A recent newspaper article in Portland, OR from The Oregonian stated that as many as 33% of all consumers will be dealing with debt collectors!

Although dealing with a debt collector can be frustrating and annoying, there is really no reason to ever fear a debt collector.

Believe me, I certainly understand why most people who find themselves in a financial situation that has caused some or all of their accounts to be turned over to a debt collector are nervous.  The thought that you might lose your home, possessions and/or bank accounts would cause any sane person to be afraid.

Well, the good news is that in most cases, that FEAR is not necessary!

In this blog, I am talking about dealing with unsecured debts (credit cards, store cards, medical bills, etc.) and not secured debts such as a home mortgage or auto loan.

So, here are a few things to remember and tips on how to deal with debt collectors:

It rarely does much good to talk with a debt collector on the phone.

Once your account is 60-90 days past due, you can expect a call from either the RECOVERY DEPARTMENT of the creditor or from a DEBT COLLECTION COMPANY.

While your account is still with the original creditor, the Fair Debt Collection Practices Act or FDCPA laws that allow you to put a stop to collection calls do not apply...yet!

Most of the time, when the original creditor's agent calls, they are just trying to find out what your situation is and may offer a plan to help you get back on track.

BE VERY CAREFUL!!!  They may offer what is called a "HARDSHIP PLAN", whereby you agree to allow them to deduct a certain amount of money (usually less than the total amount your last statement DEMANDED) from your checking account for say, 6 months. 

At the end of the 6 months, they promise to "REVIEW" your case and get you started making regular payments again.  But usually, after you have paid the agreed upon amount for 6 months, your have barely made a dent in reducing your balance and are right back to where you started!

If you take the call from the original creditor, be very calm and simply say something like:

"I realize I've fallen behind on my bill and fully intend to get caught up soon. But, at this time, there is nothing I can do, so please stop calling me."

Yes, I know I just said that they have the legal right (at this point) to call, but they may honor your request and leave you alone for a month or so.

If the recovery department of the original creditor is unsuccessful in getting your to start making payments, the account most likely will be charged off and sold or transferred to a debt collector after about 120 days.

You most likely will get a letter from the debt collector and no doubt will start getting phone calls!

A Debt Collector's job is to get you to pay...period!  Although there are plenty of "decent" debt collectors who actually may show some empathy for you, there are many that are just the opposite.

These debt collectors will use all kinds of tactics to get you to pay up!  Although most debt collectors follow the laws and/or guidelines of the Fair Debt Collection Practices Act, there are always a few "bad apples".

Don't get into a dialog with a debt collector!

While I think it's OK to have one short conversation with the original creditor, it's usually a whole different story now that your account has been turned over to a debt collector!

If they have sent you a letter demanding payment, etc., get the address of the debt collector and write them a letter demanding that they cease calling you at home.

Here is a sample letter you can use:

If the calls don't stop (it will take a week or so) then you can file a complaint with your state's attorney general's office.

Usually, the debt collector will stop calling as they can be fined very severely!

NOW WHAT?

After a reasonable period of time (varies with each debt collector), if the debt collector is unsuccessful in getting you to start paying , the original creditor may:

• Recall the account and turn it over to another debt collector and the process will start again.  Yes, you will have to send another letter to the new debt collector to stop the calls!
• Turn the account over to a Law Firm that only practices debt collection.

If your account is placed with a Law Firm that practices debt collection, you will get the same letters and calls, but now, you need to be careful.

If the Law Firm decides to FILE A CLAIM for the debt you owe on behalf of the original creditor or the debt collector, you will get a SUMMONS.

I've written several blog articles over the years on what to do if you receive a summons, but in short:

• DON'T IGNORE THE SUMMONS
• DON'T PANIC!

Most people think that a debt collector and/or debt collection law firm can just garnish your income, levy your bank account and/or put a levy on your home or other property.

While it's true that they can AFTER they are awarded a judgment, they cannot do anything until then.  That's why it is so important to take action if you receive a summons!

In most cases, you can prevent the CLAIM from moving on to a JUDGMENT by contacting the attorney's office and working something out.

Most "judgments" are awarded to the creditor/debt collector/plaintiff because the debtor didn't take any pro-active steps.

If you are employed and receive regular W-2 income, then you can't let

If you...

• Are retired, with only Social Security and/or Retirement Income, or
• Disabled and receiving Disability Income only, or
• Are unemployed and receiving unemployment income, or
• Receive child support or alimony payments, then...

These sources of income are exempt from garnishment. Notice, I didn't say exempt from state or federal taxes you may owe, but from garnishment for unsecured debts.

The best way to put an end with dealing with debt collectors is to NEGOTIATE A SETTLEMENT of your account. That is, if you have some funds available to make an offer of 40%-60% of the balance. 

If not, you can still usually negotiate a settlement by agreeing to make monthly payments rather than a lump sum payment, but you may have to pay a little larger settlement.

Click here for some very useful information on how to negotiate a settlement:

One final thought...

If your financial circumstances are such that you have no ability to offer a settlement, either in a lump sum or payments, then you may need to consult a bankruptcy attorney.

Bankruptcy is a way to help those who qualify to put and end to debt collectors and get a fresh start.

If all of this sounds a little overwhelming, we can help:

Photo credit: 

Kevin B 3

milwaukeemakerspace.org/2012/12/fear/

Too much credit card and other unsecured debt?  Not able to keep up with the payments?  You may be a prospect for Debt Settlement.

But, before you decide, consider the following:

Debt Settlement is a very effective program to help people settle unsecured debts for less than the total balance due.

• The unsecured debts I'm talking about are:
• Credit Cards
• Store Cards
• Home Shopping Club accounts or cards
• Personal Loans
• Repossession Deficiency Judgments
• Medical Bills
• Personal Student Loans (although there are programs to help on Federal Student Loans as well)

When faced with too much debt and not enough income or cash flow to keep up with at least the minimum payments due, there are only a few options to keep the debt collectors at bay:

A Debt Management Program

A Debt Management Program used to be called a "Credit Counseling Program" and sometimes it is still called by that name.  In a Debt Management or Credit Counseling Program, a person signs up with a "non-profit" (only for taxable reasons, YES, you will be paying fees!), and they will have set up a program with each of your creditors.

Usually, the interest rates are reduced or sometimes eliminated, late fees and over-the-limit fees are usually forgiven after you have made a few payments, and your account is now classified as being paid as agreed or on time.

However, the problem with a Debt Management or Credit Counseling Program is that there is very little forgiveness if you miss or are late on a payment!  I've seen people who had been consistent for many months, and then, due to an emergency, just couldn't come up with the total due that month.  The Debt Management Program was canceled or voided and they were back to square one!

Also, in a Debt Management or Credit Counseling Program, the total monthly payment may be more that the total minimum monthly payment you are required to make now!  And, the company is charging you a monthly service fee as well!

So, if you go through the process of trying to enroll in a Debt Management Program and find out you cannot qualify, what now?

A Debt Acceleration Program

A Debt Acceleration Program (sometimes referred to as a Debt Snowball Plan) is perfect for someone who is making the minimum monthly payments on each of their debts and yet, due to high interest rates and annual fees, realize that at this rate, it will take 15-20 years to pay off those debts!

A person who should look into a Debt Acceleration Program also could add another $100 - $200 each month to help reduce or accelerate paying off these debts.

Most people in a Debt Acceleration Program are DEBT FREE in 48-60 months, saving thousands of dollars in interest and fees!

I prefer the Debt Acceleration Program to a Debt Management or Credit Counseling Program because as far as your credit report is concerned, you were a very consistent debtor and not only paid all of your payments on time, but actually did so sooner than required!

OK, but what if you are one of so many people that due to:

• Job loss
• Divorce
• Disability
• Death of loved one
• Major Financial Emergency

...just cannot meet the total minimum payments due on your unsecured accounts and cannot qualify for a Debt Management or Debt Acceleration Program?

Then, you should consider a:

Debt Settlement Program

Debt Settlement is designed for people who have a severe financial hardship, have tried to keep up with all of the bills, but some or all of their credit card accounts and other unsecured debts have been turned over to debt collectors.

These debt collectors are calling all day and even harassing you at work. But, before I explain how a Debt Settlement Program works and could help you, here's how to put a stop to those collection calls:

In a Debt Settlement Program, you will go through a thorough financial overview to determine several things, such as:

• Type of employment (self or W-2)
• Basic Monthly Budget
• Retirement status
• Type of income you are receiving (disability, social security, unemployment, etc.)
• Assets (mainly do you have equity in your home)
• Are you renting?

Once you know where you stand, you will have an amount (that you can afford) deposited into your Debt Settlement Reserve Account (FDIC insured bank) monthly.

The Debt Settlement company will be contacting your creditors and/or debt collectors to arrange settlements.  As you reserve account grows, each of your accounts should be settled for much less than the total balance due.

But finally, what if you just are barely making ends meet on your basic bills and have little or nothing left over to put towards a Debt Settlement Program?

Then, you should consider:

A Bankruptcy Program

There are basically two types of Bankruptcy Programs for individuals:

• Chapter 7
• Chapter 13

The Chapter 7 is not used as much these days as it is basically designed for someone to liquidate any assets they have (obviously, not very much) and that small amount is paid to each creditor, and the balances of your debts are "forgiven".

In a Chapter 13, a bankruptcy attorney will present a type of repayment plan to the bankrutpcy court based on your financial status.  Usually, a person will be making a monthly payment of $200-$400  (or whatever your bankruptcy attorney comes up with) for about 3-5 years.  Each of your creditors receives a small portion of the balance due.

At the end of the Chapter 13, the balances of your debts are forgiven.

Oh, by-the-way, if you receive a 1099-C, in most case, you should not be liable for any additional taxes due on the amounts forgiven.

Debt Settlement is a great program for the right person.

 Photo Credit:  Daniel Oines

A recent article in our Portland, OR newspaper, The Oregonian, stated that one in every three people in America are facing debt collection.  If you are one of the 33%, what are your options?

Sadly, when faced with the annoying and often harassing tactics used by many debt collectors, people are often given only one choice...debt settlement.

But, after over 11 years helping people deal with having too much debt, I want you to know that although debt settlement is often a very viable choice, and often the only choice to prevent bankruptcy, it is not the only choice. In other words, ONE SIZE DOES NOT FIT ALL!

Unfortunately, many debt settlement companies ONLY offer and therefor ONLY recommend debt settlement as the solution to dealing with a severe debt load.

Let's briefly look at the various options:

There are so many different possible scenarios or various financial circumstances that people are facing that a quality, experienced company that assists people with debt will do a thorough analysis to determine the proper program.  It is much like a doctor who should do a thorough exam before prescribing a drug or procedure!

The first step is to determine what kind of "DEBT" you are dealing with.

For example, SECURED DEBT, such as a mortgage, auto loan, or any other loan that is secured by property (usually the property itself), must be dealt with differently than UNSECURED DEBT.

Some of the more common forms of UNSECURED DEBTS are:

• Credit Cards
• Store credit cards
• Personal or Signature bank loan
• Medical bills
• Private (not Federal) Student Loan
• On Line shopping sites such as QVC, EBay, and others that offer credit

Once we have identified what type of debts you are facing (and there are usually a combination), then we need to determine where you are FINANCIALLY.  In other words, after you pay all of your basic bills to live...mortgage or rent (all secured debts), as well as... food, utilities, gas, medicine, insurance, etc., is there any money at the end of the month to pay towards those debts?

The easiest way to determine where you stand is to complete a simple, Household Budget Worksheet.  

Once you've detemined where you stand, then we can look at the various options.

A DEBT MANAGEMENT PROGRAM (often referred to as Credit Counseling), has been used by people with debt problems for years.

This program is designed for someone who is currently making all of the minimum payments required on their unsecured debts, but because of the HIGH INTEREST RATES (APR) and ANNUAL FEES and OTHER FEES (late fees, over-the-limit fees, etc.), realize that they are not making any progress to actually paying off these debts.

For example...

Did you realize that if you have a credit card with a balance of say, $5,000 and an annual percentage rate (APR) of 19%, it may take you 15-20 years or more to pay the card off by making the monthly minimum monthly payment required.

For more information:  DEBT CONTROL: 4 PROGRAMS THAT WORK!

If you are barely making all necessary payments (secured) as well as your monthly minimum payments, but there is nothing left over, then a Debt Management Program may be best for you.

But, if you actually have (or can make some living adjustments to find) and extra $100-$200 per month to put towards your debts, then you should consider:

A DEBT ACCELERATOR PROGRAM

Originally called by various names such as a "Snowball Plan" or a "Roll Up Plan", in a DEBT ACCELERATOR PROGRAM, you are going to pay off your debt in an average of 4-5 years without enrolling in a Debt Management Program (which may or may not harm your credit score).

Basically, in a Debt Accelerator Program, you will be making the normal minimum payments each month as before, but you are going to increase one of your debts by say $150/month.

There are several theories about whether you should accelerate the highest balance or interest rate first, but I don't want to get into that here.

I recommend that you start with the lowest balance first, make the minimum due plus the additional $150, and pay that one off quickly...you'll be amazed!

And, not only amazed, but excited to go to the next debt!

Now, you take the former minimum payment (say it was $50) and after adding the $150, were making $200 per month instead of just the $50 and you add that $200 to the next card or debt's minimum due.  Let's say the next one is $75.

Now you are making a total of $275 towards the next card ($50 + $150 + $75 = $275).

Get the idea?  Soon, you keep "Accelerating" each debt and you will be DEBT FREE in a much shorter time and save thousand of dollars in interest and fees!

SOUND GOOD, BUT...

What if not only do you not have any extra money to put toward a Debt Accelerator Program, you can't even make the minimum monthly payments your unsecured debt require now?

THIS IS WHERE A DEBT SETTLEMENT PROGRAM MAY COME TO YOUR RESCUE!

Rather than opt for bankruptcy, millions of people have used a Debt Settlement Program to pay off all of their unsecured debts and avoid bankruptcy.

Debt Settlement is a program designed for those who are really in trouble, fincially.  Usually, most or all of their debt have gone to debt collectors who are are calling severaly times a day and sending threatening letters!

You will be making a monthly contribution to a bank insured (FDIC) account to hold those funds until there is a reasonable amount built up to make a SETTLEMENT OFFER.

Again, depending on several factors, most settlement offers are going to be around 50% of the balance.  Some are for more, other less.

People often ask if a Debt Settlement Program hurts their credit score.  But, they are not thinking the process through.  If you're accounts have gone to debt collectors or judgments, your credit score has all ready suffered!

Once you get all of your debts settled...ie., you have $0 balances, your credit scores will improve!

OK, but what if you can't even afford to make a contribution to a Debt Settlement Program?

Then, it is time for you to seek BANKRUPTCY PROTECTION from your creditors!

Again, unfortunately, their are many Debt Settlement Companies that only offer one solution to everyone's debt problem.  But, as you can see, ONE SIZE DOES NOT FIT ALL, when it comes to dealing with debt.

Seek the counsel and advice of a qualified Bankruptcy Attorney.  You should be able to have a FREE Consultation and hear about your options.  In fact, good bankruptcy attorneys will work with you as far as their fees go. If not, seek out another bankruptcy attorney!

I hope I have made my point that when it comes to DEBT SETTLEMENT, one size does not fit all!

Photo by: DRNW

Dealing with a debt collector can be one of the most frustrating experiences you will ever go through!  Here are a few tips that will help.

It's 5:30 PM, and you've just sat down at the table to finally relax and enjoy a meal.

You don't recognize the caller from your caller ID, but you know who it probably is. 

Yep, another call from that debt collector.

If you're like so many people these days who for one reason or another have fallen behind on your credit card or some other unsecured debt, you know how annoying it is to get these calls!

Let's put a stop to these calls!

If you do not know the address of the debt collector, then go ahead and answer the phone (just this time only!).  Tell the debt collector that you want to pay this bill, but cannot at this time.

Of course, the debt collector will try to get you to agree to some small amount to be paid as a check-by-phone or from your debit card. DO NOT DO IT!!!!

Instead, ask for the address (as though you intend to mail a check later).  If the debt collector will give it to you...great.  If not, then just hang up.  In a week or so, you should get (if you haven't already) a letter from the debt collector with the address you need.

According the the Fair Debt Collection Practices Act (FDCPA), if you write a letter demanding that the debt collector stop calling you, they must stop or face some very hefty fines!

Click below for a FREE sample letter to send:

By-the-way....

Make sure you send the letter either by Priority Mail with a tracking number or by Registered Mail.  You want to have proof that the debt collector received the letter.

OK, you've sent the letter, and since it will take a week or so for the calls to stop, what should you do the next time the phone rings?  Here is what I suggest:

TURN OFF THE RINGER ON YOUR PHONE AS SOON AS YOU GET HOME! 

If you do not have caller ID, GET IT!  You will be able to see who is calling and if you do not recognize the caller...DON'T ANSWER.  Your friends and family will leave a message. 

DO NOT RETURN ANY MESSAGE FROM A DEBT COLLECTOR...PERIOD!

Debt collectors are trained to do one thing and one thing only...get you to pay!  And although there are very clear laws that limits what they can and cannot do, some debt collectors are pretty low-down, and if you're not careful, they will get you to start paying. 

DON'T FALL FOR THE HARDSHIP PLAN OFFER!

Although a "Hardship Plan" may have it's place, once in a while, for the most part, they are not a very good solution to your problem.

In most hardship plans, you will agree to make a lower payment for about 6 months and then the creditor will re-evaluate your situation.  While this may help with your "cash flow" for a short term, in the long term, you will not be any better off.

OFFER A REDUCED AMOUNT AS A SETTLEMENT!

Believe or not, most debt collection companies will take a settlement on your account for much less than the current balance.  A 50% reduction is not unusual and depending on your circumstances, you may able to get an even better settlement reduction.

Check out some of the settlements we have done for our clients:

If you don't have a lump sum to offer, they will (in most cases) work out a TERM-SETTLEMENT plan.  Don't be afraid to ask!

Depending on how old your account is and your specific financial circumstances, the debt collector may have purchased your account from the original creditor for literally pennies-on-the-dollar, so they will usually take a settlement paid out over a 6-12 months, and in some cases longer.

What about a SUMMONS!

If you have received a summons, it is still not to late to work out a settlement or a repayment plan, but you need to take action quickly!  I have written many blogs detailing HOW AND WHAT TO DO IF YOU RECEIVE A SUMMONS.  Please take a few minutes to check out.

BOTTOM LINE:

Dealing with Debt Collectors is certainly not easy, but can be done.

Would you like some assistance?  Just let us know:

Photo Credit:   Sean MacEntee

Dealing with debt collectors is not easy, but it can be done.  Here are a few tips on how to deal with debt collectors.

If you find yourself unable to pay your bills, about to lose your home, or in a financial hole so deep that you can't climb out of, then it is time to look into filing for bankruptcy protection.

This is the final blog about DEALING WITH DEBT.  There are basically 3 ways to deal with debt:

• Debt Management
• Debt Settlement
• Bankruptcy

In a bankruptcy, you will eliminate most of your debt or you will be able to schedule a repayment plan that will fit your budget, given your dire financial circumstances.

But, bankruptcy comes at a cost of your credit score and possibly some of your assets.

Yes, after you complete your bankruptcy, you can still get credit, but usually the interest rates are higher and the credit limits are lower.

This is why it is so important to gather as much information you can from an experienced bankruptcy attorney.  The initial bankruptcy consultation should be free and most bankruptcy attorneys will work with you as to payment of their services and fees.

Individuals filing personal bankruptcy will generally be able to file a CHAPTER 7 or a CHAPTER 13 bankruptcy.

Under normal circumstances, a Chapter 7 bankruptcy will take about 90 to 180 days to complete.  A Chapter 13 bankruptcy will take about 3 - 5 years, depending on several factors.

Good news!!!!  Once your bankruptcy attorney starts the process, the debt collection calls will stop.  If you are not sure if bankruptcy is the best choice for you and would like to put a stop to the debt collection calls, click below:

Individuals or couples with few assets and are looking for a FRESH START, tend to file a Chapter 7 bankruptcy. This type of bankruptcy is basically a liquidation bankruptcy in which a debtor trades all of their non-exempt assets as payment for all of their dischargerable debt.  Many, if not all, personal possessions are protected by exemptions and most consumer debt, such as:

• Credit Cards
• Store Cards
• Personal Loans

Individuals or couples looking to catch up on mortgage payments, get rid of 2^nd mortgages, or who are ineligible for Chapter 7 bankruptcy, can file a Chapter 13 bankruptcy.  A chapter 13 bankruptcy involves making a deal with the court to pay a certain amount of your income to the court each month in return for getting rid of all of your dischargerable debt. 

People will choose a Chapter 13 Bankruptcy because there are certain types of debt that only go away in a chapter 13 bankruptcy and, there are certain advantages that can only be had in a chapter 13 bankruptcy.  This type of bankruptcy can be used to catch up on mortgage or child support payments.  However, there is a danger of not completing your plan and thus not getting a discharge.

Filing bankruptcy does not mean that you will lose your home or your car. 

In fact, in some situations, filing bankruptcy will even allow you to keep a car or home that you were about to lose.  This is because bankruptcy allows you to protect some or all of your assets with exemptions.  These are set amounts of personal property that you can protect during a bankruptcy.  Retirement accounts are generally protected as are certain support payments that you may be receiving.

Filing for bankruptcy does not mean that everyone you know will find out!

Only the necessary parties are inform of your bankruptcy filing.  Individuals who receive notice of your bankruptcy filing are creditors, co-debtors, and co-owners of shared assets. 

A bankruptcy will stay on your credit report up to 8 years, but it will have less effect with each passing year.  Filing bankruptcy may hurt your credit score in the short-term, but it allows you the chance to start rebuilding it right away.

Still not sure how to deal with your debt?  Get answers by clicking below:

Blog article written by: Noah Bishop of BishopBankrutpcyLaw.com

Photo by: www.stockmonkeys.com

If you cannot qualify for a Debt Management Program, then you should consider a Debt Settlement Program.

In my last blog, "Dealing With Debt, Part 1, Debt Management", I explained about how the traditional Credit Counseling Program or what we refer to today as a Debt Management Program works.

As with about anything in life, there are pros and cons with any program, so you want to make sure that if you are looking for answers concerning what is the best way to deal with debt, you look at all of your options before making a decision!

When dealing with too much unsecured debt, you really only have a few options:

• A Debt Management Program
• A Debt Roll Up or Snowball Program
• A Debt Settlement Program
• Bankruptcy

What is a Debt Settlement Program?

When you accumulated too much debt unsecured debt and cannot keep up with the minimum payments due or cannot qualify for a Debt Management Program, then a Debt Settlement Progam may be your best option.

Most people who chose a Debt Settlement Program have had some, if not all of their accounts become very delinquent.  Once you miss 3 or 4 monthly payments, these accounts most likely will be charged off by the original creditor and placed with a collection agency.

Sometimes, the collection agency is actually an attorney or Law Office that only deals with debt collections. 

As you may know by now, once you miss a payment or two, the letters and calls start coming more frequently!  In fact, most consumers are taken advantage of by debt collectors because they do not know their rights.

Under the Fair Debt Collection Practices Act, debt collectors are forbidden to:

• Call you too many times in a day
• Say things that are vulgar or might indicate they could take your belongings
• Make statements or suggestions that you are going to be sued, if, in fact, they do not file a claim and start the legal process.
• Call you at your place of employment.
• Any many other acts that you need to know.

You can find some very helpful information called:

Fair Debt Collection Practice Act – Guide for Consumers

OK, so you've looked at your options and Debt Settlement is the way to go...

Although you can attempt to settle your debts on your own, not only does debt settlement takes a lot of time, but you are also going to be going up against trained debt collectors who:

• Are trained professionals
• Don't care about your financial circumstances
• Don't want to hear your story about how you got into this financial trouble
• Are usually paid based on the amount of money they can get you to pay!

A quality Debt Settlement Company will:

• Take the  time to conduct a thorough interview with you (by phone or in their office) as to your financial circumstances.
• Go over you debts and basic household budget to help determine what you can reasonably afford to contribute to the debt settlement program.
• Not try to pressure you into "signing up" quickly, but be willing to not only answer all of your questions, but will also mail, fax or email you a summary of how the program could work for you.
• Be registered (if required by law) in the state in which you reside.
• Maintain a very high rating with the Better Business Bureau.

If it is determined that a Debt Settlement Program is your best option, then:

• You will stop making payments to your creditors (if you haven't already)
• You will make a payment/deposit to your Client Reserve Account through the Debt Settlement Company.  This account is with an Insured Bank located in the state of registration.
• The Debt Settlement Company will contact each of your creditors/collectors in order to stop the collection calls and to begin to negotiate on your behalf.

By the way, you cannot stop the original creditor from calling you about a missed or unpaid account.  They have a right to do so.

But, you can certainly stop the collection calls from debt collectors!

Once your reserve account has sufficient funds, a settlement will be negotiated.  Sometimes this settlement is a lump sum for approximately 50% or less of the balance.  Sometimes this settlement can be paid out over a number of months.

Each settlement, and the subsequent reduction in principal of the settlement, depends on many factors, such as:

• Your employment status (working, W-2 wages or self employed)
• Retired
• Disabled
• On unemployment, etc.

After a settlement has been negotiated, a SETTLEMENT AGREEMENT is faxed, emailed, or mailed. 

If you are going to try and settle your debts on your own, DO NOT SEND OR AUTHORIZE ANY PAYMENT WITHOUT A WRITTEN SETTLEMENT AGREEMENT!

Once the settlement has been completed (according to the terms of the settlement agreement), a letter will be mailed out stating that this account has been:

• Settled-as-agreed
• Settle-for-less-than-the-full-balance, (and sometimes)
• Paid as agreed or Paid in full

The Debt Collector or original creditor if you are dealing with them, should notify each the three top Credit Bureaus that your account has been closed and settled.

HOWEVER, it is a good idea to follow up by running a FREE CREDIT REPORT (after about 45-60 days) to make sure that this account is not showing a balance, etc.

Most Debt Settlement Programs run about 36 -48 months or maybe longer, depending on your financial circumstances.  Once each account has been settled, you're credit scores should start going up!

Debt Settlement is a noble way to do the best you can to repay debts that you owe instead of seeking bankruptcy protection. 

Bankruptcy, in my opinion, should be considered as your last and only option, and I will be blogging about that next time.

For more information about Debt Settlement, click below:

 Photo credit to Betsssssy

If you have debts that are delinquent, you may get a summons.  Do you have to respond to a summons?

The simple answer is "no", but that doesn't mean you should ignore a summons!

If you have so much debt that you cannot keep up with the payments, at some point, some or all of these debts will become "past due", "delinquent", or "charged off" for non payment.

In some cases, the original creditor or the debt collector or debt buyer may decide to retain an attorney to file a claim against you.

Here's what usually happens:

When you miss a payment or two, you start to get the phone calls and letters.  This is the original creditor trying to get you to start making the payments again.  During the first 60-90 days, the account most likely stays with the original creditor as they continually try to get you to start making payments.

As annoying as the phone calls are, you cannot legally stop the calls as long as the account is still with the original creditor.  You can, however, choose to ignore the calls, but this is not your best tactic.

You can answer the phone and try to explain your situation, but this is usually a waste of time.  It would be better for you to write the original creditor and briefly explain your financial circumstances and that you fully intend to repay this debt, but cannot do anything at this time.

This may or may not buy you some time.  Most likely, the original creditor will offer you some kind of HARDSHIP PLAN, but BEWARE!  Most Hardship Plan offers only delay the inevitable...you will have to repay 100% of this debt plus interest, late fees, annual fees and possibly over-the-limit penalties!

If the original Creditor is unsuccessful in getting you to start paying, they may decide to place the account with a DEBT COLLECTOR.  Here where things are starting to get really serious.

At first, you'll receive some letters, telling you what you already know...

                                  THIS ACCOUNT IS PAST DUE!

It will explain that you must bring you account up to date or face serious consequences (or something like that).

Then, the phone calls start!  Although the Fair Debt Collection Practices Act has helped stop many ruthless and harassing debt collectors, they are still out there!

According to the FDCPA, you have the legal right to make them stop calling you!

Click below:

But now that the calls have stopped, the original creditor, the debt collector or debt purchaser may decide to take legal action.

A word about DEBT BUYERS:

When a debt goes unpaid for a long time and a debt collector (or several debt collectors) are unsuccessful collecting the debt, it normally will be charged off as "uncollectable".  There are thousands upon thousands of these debts out there and there is are companies who will buy large groups or lots of debt at pennies on the dollar, planning on getting paid on enough to make a profit.

So, if they decide to have a claim filed, they would retain an attorney (licensed in your state) to file a COMPLAINT in your county courthouse.

By-the-way...

It's not always logical when or why a debt collector or debt buyer decides to file a claim.

Back to the process:

The court will prepare a SUMMONS, and it will SERVED or delivered to you.  This is usually done by a sheriff or company paid to serve the summons.  Some people think that they can avoid receiving the summons by not answering the door or by lying to the person or sheriff trying to serve the summons.

I don't advocate this tactic, as you could face legal charges for not telling the truth, and eventually, you will be served.  You may be able to "buy some time".

If you can come up with a lump sum of approximately 50%-75% of the amount of the claim, they may accept that as a settlement.  The amount they are willing to accept will depend on several factors, specifically your financial situation:

• employed (W-2 or self employed)
• unemployed
• retired
• disabled
• buying or renting

If you are exempt from wage or bank levy, but are a home owner (or have significant equity in your home), you may want to get this account settled to avoid a lien being placed on your property.

If you do not have funds available to offer a lump sum settlement, in most cases, you will be able to arrange a repayment of the debt by making monthly payments.  Sometimes, this will be called a STIPULATED AGREEMENT before or after a judgment.  As long as you complete the terms of the agreement, no further legal action will happen.

On the other hand, if you start such an agreement and miss a payment, they may deem the agreement "VOID", and start the legal process again!

BOTTOM LINE...

It is not in your best interest to ignore a summons! 

In fact, if you are in a stressful financial situation, take action before your account(s) go this far!  Your chances of successful negotiation are much better if you can get something worked out BEFORE a judgment is awarded!

Photo credit: Kevin B 3

Kevin B 3

If you are living with the stress of too much debt, I have a question...what would you feel like if you were DEBT FREE?.  Regardless of your financial circumstances, you can be DEBT FREE...     How would that feel?

If you were to do a search about the average family debt in America, you would get statistics all over the board.  But, if you were to average them out, here is a basic picture of the average American family's debt:

• Total debt per family                       $ 17,500
• Credit card debt                              $   7,500

Now let's think about that for a minute.  If these are the averages, that means that some households have much lower over-all debt and therefore lower credit card debt. 

But on the other hand, that means that some households have much higher over-all debt and therefore much higher credit card debt!  After helping people solve their debt issues for over 10 years, I have found that our average client has credit card debt that totals about $25,000!

Big question...

HOW WOULD YOU FEEL IF YOU WERE DEBT FREE ? ? ?

Have you ever thought about it?

I'm not talking about dreaming about winning the   lottery, but finally paying off everything and everybody you owe!

No debt...zero...nada !

• No more waking up in the middle of the night worrying about the bills!
• No more standing at the check out counter and praying the card is not declined!
• No more making excuses because you really can't afford to go with your friends!
• No more dreading the end of the month,knowing there is not enough to pay all the bills!
• Get the idea???  NO MORE ! ! !

I was talking to a good friend of mine about this and he said that to him, being DEBT FREE is better than about anything you could imagine!  I think he's right!

When you under the burden, pressure and stress of DEBT, you really can't enjoy life. 

I mean, what good is driving a new car if you know you really can't afford it?  Sure, you have a nice big home, but the truth is, you can barely keep up with the payments, much less pay for any maintenance or additional "trimmings". 

OK...I think I've made my point.  Are you ready be Debt Free?

Or...are you ready to...FEEL WHAT IT'S LIKE TO BE

DEBT FREE?

STEP ONE

It's time to get down to business...financial responsibility.  (Really...has it come to that?)  Financial responsibility starts with an honest accounting for every dollar that comes in, but most important, that goes out.

Yep, the old BASIC HOUSEHOLD BUDGET.

List everything you are spending money on.  Not just the big items like rent or mortgage, car payment, groceries and utilities... I said you have to be honest!

What about:

• Daily latte at Starbucks?  Really?  At $4 -$5 per day?
• Health club membership you rarely use?  Seriously?
• Buying lunch out instead of making a sandwich?
• OK...I know I may be over stepping, but what about that smoking habit?  At $5/pack?
• And yes, you better address all the other little "things" that can really add up!

It's time...and you know it. 

STEP TWO

Now that you've found a few (or several) extra dollars from getting rid of some, if not all, of your "wasteful spending habits", you can start down the road to financial freedom!

Depending on your individual financial circumstances, you most likely will be a candidate for one of the following programs:

• Debt "Roll-Up" or Snowball Plan
• Debt Settlement
• and if none of the above works...Bankruptcy

A DEBT "ROLL-UP" OR Snowball Plan

If you have found an extra $100 or more from making cuts from you "out-go" in the budget and, you have the self discipline to follow through with the program, this might just work for you.

Basically, you are going to list all of your unsecured debt (you can do all debts, but for now let's just tackle the unsecured ones).

List from the smallest balance to the largest balance.  Don't worry about interest rates now.

Le't say the smallest balance requires a $50/month minimum payment and you have an extra $200 (from all of the $ you were wasting).  You are going to pay $250 towards this balance until it is paid off.

After it is paid off, you are going to start on the next balance.  Let's say you have been making $100/month as a minimum payment on this one.  Now, you are going to add the $250 from paying off the first balance to the normal $100 for a total of $350 going after this second balance.

Once it's paid off, you're going to add $350 to whatever the minimum payment is on the next balance...and so on...and so on.

Guess what?  You're going to have all of these unsecured debts paid off before you know it!

HOW'S THAT GONNA FEEL???

Oh yeah, baby!!!

And since this worked so well on the unsecured debts, what about adding the extra money you now have from paying all of them off to your mortgage or student loans?  Wow!

Need some help with this?

If you don't have any extra money or if it seems a little "overwhelming", then you should consider a DEBT SETTLEMENT PLAN.

Debt Settlement is for people who, because of circumstances beyond their control, find themsleves in serious debt.  If you can't afford the minimum payments on all of your unsecured debts and/or some have been turned over to a debt collector, you would profit from a Debt Settlement Plan.

Debt collectors are usually willing to accept less than the balance due because of your financial hardship.  This can be 50% or more, again, depending on several factors.

Once the balance has been negotiated and the debt settlement agreement is paid per the debt settlement agreemenet, this account will be noted on your credit report as "paid-in-full" or "paid-as-agreed" or even "settled at less than the balance due". Regardless, the balance is ZERO....$0.

Let me ask you again...

HOW'S IT GONNA FEEL TO BE DEBT FREE!!!

OK, let's say that things are so bad you can't take advantage of the Debt "Roll-UP" Plan or even the Debt Settlement Plan, then you should consider Bankruptcy.

You will need to find a compentent bankruptcy attorney, but be careful!  You should interview two or three in your area and get some references.

You should not have to pay too much up-front for their services and you should not have to pay anything for the initial consultation.

But even if you have no choice but to file for bankruptcy, life is not over!  The bankruptcy process is not as bad as you imagine.  In fact, once it is completed, not only will you be DEBT FREE once again, you will be able to rebuild your credit a lot quicker than you think.

Sit back, close your eyes...one more time, let me ask you...

HOW WOULD YOU FEEL IF YOU WERE DEBT FREE?

Then do something about it...

Photos by eric731