what happens if i have credit card debt and can’t pay? (part 2)

Yesterday, we talked about what happens during the first few months when you haven’t paid your credit card bills (Read Part 1 here).  Today, we’ll pick up with what happens after 6 months.

3. 7-12 Months Late – While every credit card company is different, at this point, your debt/account may be turned over to collections.  For most of the major cards, collections is usually an in-house department.  They may also turn your account over to an outside collections agency.  It can get ugly here.  Collection agents are taught to do one thing: collect.  And they will do anything necessary to accomplish that.  They will call you constantly.  They will be rude and belittle you on the phone.  They will threaten you and your family.  They will make your life miserable if that’s what it takes to get you to pay.  A major tactic they use is fear.  If they can get you scared, they can usually get you to pay.

  • If This Happens To You…As we’ve established, you should have been in contact with the company, so they know what’s up with your situation.  Once you start receiving calls from collection agents, remember to keep your cool.  Like we said, their job is to fire you up so you don’t think straight and end up paying your credit card bill instead of your electricity bill.  Although collection agents don’t play by the rules, there is something called the Federal Fair Debt Collection Practices Act which outlines how collectors must handle themselves.  At this point, you should be trying to settle the debt.  It will have all kinds of fees and be much higher than the original balance, so they will usually settle for less.

4. Over One Year Late – Legally, a credit card company can sue you if it’s been this long and you haven’t paid anything.  Will they?  It depends.  Depends on the size of the debt, how long since you’ve paid, and what kind of history you have as a customer.  They may have also sold off your debt to another collection agency for them to mess with it.  By now, your credit is trashed which is not the worse thing in the world.

  • If This Happens To You…You need to get this debt settled by now.  No need to drag it out.  Start by offering around 50 cents on the dollar.  Meaning, if they say you owe them $5,000, offer $2,500.  But of course make sure you have that money available.  And don’t send them any money unless you have the deal in writing.  Collectors have very short-term memories and can conveniently forget what the deal was that you made over the phone.  The bottom line is this isn’t going away and if it’s been over a year, it’s been too long.  Deal with the problem and get these collectors out of your life.

Tomorrow, we’ll have more tips on what to do if you’re in this situation, regardless of how long it’s been since you’ve paid.
YOUR 2 CENTS – What other questions do you have about the collections process?

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