Legal Methods for Regaining the Creditor's MoneyThe creditor that you owe money to has a lot of legal ways to regain his/her money. This article outlines the most common of them – and the effects such actions might produce on you if you decide not to stick to debt negotiations or debt settlement.
Contents of the article: 1 Creditor calls
2 Lawsuit
3 The threat of wage garnishing
4 Usage of credit cards
5 Credit report
6 Bad debt buyers
Creditor calls Your creditor will definitely want to call you every once in a while to remind you of the money you owe. This is a truly unpleasant experience that often leads people into filing for bankruptcy instead of trying to carry out debt negotiations and work things out with their creditors. Addressing a debt negotiation agency is a good answer to all the collection harassment that some creditors resort to quite often. The agency may either offer you to change a phone number so that all creditor calls get redirected right to the representative of the agency, who would try to reason the creditor and reach a debt settlement with him/her. Otherwise, it may resort to the assistance of the Consumer Justice Group (CJG) – a third-party law firm specializing in the protection of customer rights. It is able to level the playing field between the creditor and the debtor by a number of legal creditor intervention means, beginning with simple verbal techniques that every customer will be able to use while having a conversation with his/her creditor, to investigative action, the results of which can hold even the most abusive or harassing creditors in, and formal requests for phone contact cessation. CJG protects the rights of harassed debtors in full accordance with the Federal Fair Debt Collection Practices Act.
Please, remember that handling creditor calls on your own may turn out to be a really hard and oppressive thing to do, so we encourage you to resort to the help of professional debt negotiation practitioners in order to avoid the irritable activity of some creditors.
Lawsuit Even though the creditors have all the legal rights to sue people with delinquent debts, the lawsuits are really rare these days. The reasons for that are pretty simple – a lawsuit started against a debtor experiencing severe financial hardships may force this debtor into filing for Chapter 7 bankruptcy, in case of which the creditor doesn’t get any money at all. The creditors seem to be far more willing to be involved in debt negotiation or use other means of collection against their debtors, since such methods guarantee at least partial compensation. Usually it turns out to be that threats of a lawsuit are far more common than the lawsuits themselves, even though the creditors are not allowed to threaten a debtor with suit until they are officially authorized to resort to litigation. In most cases, such means as debt negotiation or credit counseling prove to be effective enough to avoid the debtor being involved in a lawsuit. It’s not very likely that creditors will admit it all publicly, since that may lead to a significant growth in the number of non-payers – but paying for lawsuit that may end up with the debtor filing in for bankruptcy is not a thing that some creditor will be too eager to do. However, you shouldn’t forget that debt settlement services are offered to the debtors experiencing heavy financial hardships only – and if you don’t belong to this group, the judge may order you to pay the whole of the original debt.
The threat of wage garnishing A person living through severe financial hardship will definitely be scared of losing a part of his/her wages – the threat of wage garnishing, that a large number of creditors use in the process of credit collection attempts. However, in most cases it turns out to be nothing but a scare tactic used by the creditor to force the debtor into following the payment schedule no matter how hard his/her financial situation is. In reality, garnishment actions are carried out extremely rarely and never happen without advance warning. According to the current legislation, a garnishment action should be preceded with an official lawsuit, judgment and the acquiring of the garnishment authorization. In case the garnishment is approved, you will be notified of such court action through formal documentation. Don’t let your creditor fool you by saying that he/she is authorized to take away your next paycheck – in 99% of the cases it won’t be true.
Usage of credit cards In most cases, a person applying for a debt negotiation or a debt settlement program will not be able to keep on using any of the credit card accounts enrolled in the program, since a debt settlement implies the creditor forgiving a half or even more of the amount that a debtor owes him, so the debtor’s credit will probably not be extended until the full balance of it is regained or at least until you get back on a normal repayment schedule. However, some of the debt settlement agencies currently working in the industry of debt negotiation allow their customers to maintain one card (preferably a card with a small balance on it) out of the program.
Credit report Most of the debtors having trouble repaying the credits want to know if their credit report will suffer in the process of debt negotiation and settlement or not. Lets take a closer look at this problem in the following section of our article.
First of all, you should be aware of the fact that any problems with the repayment of the debt will inevitably affect your credit report. In case you fail to follow the original repayment schedule, your creditor will have to inform credit bureaus about your non-payment. However, if you decide to resort to the help of a debt settlement agency and everything works out successfully, the creditor will change the status of your debt into “Settled for less than full amount”, “Paid”, or “Settled”. The information about your non-payment will affect your FICO credit score, since 35% of it depends exactly on the payment history of a given debtor. On the other hand, you shouldn’t forget that as soon as the debt is eliminated, the FICO score will be improved by up to 30% (because 30% of it depend on the amount due to repayment).
Bad debt buyers Sometimes the creditors prefer to sell delinquent debts to so-called “bad debt buyers” or “junk debt buyers” - third-party companies specializing in purchasing and collecting debts. This is also not the best option for a creditor since the usual purchase price for a “bad credit” equals to 3-16% of the original loan sum. Later on, the debt buyer either uses the services of a debt collector company or attempts to collect the debt on its own.
Despite its unprofitableness for a creditor, debt buying has expanded a lot during the recent past. In 2005, the amount value of purchased debts was as high as $110 billion (two times more than the amount purchased during the year 2000).
The worst thing about debt buyers is that they often get involved in strongly abusive collection activities including: pursuing debts that are not actually owed by the targeted person; unlawfully suing, attempting or threatening to sue people on debts that are past the applicable statute of limitations; reporting incorrect credit repayment history to a credit bureau; or abusing and harassing debtors verbally. Handling the activity of bad credit buyers often turns out to be a very unpleasant experience for the debtor, so in most cases it is much easier to resort to the services of debt negotiation practitioners than to try to manage this situation on your own.
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