No one wants to get into financial trouble, but there are many reasons the average person may get into trouble with a creditor or have a debt sold to a debt collector. Medical bills, the loss of a job, poor financial decisions, and economic turmoil can turn a person’s bills into an unsustainable mess where bankruptcy might offer the only solution.
However, bankruptcy is usually what a debtor should consider only after exploring all other avenues. One such avenue is negotiating with creditors to come to a settlement or payment agreement on a debt owed. Is it possible for the average person to negotiate with a credit card company, or will a debt always reach a point where bankruptcy is the only way out?
The Fair Debt Collection Practices Act (FDCPA) guides the behavior of debt collectors and creditors in their attempts to collect debts, and it may benefit a debtor to understand this act, as well as what a creditor will and will not do when money is owed.
Original Creditors Versus Debt Collectors
One of the most critical distinctions in the world of debt collection is that of a debt collector operating on behalf of a company that owns a debt versus the original creditor attempting to collect a debt.
If you default on a car loan and don’t make payments for several months, your lender might repossess your car or take other measures to obtain the money they believe is owed to them. It’s usually quite tricky to negotiate with an original creditor, particularly when there is collateral involved (like a car).
However, some companies may be amenable to receiving modified payments for some length of time, which can help a debtor get back on track. If you miss a few months of payments on your car, the lender probably won’t immediately repossess your car. They might work with you on a payment plan to get you on track.
Credit Karma reveals:
“If your monthly credit card payment rivals your mortgage or rent, or if high-interest rates are making it impossible for you to get rid of the debt, it might be time to negotiate with your credit card company.”
On the other hand, if you default on a credit card or an unsecured debt, you may eventually find yourself working with a debt collector working on behalf of a debt buyer who purchased your debt from your original credit card company. For example, if you don’t make payments on a credit card for six months, your credit card company might cut its losses and sell your debt to a debt buyer for pennies on the dollar.
It’s often these debt collection entities and their associated debt buyers that are blamed for abusive collection tactics. However, having a group of debt collectors calling you every day doesn’t necessarily mean that bankruptcy is your only option. For legitimate debts, you may be able to negotiate with creditors – as well as debt buyers – to reduce the amount you must pay before the debt is satisfied.
“Try to stay calm, no matter what the person on the other end of the line says. You’ll get nowhere if you lose your temper. If you find yourself losing your cool, just tell the collector you’ll have to talk with them later and hang up. If you need to talk with that representative again, tell them you’d like to record the conversation. That usually keeps them on their best behavior.”
It may be nerve-wracking to negotiate on your own with your credit card company, but it is possible to do it yourself. If not, you can always consider using a company to negotiate for you.
Using a Service to Negotiate Versus Calling Yourself
Some businesses help consumers negotiate with creditors, but not all of these companies are created equal. The fees these companies charge vary wildly, and it’s important for consumers to research the cost of using these services before committing to any agreement.
Further, individuals who only have a few debts and might only be behind on a few credit cards may not need such drastic measures taken. Sometimes, all it takes is a call to a card company or a creditor to explain the circumstances to get back on track with a modified payment plan. If you don’t feel you can negotiate on your own, you may want to ask a non-profit debt assistance company to work on your behalf.
Are Debt Collection Companies Harassing You?
Are you considering bankruptcy? Do you have questions about filing for Chapter 7 bankruptcy or the requirements for filing for Chapter 13 bankruptcy? Do you want to know whether your debts are manageable or whether bankruptcy is your best option? Contact Suburban Legal Group for expert legal assistance from experienced bankruptcy attorneys.
DISCLAIMER: All information on this website are provided for informational purposes only and are not intended to be construed as legal advice. Suburban Legal Group PC shall not be liable for any errors or inaccuracies contained herein, or any actions taken in reliance thereon.