In this uncertain economic environment, record numbers of families are falling behind on consumer debt. The good news is that most will find a positive solution in time. Key to weathering the storm is to act as quickly as possible, and never ignore or put off the problem.
“It’s stressful to be unable to pay your bills on time and even more stressful to get a letter or phone call from a debt collector,” says J. Michael Collins, University of Wisconsin-Extension family and consumer economics specialist and assistant professor of consumer finance at the UW-Madison School of Human Ecology. “The key is to take action and have a plan-and stick to it.”
The first step is to talk to your creditors before you fall behind on payments. Call or write and explain any circumstances, such as a job loss or health problem. Be clear and direct that you are in a temporary situation and you have a plan to recover within six or 12 months. Resist the temptation to layer on too much information-just focus on the primary problem you are having.
“Before you call, create an overall budget for your family,” says Collins. “Then list every bill, when it is due and how much you owe. Include any late fees or other charges and decide what bills you are going to be able to pay and when you will pay them. Your creditors want to know you have a plan.”
In general. creditors will be more responsive when you let them know about your situation before a severe problem arises and if you have a strategy in place. Most will agree to reduce payments for a period of time, waive fees, or even refinance payments until your situation is resolved.
Plan on making some minimum level of payments no matter what-never just stop paying altogether. But be sure your creditors know your plan. Making partial payments may result in fees and still result in your account being turned over to a collection agency unless the creditor understands your situation.
Although most contact with creditors is by telephone, it is a good idea to keep good notes of the date, time and who you talked to in a log. Also follow up with creditors in writing in case you need evidence of your actions later. For both telephone and mailed correspondence, make sure to include your account number. You might plan to call back every month to make sure your account is not being turned over to a collector and to show the creditor you are sticking to your plan.
“Whatever you do, don’t stick your head in the sand,” says Collins. “Too often people are stressed and anxious and don’t know where to turn. They stop opening mail and start to screen their calls. Even if the creditor had a solution, the borrower would never know about it out. You have to stay on top of it,” he says. “It is important to do your best to pay something on your bill each month,” he adds.
If your accounts do go to a bill collector, you still can work out a solution. Many collectors are extremely persistent and even intimidating. They use automated dialing systems and will aggressively seek contact.
Remember that the federal Fair Debt Collection Practices Act, or FDCPA, prohibits debt collectors from engaging in abusive behavior. This includes calling you at an unreasonable time (before 8 a.m. or after 9 p.m.). The person calling must identify themselves as a bill collector and may not use abusive language or threaten you physically. Most are sitting in call centers and are not trained legal professionals; they may not claim to be legal experts if they are not attorneys or paralegals. Creditors may contact your spouse or your parents (if you are a minor) to try and contact you.
You have the right to tell a collection agency employee to stop contacting you by sending a “cease all communications” letter. You may do so even if the collector is not breaking the law, but generally this is not a good idea .
To file an official complaint with the Federal Trade Commission (FTC), the federal agency that oversees collection agencies, mail a letter to FTC Complaints, 6th and Pennsylvania Ave. NW, Washington, DC 20580, or file one online at http://www.ftc.gov/ftc/complaint.htm.
The FTC may take steps to sanction the creditor if your complaint is part of pattern of abuse. You can also contact the Wisconsin Department of Agriculture, Trade & Consumer Protection, PO Box 8911, Madison, WI 53708-8911 http://datcp.wi.gov/Consumer/Consumer_Complaints/index.aspx
Be sure and send a copy of complaints to the creditor; in some cases the creditor may offer to cancel the debt or a resolution rather than have the complaint acted upon.
If your financial situation will be a problem for more than a year, you may want to explore planning to file for bankruptcy. Even as you explore bankruptcy, do not ignore debt collectors. Fees and charges will mount, and your credit record will worsen. Some people can benefit from working with an attorney or a nonprofit credit counselor. See http://www.debtadvice.org for a list of National Foundation for Consumer Credit agencies.
If you have wages or income and have not made acceptable arrangements, your income may be garnished. That means money may be deducted automatically from your pay to pay off a debt. A garnishment can only be done by order of a court. You have a right to a hearing and can avoid garnishment if you can show the judge you have a plan in place. If you are sued or summoned to court for a garnishment, get an attorney. Contact local bar association for a referral https://www.wisbar.org/forPublic/INeedaLawyer/Pages/i-need-a-lawyer.aspx