Debt Collectors

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Lenora wrote to me and asked:

Dear Get Out of Debt Squirrel,

What should I do about my debts? I am trying to set up a budget, but even with a budget, I can’t make all my payments. I need help now? I have over $23,000 in credit card bills and I want to get free of all of them. My husband thinks bankruptcy is the answer. But I am not sure God wants one to do that. Help!!!!!!!

My Dear Lenora,

While it feels like the walls are closing in on you and that you are living through desperate times, rest assured there is a way through this mess.

It doesn’t really matter what the number is that you owe. What is important is that there is not enough money coming in to take care of the bills.

As you say, even if you take your expenses down to the bare minimum, you still can’t make it from month to month. That is a clear indication that no amount of catching rain water to flush toilets, washing out Ziploc bags or reusing aluminum foil is going to do the trick.

Your husband has mentioned that maybe you should go bankrupt, and maybe you should. After all it is a legal and valid solution for dealing with overwhelming debt.

You mentioned what would God want you to do and I think it would be a mistake to automatically discount bankruptcy as an option simply because of what you think God might want for you. Think about it, she led you here for a reason and maybe that reason was to read this answer and to talk about bankruptcy?

Your options really come down to a few basic choices:

  1. Do Nothing.
  2. Increase Income and/or Reduce Expenses.
  3. Go Bankrupt
  4. Enter a Reduced Payment Plan.

Lenora, it’s not rocket science, just tough, difficult, emotional and gut wrenching. As a furry squirrel sitting on a distant branch the path you should take seems clear. Here is my plan for you.

Lenora’s Plan of Action to Get Out of Debt

  1. First thing I would suggest if you need immediate relief from debt collectors or collection calls and you are not yet ready to go bankrupt is to enter a reduced Payment Plan where you can consolidate your debts.
  2. I would also suggest that either now or as soon as you are ready you should talk to a bankruptcy lawyer. This doesn’t have to be with the intention of going bankrupt but to educate yourself about the realities of what bankruptcy means to you and your husband.
  3. At some point following the meeting with the bankruptcy lawyer or during the early months of your consolidated debt plan you may decide that you can’t continue to make payments and live in the stress and pressure that you are currently in. You might opt for bankruptcy.

The advantages of this approach are that this does not force you to go bankrupt now if you are not mentally ready for it. And it allows you to make a good faith effort to repay your debt based on what you can afford to pay with professional help in the meantime.

Only you can decide if bankruptcy is right or wrong for you. But I ask you to consider this as you say your evening prayers. Lenora, do you have a greater responsibility to fix the past or attempt to fix the future? If you want to fix the future then it just might make more sense to go bankrupt now, get yourself back into a safe position where you can afford to live, and then if you have extra money leftover, you can always repay your creditor for moral reasons.

Going bankrupt does not mean you can’t still honor your debts. It just gives you legal protection and a fresh start, or you can keep living in the past. The choice is yours.

From a squirrel point of view I always prefer to hunt for as many nuts as I can and save them for the winter to come rather than worry about how many I didn’t have last year.

Do You Have a Debt Question You’d Like to Ask?

It’s easy, ask your question online. It’s painless.

March 31, 2008 by Get Out of Debt | No comments

Get a Text Message. Get a Loan Right Now.

March 14, 2008 in Debt Articles, Debt Warnings by Get Out of Debt | No comments

My brother and sister squirrels in Sweeden with mobile phones are getting new types of SMS or text messages that are landing them in debt.

Apparently these loans by cell phone take about 15 minutes for approval and the deposit of €300 in your bank account.

Surprise, surprise, loads of those loans are in collections. It’s estimated that the debt collectors in Sweden are hunting down about 36% of the people that took out these SMS loans via their mobile phones.

The target group for these loans are potential borrowers between 18 to 25 and if the loan isn’t repaid in 30 days, it continues to rollover and grow interest like a squirrel tail when I spot a fox. Boing!

Let’s not get ahed of ourselves here. This isn’t anything but your run of the mill cash advance loan or payday loan technique, but through your phone.

No matter how much you bitch and complain about these types of loans, there can be no doubt at the speed that someone will push the # key on their phone to have €300 deposited into their bank account in 15 minutes so they can go enjoy the weekend.

From a consumer point of view, this sucks. From a lender point of view, it’s brilliant.

For more information, visit physorg.

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Your Online Debt Collection Rights Guide

March 4, 2008 in Debt Collectors by Get Out of Debt | No comments

Here is a Quick Online Debt Collection Guide

Most people make a big mess out of dealing with the debt collector and don’t know what their fair debt collection rights are. Dealing with a debt collector isn’t so much about learning how to beat the debt collector as it is just understanding what the debt collector can and can’t do.

Remember, debt collectors have received credit card debt collection training and are professionals and unless you are a repeat debtor, you’re a rank amateur at this game.

The best way to deal with debt collections is to be cool, organized and cordial. There is no reason to lose your temper or raise you voice to the debt collector. If the debt collector is doing abusive stuff like using abusive language or engaging in debt collection on a bankrupt account, then you can pull out the big guns.

And don’t be afraid to ask to speak to a supervisor if you feel you are being treated poorly. It is just one of the duties of debt collection manager. Just remember that great advice though, be nice, be cool and be cordial.

Let the debt collector know what you can and can’t promise. And NEVER make a payment promise that you can’t keep. It is much better to over-deliver than over-promise.

But you still need to know your rights. “Most people are not aware of their rights. And unfortunately debt collectors take advantage of that fact,” says Joe Ridout of Consumer Action.

Here’s some expert advice on how to fight back against unethical collectors. The Fair Debt Collection Practices Act requires that debt collectors treat you fairly. This doesn’t mean you won’t have to pay your legitimate debt. But here are some basic rights:

A debt collector cannot call you before 8 a.m. or after 9 p.m., unless you agree.

You cannot be contacted at work if the collector knows your employer disapproves.

If you don’t want to hear from a debt collector, write a cease and desist letter to debt collector letter telling them to stop. By law, they have to. Remember, the debt won’t go away and you can still be sued.

The debt collector can contact your attorney — if you have one. If not, your friends and family can be asked about how to get in touch with you. If the collection pressure is getting to be too much, talk to a lawyer.

A debt collector can’t misrepresent the amount of your debt.

A debt collector also cannot use profane or threatening language

Debt collectors can’t say that they will put a lien on your property or file a lawsuit unless the agency really means to do that and it’s legal.

Collectors can’t legally claim federal benefits, such as Social Security or your retirement accounts, like your IRA or 401(k).

Once you’re contacted by phone, you have the right to get a notice that outlines your debt, whom you owe money to, and what action to take if you don’t owe the money. Keep in mind that a debt collector can collect a debt owed by an ex-spouse. If the debt was incurred while you married, you may be liable for the debt after a divorce even if the divorce papers state your spouse is responsible for paying off the debt.

If you’ve been contacted by a debt collector, but you don’t think you owe a debt, you must write a return letter stating that the debt is not yours within 30 days. Once a collector receives your letter, they should send you proof of the debt, such as a copy of the bill. Don’t be coerced into paying a debt you don’t owe. If you do pay just to get rid of the debt collectors, it’s an admission of guilt, and it will have a negative impact on your credit score.

If you still feel like you aren’t getting anywhere, consider enrolling in a debt management plan to get the debt collector off your back while you figure out how to best deal with the situation. Who knows, maybe your find a debt consolidation loan to save you or have to resort to going to the court house to file bankruptcy.

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Five Inside Truths About Debt Management Plans (DMP) You Need to Know

March 2, 2008 in Debt Management Plans by Get Out of Debt | No comments

People are often so confused or uninformed about debt management plans in the US that I wanted to share some truths with you. Here are the five biggest misconceptions people have about debt management plans, in no particular order.

  1. Debt Management Plans Are Not Designed for You to Get Out of Debt

    Since the DMP terms are really dictated by the creditors a debt management plan is not really designed to get you out of debt.

    A true get out of debt plan would be created using your circumstances as the starting point and then crafting a plan to allow you to get out of debt from your starting point.

    The DMPs of today, with creditor dictated terms, doesn’t work like that. It tries to get you out of debt using what the creditor wants as the starting point.

  2. Debt Management Plans From a Not-Profit Credit Counseling Group Are Not Better

    A debt management plan from a nonprofit, non-profit or not-for-profit charity is not any better or worse than from a commercial or for-profit company. Being a nonprofit credit counseling group does not change the basic security measures necessary for a safe debt management plan.

    A nonprofit charity like a consumer credit counseling office is not much different than a commercial company. Except for the following major issues.

    The nonprofit credit counseling company gets paid for collecting money from you on behalf of your creditors and does not want to “rock that boat” and fight back against creditors if that will reduce their favor or funding.

    The nonprofit credit counseling company “pretends” for the most part to be a charity when in fact they generate the majority of their income as debt collectors.

  3. Most People Don’t Get Out of Debt Using a Debt Management Plan

    The majority of people that participate in debt management plans do not make it to completion and thus do not get out of debt using a debt management plan. This is not really a fault of the DMP provider but that a debt management plan takes years to complete and the debtors circumstances can change along the way.

    The majority of Chapter 13 bankruptcy plans fail to complete as well for the exact same reasons. The failure of debt management programs is due to life and time, primarily.

  4. Bankruptcy is Often Better Than a Debt Management Plan

    Strictly from a time point of view, bankruptcy can be a better option. When you file bankruptcy the credit report recovery clock starts ticking immediately. In a debt management plan the history of you plan and payments can remain for longer since it can be reported from the date of your last payment.

    Bankruptcy also allows many to get a fresh start and a second chance to start over. Recovering from a bankruptcy is hard but not impossible and the breathing room people get after bankruptcy is often just what they need to move forward, faster.

  5. Paying For Help to Get Out of Debt is Good

    The charitable debt management industry fails to inform you that they are paid by the creditors to collect money from you. There is no way around the fact that this can cloud their assistance because they are trying to please their pay masters and the clients at the same time. Which do you think gets the higher priority?

    When you pay for debt help the company you hire is motivated to work for you. You are the client and there is no confusion about who the allegiance is owed to.

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