of consolidation. Which, if any, of these take place depends on the specific debt consolidation plan you have planned.
In the ideal case, which rarely happens, all three take place. The most common scenario is that the monthly payment is lowered. This has several advantages to the debt ridden. When the payment is lowered, you have a much higher chance of being able to pay it consistently.
That helps prevent piling more debt (interest and late charges) onto existing debt. You also have a much more relaxed frame of mind, knowing you can meet the monthly debt obligation without sacrificing other needed items.
The risk is that if the payment is too low, some of the psychological factors that led to excessive debt in the first place can rise again. Thinking you have lots to spare can cause you to relax too much too soon. Continual worry is not healthy, commitment and concern are - if your goal is to become debt free.
Unfortunately, many plans lower that payment by extending the life of the loan long enough to cover paying off the entire original amount owed. That leads to more interest paid over the long term. That’s fair to the lender, since you do owe the money. But some will settle for less if they have good reason to believe they will actually get repaid. Try to negotiate a lower settlement, then consistently make the agreed on payments every month.
Losing debt is like losing weight. Consistency, and a commitment to lower it, and keep it lowered, is the key to long-term success.
Topics: Debt Consolidation | 1 Comment »
Debt Handling - Bankruptcy – What To Consider Before Filing
By Debt Handler | July 21, 2007
Some people think of bankruptcy as an easy way to offload a crushing debt burden, and it’s sometimes the first method they reach for. Well, it may well relieve the burden, but it’s far from easy and should be the very last thing you use to do so.
While the law has made it relatively easy to actually file papers, the process - like any legal proceeding - is far from painless. You will have to justify your filing, exposing all your financial history to a judge and opening it to objections by creditors. If you genuinely owe the money, they’re unlikely to settle happily for 10 cents (or less) on the dollar.
Even if you’re successful, there are multiple long-term impacts that you’ll want to consider carefully before taking such a drastic step.
You will lose any credit cards that have outstanding balances, and others may choose to close your accounts. You’ll also find it near impossible to get a home loan or other large credit line (except possibly at the kind of ruinous interest rates that probably led, in part, to your current situation).
Also, not all debts are covered even by a bankruptcy filing. Student loans, back taxes within the past three years and select other debts are generally exempt from bankruptcy protection.
That situation will persist for 10 years, during which time you will need to maintain a near perfect credit record in order to work your way back to a useful level of trust. Potential creditors will regard any bankruptcy as the most negative criterion on any credit report - even beyond a low FICO score.
Beyond the credit impact, you may actually be required to forfeit real assets - a boat, expensive jewelry and other items - depending on when they were acquired. Most states make an exception for the primary residence and your auto. If you have secondary property, that may not be protected, however.
Finally, of course, the bankruptcy procedure itself is not free. Courts always have required fees and if you use an attorney that too will cost you. That can add the final straw to an already very bad financial situation.
On the upside, you will obtain relief from debt collection efforts (provided they receive notification). Your wages can not be garnished and any foreclosure action will be stopped. By taking action sooner rather than later, you will start to build a new credit history that can be better than the past one.
Since you won’t have access to new credit cards, this can actually be an advantage. There are some people who simply should not have access to easy credit, until and unless they can find a way to change their habits.
It can serve as a huge wakeup call to change any bad money management habits. For some, it’s necessary to hit rock bottom before they find the inner strength to make large, positive, long-term changes.
But, hitting rocks is painful. Consider carefully before you take the plunge.
[tags]bankruptcy, debt handling[/tags]
Topics: Debt Handling Tips | 2 Comments »
