Harassing creditors may move you to file for bankruptcy to get rid of your outstanding balances. Yes, a bankruptcy can erase debts and stop calls from creditors. But the consequences of a bankruptcy include possible credit rejections, a tarnished credit rating and higher interest rates on future loans. Rather than file for bankruptcy, consider ways to deal with creditors and stop harassment.
Resume Monthly Payments
If you stopped making payments due to financial problems, review your personal finances to see how much you can afford to spend on debt payments each month to avoid a bankruptcy. Contact your creditors to explain your situation. Mention the reason for delinquencies, such as loss of employment or other issues. Speak with an accounts manager or someone who has authority to offer assistance. Ask for a monthly payment reduction or ask for a forbearance that lets you skip payments for a few months while you work to improve finances. Because collection agencies are less sympathetic to hardships, speak with your creditors directly and not the company handling the collection account.
Debt Settlement
Satisfying debt by paying the debt off in full looks good on your credit report and improves your credit score. But if you owe $5,000 on a credit card, and know that you're unable to pay off the balance, offer to settle your credit card debt for less in order to avoid bankruptcy. Debt settlements involve negotiating with your creditors, wherein they agree to let you pay a percentage of the debt owed, and they stop all collection attempts on your account.
Know Your Rights
The Fair Debt Collection Practices Act is a law that protects debtors. Some creditors and collections agencies employ various tactics to get a debt paid. They may ask for a bank account number in order to draft payments in monthly intervals, and then deduct the entire debt from your account, leaving you with a negative balance; or they may resort to verbal abuse or excessive phone calls. Know your rights, and threaten to report any creditor or collection agency that violates your rights.
Ask for Proof of Agreements
Creditors that agree to monthly payments or a debt settlement should be willing to put the agreement in writing and send you a copy. Keep this copy on file. If the creditor doesn't fulfill its end of the deal or reverts to bad practices, you can complain and possibly file a lawsuit to stop creditor and collection agency harassment.
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