by Cindy Diccianni
Debt. Just
hearing the word can make the hair stand up on the back of your neck! And for
those who are handling too much debt, it is a four-letter word. Oftentimes,
situations can get beyond our control: uninsured medical bills, major illness,
marriage, divorce, children, college education, a loss of a business,
disability, unemployment or some type of natural disaster, or just spending more
than we could make. The one common thread is that all of these life events lead
to debt. The natural reaction is to bury your head in the sand and hide, but you
will usually be offered help if you genuinely try to correct the situation.
Take
Responsibility
The most
important step to take is to talk directly to your creditors. Creditors really
want to be paid and to keep you as a customer. This can work in your favor.
Legally, as soon as you default on a debt, which is making a late payment, the
creditor has the right to ask you to repay the entire debt. That rarely happens
because the creditor is interested in building a relationship with you and
selling more products or services. Most creditors will listen if you ask for
help in structuring a new repayment plan. An example of this would be an
extension that they may grant you or a reduction in your payment.
If you are
paying late, creditors typically send you some type of form letter as gentle
reminder. If you still do not pay they send letters with increasingly more
demands or call you over and over again on the phone. They may even threaten you
with legal action such as a lawsuit or collection process.
Get
Outside Help
If you have made
an attempt to work directly with a creditor and have had no ability to resolve
the situation you will need some outside help. There are several agencies that
are good at resolving these types of situations. The ones I prefer are Take
Charge America and Consumer Credit Counseling Service (CCCS). They are a
non-profit organization supported partially by the credit card companies and act
as a liaison for you and your lenders. They will set up a workable repayment
plan and assist you in the process.
The most
important consideration is to use an agency that is non-profit and who
understands what you can feasibly pay and not set you up in an unrealistic
repayment schedule. Remember that sticking to the plan is vital for two basic
reasons: the first one is that you build good faith in demonstrating that you
are willing to do what you say. The second is that it will improve your credit
rating over time.
A mediator is a
third party individual (often a lawyer) who charges a fee, and will negotiate
some type of settlement or repayment schedule. This is a popular way to resolve
your credit problems. They have no ability to force either side to settle but
often knowing what to say makes the settlement process happen.
An arbitrationist is someone who will arbitrate or argue and settle for you for
some type of fee. Oftentimes this will not make the credit card companies very
happy because they are settling for pennies on the dollar. You are both bound by
the settlement agreement and there is no renegotiation after that agreement has
been made. These types of agreements although completely legal, are sometimes
viewed upon as unfavorable by the lenders or creditors. They may report the
information on your credit report as an “arbitrage settlement” which could alter
your credit rating for a period of time. Or the creditors can agree upon the
settlement and there may be no adverse affect on your credit score after the
arbitrage agreement is satisfied.
Keep
Accurate Records
Whenever you
begin this process always get the name and extension of whom ever you speak to.
Creating a paper trail is vitally important-especially if you are contemplating
legal recourse. Without the paperwork it is virtually impossible to name anyone
in a lawsuit. Face it; no lawyer will take a case they cannot win, especially if
their fee is based on winning the settlement.
As
a side note: the government can assist you if you feel that you are not being
treated fairly. Contact the Federal Trade Commission and have your documentation
ready.
Deal
with Your Bill Collectors
A last resort
for any creditor (other than suing you) is to hand over your debt to a
collection agency. Do not ignore these people. They are not interested in
keeping you as a customer and are paid for results, i.e. collecting the money
that you owe, and will be relentless in their pursuits including calling you at
work, home and anywhere else they can get you. Their only goal is to recoup as
much debt as they possibly can.
Your
Rights as a Consumer
Bill collectors
are restricted by the Fair Debt Collection Practices Act, which applies to
everyone who collects consumer debt for someone else, including attorneys. Some
of your rights include:
The right to
tell collectors not to contact you again. After that they can only call to say
collection efforts have ended or that you’re going to be sued (not the best
situation to be in).
-They cannot threaten violence or use obscene language.
-They cannot contact you at work and cannot call your home after 9:00 PM.
-They cannot put a marking on the outside of a letter or postcard that
would indicate that
they are trying to collect a debt.
-They cannot mislead you into repaying a debt.
Let’s face it,
if you are in the situation were collection agencies are calling you, you need
to take immediate action. Most lenders and creditors are more than willing to
work with you when you are proactive and take action. It builds your
creditability and lenders understand that many people can fall on hard times.
When you opt
not to act, then your problems are only compounded. Many creditors are not
willing to assist you and can either bring legal action against you or contract
a collection agency to attempt to get their money. Ultimately, your credit
rating is severely damaged and it can take years to correct the problems and get
your credit rating back up to the quality that will enable you to get the best
available lending rate. If you need to seek professional help, don’t delay in
doing so and get the guidance you need to resolve your situation.
Cindy Diccianni is a Registered Nurse, a Certified Senior Advisor (CSA), a
Certified Long Term Consultant (CLTC), a Registered Investment Advisor and a
Registered Representative with Leigh Baldwin & Company member NASD and SIPC. She
is a co-founder of Nurturing Your Success, Inc. Her passion is assisting clients
in creating financial independence. You may visit Cindy at
www.nurturingyoursuccess.com, write to her at
Cindy@nurturingyoursuccess.com or call her directly at (610) 251-9393.