Saturday, November 26, 2011

Dealing with debt collectors

I mentioned in my last post that at one time I had a few nasty debt collection issues due to uninsured car accidents. 3 to be exact. 2 for husband, and 1 for me, and thanks to us not having insurance and being unable to pay the insurance companies chasing us to pay for the accident, the debts were sold onto external collectors. I have some hints for working with these bad boys. I don't mean financial institution collections departments either. Those ones you definitely want to prioritise or risk getting a default on your credit file which will show up for 7 years. And believe me when I say that the banks with the best or even ordinary rates will not be interested that you paid off that debt 6 years ago. If you have a nasty loan default, you will not be getting finance from anyone reasonable until its dropped off your file again.
I'm talking about the external kind. The ones that buy debts for a fraction of the original debt. Many business's use them, insurance companies, etc and they usually present themselves as working with the company that you originally owed the money too. Fair enough, they own the debt now.
Of course the best policy is to pay your bills in the first place. Definitely. But I, and many people like me have fallen into a trap where a debt collector is chasing you for money.
My steps for handling this situation:
1. Set up a payment arrangement AND STICK TO IT. Make it minimal though. Realistically, you are probably trying to juggle numerous bills right now, and most of the others have a bigger impact. Electricity will be turned off with a penalty, interest and fee's will be charged on finance, not paying rent will lose the roof over your head. A debt collector is really only chasing the original debt making them the lowest priority. Demonstrate to them that you are on a thin budget and negotiate a $5 or $10 per fortnight payment. Even if this means it will take 5 years to pay off.
2. When you get spare cash, put it aside and accumulate it for the purpose of paying off this debt, BUT DON'T ACTUALLY PAY IT.
3. Once you have accumulated 40% of the remaining debt amount, contact the debt collector to negotiate an early payment arrangement. Often, they will initiate it themselves periodically especially if you are committed to a tediously slow payment arrangement because they can't take any court action against you as long as you keep paying. Because they bought the debt at a fraction of the amount, they will often accept these negotiations as it is still a profit and they will save in admin costs maintaining your debt. If they ask for more than you have, turn it down and keep saving. You will find the middle ground eventually and they will be more likely to play ball next time you ring.
4. If they do not accept it, continue to pay them the base amount unless you have repaid all other interest or penalty bearing debts. Then do everything you can to eliminate this debt from your life as well by paying extra when you can. Do not commit to a higher regular payment though. If the collector contacts you, indicate that you have spare cash as an isolated circumstance and cannot commit to a high repayment. This way you avoid a commitment that is not sustainable long term. If you were to miss a payment, the collector would be able to resume legal activity against you.

Lets be clear. I am not encouraging you to avoid your financial responsibilities. Paying your bills in the first place is the best way to go. This is for when you are in that really bad situation and you are looking for tactics to make it right again. Most people do not end up in these situations because they are bad people. Sometimes they are stupid people (me), or have had bad luck, but usually they didn't set out to not meet their financial responsibilities. This information will help you to minimise the impact of a bad debt in your life and potentially fix up your situation faster.
If you are struggling with bad debt right now, I hope this helps. I'm not happy about some of my life experiences, but I'm happy to share the lessons I learnt. 1st lesson, get insurance. 2nd lesson, stop having accidents. 3rd lesson, as above.

2 comments:

  1. Overall with the things that has an importance with the financial activities tanner mainstain helps me a lot with overall.

    ReplyDelete
  2. All the banks with the best or even ordinary rates will be interested on debt consolidation payday loans. Just follow the instructions of this purpose.

    ReplyDelete

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