Debt can be quite frightening and you may feel panic if you begin to receive phone calls or letters from collection agencies. Despite their threats, you have a right to settle or write off your debt by negotiating with collection agencies. There are several guiding principles that can assist you in this process that you should understand and utilize.
True Risks of Overdue Debts
Collection agencies tend to overstate their power and efficacy at retrieving the money owed to them. Before a collection agency can retrieve their money from you, they must first sue you in court and win a judgment against you. A civil trial is a long and arduous process. According to Creditinfocenter.com, it is quite unlikely that a creditor will hassle with suing you in court to place a lien on your property or garnishee you wages. So do not file for bankruptcy unless it is absolutely necessary. Be wary of interest "penalties." Collection agencies can only charge a fixed interest amount by law.
Time Limits
Creditors have a period of time, a statute of limitations, in which they must sue you to collect an outstanding debt. Refer to a local credit-counseling agency to determine the statute of limitations in your state. If a collection agency is seeking repayment of debt that is beyond the time limit, it has no right to seek collection. If the creditor has made a negative mark on your record for an uncollected debt, the negative mark can only remain on your record for seven years. After seven years, law requires that it be removed and the debt becomes "uncollectable."
Negotiating
If you decide to negotiate or settle your debt with a collection agency, there are several methods of achieving beneficial results. First, determine whether or not you have a type of debt that is ideal for settlement. Unsecured debts, like medical bills, credit card debt and student loans are ideal because there is not actual property attached to these debts. Secured debts, like car loans and home loans, are not ideal because the collection agency can simply place a lien on the property and reclaim the property.
When you negotiate, you have leverage because the agency wants money from you. Remain calm and do not balk at their initial resistance to negotiate with you. Many collection agencies function by purchasing your debt from your original creditors. The collection agencies pay pennies on the dollar for these debts so there is a lot room to negotiate. Begin your initial offer at 25 percent of the original value. Such an offer is appropriate because the collection agency probably purchased $1000 worth of debt for about $70. To them, an offer of $250 dollars is a profit of $180. If you are able to negotiate a settlement, get your terms in writing. Keep records of everything you send and receive from the collection agency, and send all correspondence by certified mail.
0 comments:
Post a Comment