I get calls every month from people who say they are surprised that they have received a summons!

Let’s see….

• You took our loans or charged up credit cards.
• Due to circumstances beyond your control, you have not been able to make the minimum required payments due each month.
• You received several calls, letters or emails from the creditors, but ignored them.
• Someone knocks on your door and hands you a SUMMONS!

SURPRISED?   Now what?

First…DON’T PANIC!

• You are not going to jail!
• You will not have to go to court!
• They are not going to garnish your next paycheck (UNLESS YOU IGNORE THE SUMMONS)
• They are not going to garnish your bank account. (UNLESS YOU IGNORE THE SUMMONS)
• They are not going to come take all of your belongings!
• At least….NOT YET!

If you have secured loans…where there is collateral (home, car, boat, RV, motorcycle, etc.), the situation is different!

If you default on a loan where there is collateral, the creditor or collector may decide to repossess the item! Be AWARE!

OK, but in this article, I’m taking about UNSECURED DEBT:

• Credit cards
• Personal loans
• Medical bills
• Personal line of credit
• Store cards, etc.
• Auto Repo

To prevent a summons and the start of the “legal” process, you need to understand the basic process and/or option a creditor or collector has.

The Summons Process

• After attempting to contact you (remember all those calls, letters and emails?)

• The creditor or collector may retain an attorney to

• You will receive a SUMMONS. This is usually hand delivered, but can be left with someone at your residence. Sometimes the server will deliver to your place of employment.
• The summons will state something to the effect that you have 20 or 30 days after receipt of the summons to ” ANSWER THE CLAIM.”
• An answer is your side of the story that you would file ONLY if you can PROVE WITH DOCUMENTATION, that you do not owe the amount of the claim
• If you owe the debt, there is no reason to spend the time or money for an answer. YOU DO NOT NEED TO GO TO COURT.
• Contact the attorney for the plaintiff (the creditor). If you are employed and receive normal W-2 wages, you need to try and work out a repayment plan so they do not proceed with the legal action.

So, what can you do or could you have done to

PREVENT THE SUMMONS?

FIRST OPTION:

Contact the creditor/collector and try to work our a “catch up” plan to start repaying the debt you owe.

The problem with this option is that you most likely cannot afford the payments.

The same is true with a Debt Management or Credit Counseling Program.

Not a bad idea IF YOU CAN AFFORD THE PAYMENTS!

SECOND OPTION:

Once your account has been charged off (the creditor has kind of “given up” on collecting the debt on their own), the account is usually placed with a DEBT COLLECTOR.

Now you can try to SETTLE the account for LESS THAN THE FULL BALANCE.

The process is time consuming and stressful, but usually (not all the time), the collector will agree to a SETTLEMENT AGREEMENT.

This agreement is usually for 40%-70% (in some cases even lower) of the balance due.

Of course, the collector wants the amount of the settlement in a LUMP SUM, but I doubt you have that kind of money. If you did, you probably would not have gotten behind in the first place! RIGHT!

Yes, you can also negotiate TERMS/MONTHLY PAYMENT PLAN on the settlement.

Again, they want the monthly amount as large as possible and the length of the plan to be as little as possible. You have to negotiate strongly to get a plan that fits your budget. Not easy!

 IF ALL ELSE FAILS….BANKRUTPCY MAY BE YOUR ONLY OPTION

If you failed in trying to work out a reasonable repayment plan.

If you failed in trying to negotiate a reasonable settlement.

Then you may the assistance of a Bankruptcy Attorney to protect you from:

• Bank Levies
• Wage Garnishment

Bankruptcy is a “scarry” word to most people, but bankruptcy laws are to help us protect ourselves from creditors and/or collectors devastating our lives.

Contact several attorneys in the area where you live.

The initial appointment (may be by telephone only) should be FREE. If not, keep looking!

To wrap up…

When you find yourself in a financially stressful situation whereby you are falling behind or simply cannot make the required monthly payments due, DO NOT IGNORE THE OPTIONS YOU HAVE FOR REPAYMENT OR SETTLEMENT!

Be pro-active…don’t “hide you head in the sand” so to speak.

For more information…click below:

Photo credit

If you are a Texas resident and cannot keep up with the minimum payments due on your credit cards, then I have some good news!

We're talking about UNSECURED debts like:

• Credit Cards (Visa, Master Card, Discover, etc.)
• Store Cards (Kohls, Home Depot, Lowes, etc.)
• Personal loans with no collateral
• Private Student Loans
• Medical Bills
• Quick Pay or "Pay Day" loans

If you find yourself in a situation where you just cannot keep up, then what happens?

You will start getting calls, letters and emails from the creditor trying to get you to start making payments again.

You would think that if you could just "explain your situation" the agent would understand, but this is rarely the case!

After helping people deal with debt for over 20 years, I think is is better to not speak with the agent and of course, not to call back if they leave a voice mail.

Same with emails, just ignore for now.

Why?

After a month or so of unsuccessful attempts (calls, letters, emails), your account will most likely be transferred to the internal collections department or sold to a debt collector.

Well, now the calls, letters, and emails will start again!

But now that your account has been transferred, you can stop the calls:

After a few more months, a creditor, collector or debt buyer could decide to retain a law firm that specializes in debt collection to file a CLAIM.

A claim is filed with your local county courthouse and you will then receive a SUMMONS.

The summons will basically state that the creditor (PLAINTIFF) claims that you ( the DEFENDENT) owes a certain amount of money claimed.

The summons will also state that you have 30 days (varies a little from state-to-state) to APPEAR and give an ANSWER.

It sounds like you will have to go to court and stand before a judge to explain yourself!

NOT SO!

It means that if you can PROVE with UNDENIABLE PROOF that you do not owe the CLAIMED debt, you have 30 days to file the proper papers with the court.

If not, then the Plaintiff may petition the court for a DEFAULT JUDGMENT.

NOW WHAT????

Only after a judgment is awarded (usually will take 4-6 weeks after the summons is served) the Plaintiff can have the attorney file a claim for WAGE GARNISHMENT.

HOWEVER....

If you a resident of the great state of Texas, your wages CANNOT be garnished!

In most other states, the court can approve a wage garnishment and your employer would have to send 25% (average per state) of you NET, TAKE-HOME to the creditor or attorney for the creditor!

But again, NOT SO IN TEXAS!

Does that mean that you can just forget about your debts?

NO! Please understand...

A creditor may not be able to garnish your wages, but they can have their attorney apply to the court for a writ of LEVY ON YOU BANK ACCOUNTS!

That means that you could try to use your debit card or write a check and find out there are no funds available!!!

So what can you do?

Once you account(s) go to "collections", you may be able to negotiate a SETTLEMENT for less that the full balance.

But you need to do this BEFORE A JUDGMENT IS AWARDED!!!

Yes, you can negotiate a repayment plan after a judgment has been awarded, but it is difficult to do so.

If you can get to the creditor, collector or debt buyer before legal action starts, then a SETTLEMENT can be negotiated.

A SETTLEMENT is an agreement between you and the creditor or owner of the debt to repay a certain percentage of the balance due.

Once the agreement is completed, the account is now considered "paid-as-agreed" or in some cases "settled for less than the full amount".

Either way, the account now has a $0 balance and believe it or not, you credit score will start to improve! 

Here is an actual example of a settlement we negotiated for one of our clients recently:

Some settlements may be higher or lower, depending on the circumstances, but a decent settlement should be around 50%-60%.

I hope this has been helpful.

     To recap:

• If your unsecured debts are only a month or so delinquent, then they are most likely not going to be open for settlements.
  
  
• But, after 4-6 months (can vary), your accounts should be able to be negotiated for a settlement.
  
  
• REMEMBER...DO NOT IGNORE A SUMMONS! Just because your wages cannot be garnished in Texas, you bank account could be levied!

photo credit

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.

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!

But 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:

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:

Photo Credit

Receiving a call or letter from a debt collector can be a scary experience. Here's what you need to know and what to do so that you don't have to be afraid:

• Debt collectors (for the most part), are just trying to collect monies owed.  They are not "evil" or "our to get you".  If you follow my advice, you should be able to work with them to resolve your debt problem.
• Having said that, some (yep, there's always a few) go too far in their debt collection efforts.  I'll show you how to handle this type of collector.
• No matter how serious you financial and/or debt situation is, there is a solution.  DON'T BE AFRAID!
• A debt collector can be from an attorney's office.  There are many lawyers that only practice debt collection.  You can work with them as well.
• Regardless of what a debt collector says, you are not going to jail or have all of your belongings seized or confiscated!

You probably already know this, but let me briefly explain the debt collection process:

There are several reason why you find yourself barely able or unable to keep up with your debts.  (For the sake of this article, I'm only dealing with UNSECURED DEBT (credit cards, medical bills, personal loans, etc.) and not SECURED DEBTS (debts secured by the item itself (house, car, etc.)

Having been helping people deal with the stress, frustration and seemingly hopelessness of have too much debt, in about 99% of the time, something like this has cause the financial hardship:

• Unemployment for a long time
• Divorce or separation 
• Trying to make ends meet on a fixed income after retirement
• Long illness or disability
• Death of spouse or partner

Using credit cards or credit in general may help in the short term, but when your situation doesn't improve or change over a long period of time, then you get to the point where is is very difficult or impossible to just make the minimum payments!

NOW WHAT?

So when you start missing payments or don't make the required minimum payments due, the calls and letters start!

I'll show you how to put a stop to the calls later, but for now, it is very important that you realize what to DO AND NOT DO, when the original creditor calls or writes.

Unfortunately, the original creditor (Visa, Macy's, Home Depot, etc.) that issued the card or account, has the legal right to call you when you miss payments.  You can do one of two things:

• Not answer the call (just let all calls go to a recording), or...
• Answer the call.

While your account is still with the original creditor (and it will be for 3-4 months), you might want to answer at least one call to see "where you are at" with this creditor.

Here's what I mean:

Depending a various circumstances, once you've be delinquent on making payments for a couple of months or more, you may get an offer (usually in the form of a letter), with a reduced payment plan or even a reduced balance settlement that could work for you.  

Let's say that you've been unemployed for about 6 months, used up all (if any) of your savings, and have been using credit cards to make up for the lack of income for things like groceries, gas, or even a cash advance to keep the lights on!

But, GOOD NEWS, you've found a new job and the pay is pretty close to your last job.

One the one hand, this is great!  But, on the other hand, you are so far behind in paying your credit card debt, it looks like there is just "no way" you can catch up!

You really only have a few options:

• A Debt Management Program
• A Debt Settlement Program
• Bankruptcy

Debt Management is a program offered by most creditors, whereby they agree to reduce and/or eliminate interest rates and fees until you get "caught up".  This used to be referred to a Credit Counseling Program.

If you qualify, you will have ONE PAYMENT that is pretty close the total of all the minimum payments that are currently required on all of you cards or accounts.

The problem is that with a Debt Management Program, that payment may be too high for you to be able to qualify.

If you would like to learn more about this and/or see if you qualify, click below:

If you do not qualify for a Debt Management Program, then you should consider a:

Debt Settlement Program

By now, most or your credit cards and other accounts most likely have been placed with a Debt Collection Agency.

Sometimes the accounts are even sold by the original creditor for "pennies-on-the-dollar" to companies.

Now, these collectors or "debt buyers" will start to contact you by phone and mail.

Whereas before, when your account was still with the original creditor, you could not stop calls, once the account is assigned or sold to a collector, you CAN PUT A STOP TO THESE CALLS! Here's how:

At this point in the collection process, most likely you will get or can negotiate a SETTLEMENT.

The debt collector who has the account (or the debt buyer) can offer to settle the outstanding debt for less than the full amount.

This can be done in a LUMP SUM or even in several, interest-free PAYMENTS.

Check out some actual settlements we have negotiated for our clients:

Once the account has been settled, not only will you be done with this debt, but your credit report/score will start to improve.  

It won't happen over night, but over a relatively short time (3-4 months after settlement), your scores will increase!

Finally, if you cannot qualify for a Debt Management or Debt Settlement Program, you may need to seek BANKRUPTCY PROTECTION from your creditors.

The law allows (in certain situations) for someone to basically "start over with a clean slate" through bankruptcy.

While I believe you should try to either take care of your debts through Debt Management or Settlement, if you just cannot do either, then seek the help of a Bankruptcy Attorney!

The attorney will offer you a FREE, Initial Consultation and he/she will explain your options.

As you can see, when dealing with the stressful situation of having too much debt and too little income, you don't have to fear the debt collection process.

But, you just can't "put your head in the sand" and ignore the problem.

There are answers and freedom waiting for you:

 Photo Credit