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If a situation like this arises what would you do ?
You recently had a surgery, which required hospitalization for 3 night and to top it up, you had to pay the bill by your credit card as your insurance only partly covered the expenses. Due to the surgery, you had to take a 3 weeks break to recuperate, which was non paid. And on the first day back to work, your car broke down, adding up $1000 expenses on your card.
Owing to the mental stress that you underwent, you may have slipped or missed paying your minimum dues to your card. Now you are constantly receiving collection calls from agents. At this point, it is important that you understand the alternatives that you must opt for and what are your legal rights.
What Is Debt Recovery?
The procedure through which lenders make an effort to persuade a debtor to settle overdue obligations is known as debt collection. There are four methods in which your creditors may try to recover debt from you:
A lower APR, a payment plan, a temporary forbearance or deferment, a waiver of late fees, or a reduction in the amount of debt you owe may be offered if you explain the circumstances causing your financial hardships (such as a recent layoff, a reduction in your working hours, or medical expenses) to your creditor. However, there is no guarantee that they will be understanding.
Usually, after approximately six months, if you and your creditor are unable to come to an arrangement or if you just ignore their correspondence, they will give up and employ a debt collection agency or legal firm to pursue the debt on your behalf.
What to Do If Your Credit Is Sent to Collection
If your debt is being collected, the most crucial thing to remember is to NOT evade or dismiss a debt collector. By doing so, you run the risk of the debt collector taking legal action against you, which is unlikely to happen.
So what should you do now that you know this?
To get additional information about the debt, you may always make a formal request to the debt collector. Send a written letter to the debt collector and “contest” the debt if you think the debt amount is inaccurate or that you don’t even owe the money. Before you speak with the debt collector if it’s your debt and you want to try to settle it, it’s crucial to develop a reasonable payment schedule or settlement offer based on your overall spending plan. Realistic thinking is essential in this situation; avoid attempting to pay off this debt at the expense of your capacity to fulfil other financial commitments.
Once you’ve done that, use your suggested repayment plan to bargain with the debt collector. Make sure to record your conversation with the debt collector and request a written or electronic proof of your agreement. If you’re feeling intimidated by the idea of negotiating with the debt collector, you might think about speaking with a non-profit credit counselling organisation. They can help you analyse your overall spending and develop a realistic payment schedule, as well as offer guidance on how to negotiate with your creditor(s) or even handle the negotiations on your behalf.
Working with one of the many debt settlement businesses that offer to settle your debt for less than you owe is an additional alternative that some debtors who are experiencing financial difficulties select. Unfortunately, these businesses frequently provide evidence to support the saying “if anything seems too good to be true, it usually is.” I’ve witnessed far too many debtors who are in worse financial situations throughout the years.
Although there are reputable debt settlement businesses, I do not advise dealing with them since the market is rife with dishonest tactics and false advertising.
Insolvency and Debt Recovery
Many people battle to pay off unsustainable debt in the hopes of avoiding bankruptcy, only to wind up declaring bankruptcy several years later in a worse financial situation.
In particular, if you have debts totaling more than $10,000 or have had accounts sent to collections, you might think about speaking with an experienced bankruptcy attorney to go over your circumstances and see whether filing for bankruptcy would be your best course of action.