One of the worst experiences you’ll ever have is dealing with collection agencies and creditors. There are some reputable ones like mortgage and some car loan creditors, but when it comes to credit card collection agents, forget it. They will do anything and everything to pressure you into paying off your debt now. Let me preface this post by saying that I believe you should always pay back your debts in a timely fashion, but I understand why some people get behind. If you don’t have the money, there’s no way to pay it back! Before you even start talking and negotiating with creditors, you need to set your financial priorities. Your priorities should look something like this:
- Always pay your necessity bills first! This includes paying your rent/mortgage, food, and utilities before you ever pay any kind of unsecured debt back.
- Get familiar with you rights. Browse the Fair Debt Collections Practices Act
- Make a plan of how you will pay back your debts and which ones you may be able to negotiate down 10 – 20%.
- Get all agreements in writing and make a log of every time you speak with a creditor.
- NEVER give bank account access to a creditor. They will try to set up a way to EFT “payments” out of your account, but don’t believe them. They’ll pay themselves in full and then you can’t eat for the month. Also, never do post-dated checks. They’ll find a way to cash them. Believe me.
It is possible to negotiate old debts. The older the debt, the easier it is to negotiate it. Also, watch out for zombie debts where creditors will try to collect on debts longer than seven years old. It is illegal to try to collect on debts older than the statute of limitations which is seven years, but that doesn’t stop debt collectors. They bought the zombie debts for pennies on the dollar, so even if they get 10% of the debts repaid, then they are probably profitable. Remind them that they are committing illegal acts and there’s a reason your debt is older than seven years old. You didn’t have the money to pay it back! You should never let a debt go that you have the means to pay back, and you should never go into debt for something with no intention to pay it back. However, credit card companies are taking the risk that you may not pay the money back and they have no collateral to back up the loan. Don’t feel horrible for trying to negotiate down an old debt that you can’t pay back in full. Credit card companies will go for it if you are persistant. Make sure that you get ALL agreements and negotiations in writing before paying any money. You’ll be surprised at how many old debts you can clean up rather quickly. This is the first step to regaining traction with your finances. Go ahead and take out the trash!