S.O.R.- Save Our Readers
Posted on July 5, 2007 4 Comments
As the author of The Budgeting Babe, I get a bevy of questions from readers that I’m unfortunately unable to answer due to my general lack of financial savvy beyond the basics. However, I happen to have some really amazingly knowledgeable financial friends that are willing to step in and serve as a resource from time to time.
Today’s question comes from an anonymous poster in response to my budgeting post (which turned out to be surprisingly controversial … who knew??). Here the question:
Anonymous writes:
Q: “ok….so I have a question. (I’m going to be real here…you will cringe at my situation) I have way to many credit cards. They are all maxed out. Car accident, death of a parent (helping out my mom after my dad passed away), and retail therapy to name a few reasons. Then I went back to school and have that bill to pay. How do I get the collection agencies to stop calling me and let me make monthly payments that I can afford?Thank you for the advice. :0″
To answer Anon’s question, I was able to get debt whiz Emily Davidson from Credit.com to provide some solid advice. Emily is a former TransUnion credit expert, and currently serves as the communications director for Credit.com, writing about credit reports, credit scores, loans and personal finance. Clearly, she knows what she’s talking about. Here’s Emily’s answer.
A. This is an interesting question and one that requires a little detective work. Let’s break it down:
1. Does she really have accounts in collection? She mentions having maxed out accounts but that doesn’t necessarily mean that the debts have been sold to collection agencies. Normally, you have to have not paid your bills for several months in a row in order to have your debts sold or transferred. If the credit card balances are not officially in collections, she should immediately call her creditors and explain her situation. Credit card companies can be surprisingly helpful for consumers in a crisis. It is crucial that she does everything she can to prevent the debts from being sold to a collector and to avoid the resulting credit damage.
If the accounts really are in collections (she should check her credit reports to be sure), the credit damage has already been done and she has an entirely new set of options. Keep in mind that paying off a collection account will not cause it to be removed from her credit report. Paid or unpaid, that negative record will stay on her credit report for 7 years.
2. How can she get the collectors to stop calling? Under the Fair Debt Collections Practices Act (FDCPA), consumers can send a letter ask debt collectors to stop contacting them. Once a collector receives this letter, they can’t contact you again except to notify you of specific changes to your debt. You can read more about your rights under the FDCPA online here.
3. How can she negotiate with the collectors? Collections agencies have usually paid pennies on the dollar for your debt or are working toward a small commission and are more than willing to negotiate a reduced settlement. The caveat is that collection agencies will normally only accept a lump sum instead of a monthly payment system (they’re not really set up for monthly payments). If she does work out a settlement with the collector, it is important to get the terms in writing before sending your payment. Collectors are notoriously sneaky and it is important to protect yourself.
Thanks Emily!
For those of you wondering about Credit.com, here’s a brief description.
Credit.com, a leading credit education and financial services company, provides some of the Web’s premier practical information, education and products. Credit.com was established in 1995 to give consumers access to comprehensive education, information and “best of breed” credit products. The goal is to help consumers with any credit standing to establish, rebuild, enhance and effectively use credit. Credit.com works with industry experts to create clear paths for consumers looking to improve their finances. For more information, go to: www.credit.com.
I have always found the folks at Credit.com to be very helpful, and other sources I work with have vouched for their expertise as well. The founder, Adam Levin, is very well known in the financial services industry. Be sure to check them out if you can.
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4 Responses to “S.O.R.- Save Our Readers”
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July 9th, 2007 @ 2:37 am
Thank you for the advice. Sometimes a person can be very organized and on track and then life you throws you some curve balls.
I enjoy your sight and have learned a lot. I might be in a tight financial spot right now. However, your sight motivated me to open a 401k, a savings account, and to keep paying down my bills.
My friends and I never talk about money and they have know idea the financial situation I am in. Your website is a friend to me and your advice is perfect for a single women (working in retail)who is trying to build a financial future.
Thank you~
July 9th, 2007 @ 7:28 pm
Awww… thank you for your kind words. (glowing inside right now) Best of luck to you! Maybe you can write a post about it and I’ll put it up, when you feel like it.
July 9th, 2007 @ 8:00 pm
I’m so glad I could help! Feel free to ask anytime you have a tough credit question
- Emily from CreditBloggers.com
July 13th, 2007 @ 3:53 pm
Well…..as hard as it was to make the phone calls….I have been. My two credtit cards are not in collections, just past due. The credit companies have been great and have set me up with payment plans. One credit company lowered my intrest rate and waived late fee’s to help me get back on track.
Lesson learned? Make the phone call and let them know I want to pay down my debt. I just need some help. I feel better now that I have called.
I have one debt collector that has been very rude and yelled at me. I have tried to set payment plans with her and she will not budge. She wants a large amount that I can not pay at this time. She told me that she calls from her home phone number and that I am being rude when I do not answer her phone calls. UUMM….I have to work to pay the bills!!??? Plus. I work in retail and my hours are never the same.
Overall…I am getting on the right track.