If you have ever had to deal with a deal collector, you know how frustrating and stressful it can be!

• First you get the letters from the debt collector.
• Then, you get the phone calls.
• From then, you get a combination of angry and sometimes threatening letters and calls!
• If you chose to ignore all of this, you may get a knock on your door and be served a summons!

Yes, very stressful and frustrating.

But, here are some tips to make this process somewhat bearable:

You must understand the basics of the DEBT COLLECTION PROCESS:

Let's say you have several (unsecured for the sake of this blog) accounts including:

• Credit Cards
• Store Cards
• Medical Bills
• Private Student Loan
• Personal Bank Loan

Not that unusual for the average person to have $7,000 - $15,000 of unsecured debt these days.  As long as you are making at least the minimum payments, everyone (your creditors) are happy.

But, miss a payment or two and the DEBT COLLECTION PROCESS starts.

Once your account gets a couple of months behind, it will most likely be transferred to  the "collection or recovery" department within the company.  They send letters and start making calls.

By-the-way...here's a link to show you how to stop collection calls from DEBT COLLECTORS.

But, as annoying as the calls are, as long as the account is with the the original creditor (not transferred to a debt collector), they have the legal right to call you.  Now, once that account is transferred, sold, written off, etc. and lands with a Debt Collector, you can request/demand that they stop calling.

If your account is still with the original creditor, you may be able to get a settlement (reduction in the total you owe), but most likely they are going to offer you some sort of HARDSHIP PROGRAM...but, BE CAREFUL!

In most "hardship programs", the original creditor offers to let you lower your monthly payment for 6 months or so and then "reconsider".  While this may cut your overall payments, inevitably, you will have to go back to making the larger payments.

So now you are late on your payments, the calls and letters are still coming, but there's not a lot you can do about it due to your financial circumstances.  What happens to your debt now?

In most cases, the creditor will hire a Debt Collection Company to try and get as much money from you as possible.

Dealing with debt collectors can be very intimidating for the average person.  They call several times a day and leave messages (for anyone and everyone to hear) that says that you need to return their call right away.

So, you call them back, and here is where it gets frustrating.  Debt collectors are trained to do one thing...GET AS MUCH MONEY OUT OF YOU IN THE SHORTEST PERIOD OF TIME they can!

You try and explain your situation, thinking that the debt collector will actually "care".  While it is true that not all debt collectors are bad people, it has been my experience over the last decade of dealing with them for my clients that the average debt collector has just gotten (for lack of a better word) "calloused".

You owe their client (the creditor) money...their job is to get it....period.

The debt collector will tell you that you must pay this much in this period of time and there is nothing else available.  But, that is usually not true.  In most cases, some sort of settlement can be negotiated.

The problem with trying to negotiate on your own for your own debts, is that you are (obviously) emotionally involved, stressed out, frustrated and scarred of what the debt collector can and cannot do to you!

If you are going to try and negotiate and/or work out agreements with debt collectors, I strongly advise you to learn about what your rights are as a consumer in dealing with them.

The Federal Trade Commission has some very good information on their sight that you should investigate. 

                    Go to: Consumer Information about Debt Collection.

The more prepared you are, the better your chances are that you can negotiate a good settlement or repayment plan.

If you are unsuccessful in coming to a mutually agreeable settlement, the debt collector may take the final drastic step and file a complaint against you.

They will hire an attorney who is licensed in your state to file a claim in your county's courthouse.  Next, you will be served a summons.  A lot of people try to avoid accepting the summons, but eventually you will be served.

unfortunately, a lot of people who are served a summons choose to ignore the summons.

                   BAD MISTAKE!  Please, DO NOT IGNORE A SUMMONS. 

                    Check out a recent blog on this that will be very helpful.

The goal of the claim and summons is to either:

• Scare you into sending them money
• Being awarded a "default judgment" so they can pursue wage garnishment.

But, the are EXCEPTIONS!  Basically, only W-2 wages can be garnished and each state has it's own variation of how much, etc.

The basic guideline for garnishment is 25% of your net take-home pay!  Wow!  Suppose you are bringing home a modest $2500 per month.  At 25%, that's $625 they can get and there's little to nothing you can do about it.  That is why you can't ignore a summons.!

Debt collection in Texas is a little different in that there is no wage garnishment for residents of Texas! However, your bank account could be garnished or better, levied in Texas, so be careful.

Their are more protections and/or exemptions that would prevent a debt collector form being awarded a wage or even a bank garnishment.  Again, if you are going to try and go it alone with debt collectors, you have to know what type of income is and is not available for garnishment!

I live in Oregon, and debt collection in Oregon can be very, very stressful and frustrating!  It seems that the smaller debt collection companies are tougher to work with than the larger ones.  Some debt collections companies are actually attorneys who only deal with debt colletion.  However, they can and will work out settlements, depending on your various circumstances.

Finally, if you decide to DIY and deal with the debt collectors on your own...good luck!

It is a frustrating and stressful situation to be in.

• Know your rights
• Know the debt collectors rights
• Know the process

Photo credit: www.flickr.com/photos/kitby/4883787012/

Can I use debt settlement in Oregon to clear up old debts?

YES! Debt Settlement is a viable option that creditors will consider when you are facing difficult financial times.

HOW DOES DEBT SETTLEMENT WORK?

After you have been delinquent in paying your accounts, usually those accounts go into an INTERNAL RECOVERY department within the company.  During the first couple of months, you will receive numerous calls and letters about your account.  These calls can be VERY ANNOYING, and in some cases, put your job in jeopardy if they call you at work!

THE GOOD NEWS is that you can PUT A STOP TO CREDITOR CALLS.

According to the FAIR DEBT COLLECTION PRACTICES ACT (FDCPA), once you have requested/demanded that the creditor stop calling you, they must stop!  If they continue, you can report them to the State Attorney General's office and they may be subject to a hefty fine!

After approximately 120-180 days, if the creditor has not bee successful in getting you to start paying again they may offer your a Hardship Plan. Before you agree to their offer of a "HARDSHIP PLAN", you need to read  BEWARE OF SO-CALLED HARDSHIP PLANS!

If you choose to decline the Hardship Plan, your account wil be CHARGED OFF, it will be placed with a COLLECTION AGENCY.  This agency may also be a law firm that only specializes in debt collection.

At this point, the calls and letters start again! Even though you requested that the original creditor stop calling, now your account has been placed or sold to a different company and you must send the demand-to-stop calling letter again!

Your account has now been delinquent for approximately 6 months, and depending on your circumstances, a settlement offer of 50% or less may be possible.  It takes a lot of time and effort to secure a good settlement, but settlements can and are negotiated all the time.

Click here for some ACTUAL SETTELMENT EXAMPLES.

If you are able to negotiate a good settlement (50% or less), before you send money or agree to a check-by-phone, GET THE SETTLEMENT AGREEMENT IN WRITING!

Many consumers have made a verbal agreement over the phone, authorized a settlement payment, and then find out that the company claims that the payment was just toward the ENTIRE BALANCE, and not a settlement-as-agreed.

Yes, DEBT SETTLEMENT IN OREGON as well as most all states is possible, but time consuming.  We have been helping people become DEBT FREE through DEBT SETTLEMENT FOR MANY YEARS  and may be able to help you also.

Is there a way to legally eliminate debt? 

Recently, a client contacted us after hearing that our programs were not recognized by the courts. So, let's address this question:

Can you legally eliminate debt through a Debt Management or Debt Settlement Program?

And the simple, honest answer is YES !

Unsecured debts, such as:

• Credit card
• personal loan or line of credit
• bank loans
• cash advance loans
• medical bills
• repossessions

...are granted to the consumer under a contract or agreement. The consumer agrees to receive the credit (money/funds/item) with a promise to repay according to the contract.

What happens if the consumer cannot or does not repay the debt?

The creditor can attempt to collect through using various methods within the guidelines of the Fair Debt Collection Practice Act.  In most cases, a settlement offer of the account for less than orignially agreed upon, will be made.

When the settlement is completed, either paid in lump sum or in a series of payments, the account is deemed to have been either:

• Paid-as-agreed or

• Settlement-as-agreed

Your credit report will report this debt to have been paid in the same way with a ZERO balance. 

The "court" does not consider a supplemental payment plan or settlement agreement to be illegal as the creditor has the right to modify the original agreement!

If the debt forgiven is over $600, the the creditor may report it to the IRS and you would receive a 1099-C indicating that you may be responsible for additional taxes on the amount forgiven.

However, if at the time of the settlement (forgiveness) you were basically insolvent, meaning your debts (all debts: mortgage, car, student loans, credit cards, loans, etc.) were more than your assets (and in about 99% of the time they were), then you would not be required to pay any tax on the amount forgiven.

In fact you or your tax preparer can file intructions with IRS 4681 and then file a simple form IRS 982.

So, yes, you can legally become debt-free through debt management or debt settlement.

It may be in your best interest to seek professional help.

You are late or behind on your credit card payments.  The agent calls and tells you about Hardship Plans.  Is this a good deal?

Never forget that the goal of the credit card industry is to make money...lots of money!

They don't care...                    

• about you
• your family
• if you lost your job
• have had major illness

So when they offer a hardship plan, remember the saying,

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

A typical hardship plan will waive or reduce interest rates and fees fo 6 months or so.  The pitch is that this will give you a little breathing room and you can renegotiate your payments or plan later.

• They will want you to set up automatic deductions from your bank account or send them 6 months of post dated checks.  Doesn't sound too secure, does it?

OK, so maybe you agree.  Let's examine the plan.

• Your balance is $5000. 
• You current minimum monthly payment is $150 or so. 
• They offer you payments of $100/month for 6 months at a reduced rate of 6% and no fees.

After six months:

• you've paid $600
• $144 went to interest 
• $456 went to reducing the principle 
• your balance is $45444

Now it is time to renogiate your plan.  More often than not, you'll be back to high interest rates and fees which means it will take you several years and thousands of dollars in interest to pay off your card.

Some plan!