You Cannot Settle Secured Debts

Category: Finance, Credit.

I ve talked to people who didn t believe that the credit card companies would actually settle for less than they were owed. If your debt is no longer with the original creditor, and has been sent to a collection agency, you will have to deal with them.

But the fact is that if you haven t paid your bill in a few months, it is likely that they will offer you a settlement without you doing anything. I have actually gotten better deals from some collection agencies than from the original creditor. I don t wan to imply that there are no consequences, but the process is fairly slow. There is no need to panic about the first collection notice you receive. The collection agency wants you to pay. If that happens, nobody wins.

They have no interest in you declaring bankruptcy. If they win a judgment in court, they can levy your wages, or hire the sheriff to get your property. I don t want to say it wont happen, because it can. This is unlikely. Usually, the expense is to great and they are more likely to sell the debt on the open market to another collector who will again try to collect. When debt becomes overwhelming, and the word" bankruptcy" starts going through your mind, don t let it get to you. These companies buy old debt on the secondary market where debt is traded much like secondary mortgages.

Collection agencies love to tell tall tales of gloom, about taking your pay check or your property. Since most consumers don t know this, they turn unnecessarily to bankruptcy. What they sometimes don t tell you( unlawfully) is that they can do none of these things until after they get a judgment against you in court. Bankruptcy may become an option at some point, but there are plenty of other choices for dealing with debt before it gets to that. The first step in the settlement process is to try" debt validation" . Make sure you have taken advantage of all of the other options available to you for settling your debt before you go through the financial ruin of a bankruptcy.

Don t attempt to settle a debt until you have checked the statute of limitations. Usually after 7 years negative marks will disappear from your credit report. If the debt is older than the statute of limitations, then the collector is wasting their time and yours. We do need to be clear about something. If it has been over 7 years, and the debt has been removed from your credit bureau report but the statute of limitations is 10 years- you are still liable for the debt! The creditor can still go to court and get a judgment even after the past due debt no longer shows on your credit report. If however, the debt is off of your credit report, and the statute of limitations has passed, it can no longer be collected.

If you know that the statute of limitations has not passed, then validation is a waste of time. You don t have to worry about it any more. You can move immediately to making arrangements to settle the debt. Their job is to use any legal means to get you to pay. The collection agency is assigned the debt by the original creditor. These may be companies who have purchased the debt, sometimes called junk debt buyers.

Don t panic just because you receive a letter from an attorney. They may also be attorneys who attempt to collect either by calling, or sending you a letter. They have to go through the same court process as any other collector before they can do any type of enforced collection. Unsecured debts include things like store cards, medical bills, gas cards, master card, amex, visa, etc. Some debts are easier to settle than others. These are generally pretty easy to settle.

You have promised an actual asset as security for the loan. You cannot settle secured debts! If you default, or cannot make your payments, you have already promised to give back the property. You can get a creditor to make a good deal. Repossession is used for personal property such as automobiles, and foreclosure is used for real property. In the negotiation, you have the advantage.

They will drive a hard bargain. You have what the creditor wants. They will tell you no. Be professional, be courteous. Stand firm, and make a good deal. Let them know that you know what your rights are, and what they can and cannot do. You will want to have ALL they paperwork so you can validate your efforts.

Correspond with them by mail. This means saving not only the letter, but the envelopes with the postmark. One rule is, if it wasn t written, it wasn t done. When you send mail to them, send it certified mail with a return receipt. If I were to ask you to prove that you sent a particular piece of mail to the creditor, you you be able to produce proof? How much should you offer?

They agency will almost always take substantially less than what is owed. They amount that companies receive for old debt is quite literally a few cents per dollar. If the debt has been charged off recently, the company may have paid only six or seven cents on the dollar. The amounts that they pay depend on the age of the debt. If the debt has been cycled through a couple of different agencies in an attempt to collect, they may have paid less than 2 or 3 cents on the dollar. Knowing this, start your offer at 25% or less.

If the account is several years old, and is out of statute, they are basically worthless, and may have been sold for one cent or less. If you have an old credit card balance of$ 10000, the collection agency has probably paid at the most$ 700 for the debt( seven cents on the dollar) . So this money is all profit to the collections. If you only offer them$ 2500, they still make a profit of$ 180The original creditor gets nothing because they have already sold the debt. Remember the rule- if it wasn t written, it wasn t done. Make sure you have all terms in writing before you send anyone any money. Keeping this in mind, and I mean, never NEVER, talk to a collection agency on the phone.

A creditor will almost never live up to a verbal agreement. Good records make or break a settlement. You need to have written documentation of all agreements, and even then you can expect a fight. Keep a copy of every letter you send. If you do call a collection agency, my first question is WHY? Its important to remember that you may not only need to verify what they collector told you, but also what you sent to them.

My second question is are you keeping a log book of the calls, the date, the time, and first and last name of the person you spoke to, their employee number if they have one, and a general record of the topic discussed including any promises made. Keep in mind it is illegal to record a conversation without notifying the other party that the call is being recorded. You can also go to Radio Shack and by a telephone recorder. But when they tell you that" the call is being recorded for quality assurance" it is kind of fun to tell them thats OK, because you are recording them also. Agencies will sometimes add charges that don t actually exist to a debt, basically because they just want to make more money. Make sure you know the amount of the debt.

I understand the motivation to make more money, but this practice is illegal. Most companies will waive the fees. If your original debt was$ 20000 and its less than 5 years old and has somehow become$ 10, 000, then you know there is some serious padding going on. You generally have a lot of time. Just because the debt has become inactive from a collection standpoint, doesn t mean that they won t try other means to collect. As the debt gets older, the daily calls will stop, and as the debt remains uncollected your chances for a good settlement increase.

Don t think that they have forgotten about it. Don t be in a hurry to settle. They may consider the debt to be a loss and take the tax write off, or may forget about it for a few months and then pursue a judgment. Take lots of time to reach an agreement. Don t be" friendly" . If your trying to settle the debt for a specific reason, its none of their business. Be polite and professional.

And anything you say will be used for that purpose. But no matter how nice these people seem, they are not your friends, they are not there to help you, they are there for one reason- to collect the debt. If you tell them that you need to settle so you can buy a new car, you can basically forget a decent settlement. Don t accept the first offer they make. Let them deal. Sometimes you will be contacted by a second collection agency attempting to collect the same debt, at the same time.

You should use the threat of bankruptcy. Negotiate with both, and take the best deal. It is in your best interest to let the collector think that you have no money, and that you are on the precipice of bankruptcy. Thats its for today. Make the collector think that this is their last chance to make an arrangement for payment. Thats a lot of information. Negotiating your debt can save you literally thousands of dollars.

Over the last three days we have covered what a collector can do, and some strategies, what they cant for negotiating your debts and paying a lower about. I constantly stress that while you can certainly settle your debt on your own, it is sometimes best to get a professional to handle a this for you. Whatever you choose to do, get started today. You know your situation and your comfort level. And begin living a debt free life.