How to Deal with Bill Collectors when You have No Means to Pay
81How to deal with creditor when you have no money is very easy. You can't give what you don't have. Now that said, very few people have no money, they simple don't have enough money to meet the necessities of life, and pay their creditors at the same time.
What I am going to say here will not be what your used to hearing on this subject, as I consider myself a bit of a guerrilla when it comes to the predatory nature of the lending business. I am of the opinion that it is morally wrong to lend money in order to profit. Particularly to the class of people who are most likely to borrow to begin with. Enough of my political views.
Here is how I have done things in the past and the results, and how I believe this should be handled by anyone facing this situation. You will find that many of our nations most prestigious families and personages have handled it this very way as well. (Look up Neil Bush the Presidents brother) That is why they are wealthy, and 95 percent of everyone else is not.
First, take care of your health, nutrition, and well being. Without your health you have nothing period. Therefore, there is no point in stressing as if you starve you will be dead and that is that. Your children are more important than your debts, you should not ever sacrifice them for a blood sucker. Really this should be a no brain-er.
With what money you have, take care of your nutritional needs, then health (Proper clothing for the environment) and medical, followed by shelter. In that order, you have to have food to live, shelter is a nicety. Everything after that is a luxury.
Now once you have had your dinner, and the kiddo's are fat and happy, and a roof over your head, you have a few extra dollars left over what do you do next. Good question, the money changers who control the media and most of our popular thinking will promptly tell you to start paying your debs, no matter how little you have to pay.
That is a great way to remain a slave and never get anywhere. The funny thing is people who have never been in this situation will give you the party line and tell you to work with them and do whatever and bend over funny how they become programmed to assist the well to do at the expense of someone else.
No you are the customer of the creditor not the other way around and guess what the customer is always right. People's collective attitude about debt repayment is so ingrained it reminds me of the story of the gorilla's in the cage.
It goes something like this, there are five Gorillas in a cage and a bundle of banana's are lowered into the center and as soon as a Gorilla goes for the bananas they are all promptly sprayed by cold water. This scenario is repeated until the gorillas no longer go for the bananas. Now over time one of the gorillas is replaced with a new gorilla. When the new guy goes for the bananas the other gorillas attack him until he no longer goes for the the bananas, this process is repeated until none of the original gorillas are left. At which point no gorilla is left that knows why you don't eat the bananas but they all know not to touch the bananas.
So back to what to do with your disposable income. First and foremost you must pay yourself. That means you pay yourself before you pay any creditor. You owe the fruits of your labor to yourself before you owe it to anyone else.
So simply put give yourself the first 200 dollars or 10% of your gross pay if you make more than minimum wage, of your disposable income before anyone else gets paid.
This is necessary for many reasons here are a few: You need to have an emergency fund to buy food and other necessities if you find yourself with no income again. This will take the stress out of the next lean period, there will be another one, there always is. Second you have to make a choice to be a slave and give over your fruits to a master or be your own person and to do that you have to pay yourself first. It was your work not theirs.
So, you say, "MoneyGuy what do I do about my debts what about my credit rating what about the debt collectors", well let's take this in order.
First the last thing you should care about is your credit rating, if you are in debt the last thing you need is more debt. Very simple, think of it as insurance to help prevent you from getting into debt in the future. Little hint, they only make money if money is loaned so don't worry the blood suckers will be back with plenty of credit offers after a couple of years and your assets are built back up.
Second, the debt collectors, IGNORE them. That is correct, throw the letters in the trash and don't answer the phone. They have only one mission in life and that is to get what ever they can, however small or large that amount may be. Don't believe a damn thing they say (They aren't going to take any legal action or whatever crapola they say, it will cost them way more than the debt itself and they have an obligation to the bottom line). Check out this Hub to see how debt collections work to learn more.
Third, about the debts, This is simple since you have defaulted the bank or credit institution that loaned you money has two recourse's, if the loan is secured they repossess the property that secured the loan and that settles the bill.
Again consider this a blessing as you obviously have something you cannot afford and most assuredly don't need. Change your paradigm if you must in order to accept that.
If the loan is unsecured, they can pester the hell out of you if you let them by calling and letter writing and whatever. Other than that after 6 months they write it off. Sure they will pile on some late fees and what not but who cares at the six month point it is done it will be whatever it is.
You still will not pay that amount. They will turn it over to a collection agency who will try to collect whatever they can and split that amount with the original debt owner. Here is where your savings comes in. Once you have a full six months of living money saved up(Your emergency stash not to be spent unless an emergency).
Your savings now goes to clearing your debt. Once you have about 50% of one of your debts saved up write the collector that owns that debt offer a settlement of about 25% of the amount.
They will do one of two things they will accept your offer or they will counter offer, anything at 50% or less take the offer, get it in writing and settle the debt.
Don't I repeat don't give in for anything more than 50%. Build up your savings again and repeat process until all debts are settled. I Repeat do not use an agency or any other scammer service to help you. They wouldn't be doing it if there wasn't profit to be made.
Upon settling of your debts continue your debt free life. Continue sticking 10% back for your future, stick another 10% back for future purchases (Cars and Homes) pay cash. Lastly stick 10% back for gotchas like tires and appliances. This will prevent you from being forced into not having the cash when these little realities crop up.
Some people may be skeptical or critical of this advice as they are deeply programmed to assist the system extract the max profit from the working class. To those people allow me to give a little lesson on Banking in this Hub. I hoped this helps those in need out.
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Comments
Thank you,
I tried to keep the answer as close to how I have successfully handled this scenario in my own life as well as my clients.
TMG
I wonder what the point is in paying them anything after they have sent you debts to collections. From experience, I know that once it is written off, they have already recieved their money and you credit is still screwed. From a realitor herself and other sources, paying after the debt has been sent to collections is stupid.
The ding will stay on your record regardless and you just threw your money away. I have also tried negotiating, especially with my car. Wachovia wouldn't give me more than a chuckle on thit one. I tried to settle with 5000 instead of 7000 but they insisted on all of it and my car was repo'ed.
I told WaMu to go f- themselves for "them" tacking on all these charges for a three dollar overcharge that was incurred by them and thier fees for whatever. They didn't send me any notice and wouldn't reverse the charges, so after another 200 bucks of crap, just money because they felt like it, I told them to go f themselves. :)
I even asked them what they expected me to do. I had never made a late payment or missed a payment in years, I even had that credit protection on all my credit cards and even after explaining that I am unemployed, divorced and I need to take care of my kid and put a roof over our heads first, they so "sincerely" replied. "I am sorry for that but we need you to make a payment."
So after that I realized that all those extra fees to help you when something goes wrong was a bunch of crap and not worth it to anyone!!! Plus the media really like to paint people like me in a bad way. They don't ask why you took out credit cards.
If they asked me I would tell them. I used my credit cards to pay utility bills and buy food just to get by because everything is so friggin expensive. They make it look like people who take out credit cards are out buying crap they don't need when only about 1% of all my credit card debt went to things other than bills and food and that 1%, clothes for my kid.
Nice world we live in!!!
nice info
Sandra,
Well, I compressed the timeline a little. But, depending on your profession. Big Credit has gotten the government to make rules about certain occupations and unpaid collections. I.E. Nuclear engineering, Financial Professions. So, for me I have to settle the account by either bankruptcy or settlement. I prefer settlement because bankruptcy kills your securities or insurance license for 10 years. As for engineering they claim this cop out that if you have debts you are more subject to bribery to sell secrets. Really it is a way to shakedown the top producers of society to give more money to the man.
As, for paying after sent to collections you are absolutely correct, there really is no point unless you are going to pursue a career where that will come up.
As for secured loans such as your car, I use that in an example in another hub, on a car they have already gotten the money from the loan, they have already made pure profit on your payments, and they will make pure profit when they resell the car at auction. So there is zero incentive for a bank to negotiate a car loan.
And for the other stuff, that is why I say ignore them don't take the calls write them a letter putting them on notice to only contact you through the mail. The person on the phone is a flunky that only gets paid if they collect. Only negotiate once you have enough money to settle a good percentage in the next 30 days. Again, only if you have a profession that requires it.
And lastly Sandra, you can always call me and I will smite them.
TMG
Great Hub TMG, valuable information for sure! Glad you published this it will no doubt be a great tool to refer to for those who are in a sticky situation.
Wow, I've never read an article so committed and sure. I've never heard of doing these things, either. I have no doubt that these suggestions will the perfect advice for many!
Thank you Shirley,
I take that as a huge compliment from you.
Gwenymom,
Any and all compliments from fellow Okie's are very appreciated.
TMG
Darn! There goes my dreams of becoming a spy. lol :)
Great hub money guy - I wonder if we have the same rules etc here in Australia? must find out...cheers
Sandra,
Never give up on your dreams you sound like a perfect candidate for a double agent. :-)
Ajcor,
I am not to sure about Australian financial laws, but I know it is one of my favorite places to visit.
TMG
Thanks TMG - it is a good place to live ........ cheers
Good stuff! I agree that a crappy cedit record is better in the long run. It may be tough when things are tight but it works out well when you learn to manage your finances - increasing earning power and living within your (growing) means! Consumer debt is a disaster!
The only time debt is good is when it serves as leverage to increase your earning power but then it has to be done with a healthy amount of common sense.
Shaun,
It's really about assets and liabilities. Most people don't know the difference. I use this explanation for my clients.
If you lost your job this month would this put money in your bank account or would it take money out.
That said your car and your house are liabilities no matter how you try to rationalize it. Credit cards are usually much worse.
Thanks for the read!!
TMG
Wow. I have been wanting to do this for at least the past three years. I know I have paid Citi back at least 50 times since my divorce seven years ago and after losing my banking job (hallelujah on that by the way) I feel like I am shooting myself in the foot every time I send in another payment. Thanks for this hub, it was just the push I needed. My partner did this three years ago and he owed four times what I do, and so far nothing, I mean nothing, has happened.
If they send me to the slammer I may call you though, at least just to say, oops. (o:
I think there are a lot of people who can use this advice-- and sadly there are going to be more and more as the layoffs escalate. Credit card companies are worse than the mafia these days with 33% intrest, late fees and fine print that is totally off the wall. Good work Moneyman!
Pamela,
No worries on going to Jail we have no debtors prisons here. You can only go to jail for fraud, and for that you would have had to lied on the application with the express intention of getting a loan with no intention to repay. Since you don't strike me as a liar and you have been suffering this long under the burden, your integrity nor your intentions can be questioned.
They can file a civil suit, but odds are your debt is much lower than their lawyer fees would be. So they will pay some flunky on a commission (They like that no out of pocket expense) to bug you but that is all that it will ever be. You don't have to put up with that either just write them and let them know you only wish to be contacted by mail.
Robie2,
Thank you for the comment.
TMG
Thanks for giving us all some financial balls. An early Christmas and New Year's present!!! Great hub, TMG, MM
Pamela,
If for some reason my advice lands you in a spot my number is (918)360-5546. I got a big truck, a log chain and a lot of guns. I will be able to get you out if things go south. :-) I may call ColdWarBaby also.
TMG
LOL! I may take you up on that!
Seriously, I'm going to see an attorney, but my sense is that it's probably a waste to spend the money on bankruptcy. Bill & I want to get married, but (this is so screwed up) we have to know what they can and can't do to us if we marry our debts. If we marry and end up losing our house, well, better to live in sin and have a roof over our heads. If we marry and they start attaching property, that's bad too. If we marry and we need to file bankruptcy and our combined incomes give us a larger monthly payment under Chapter 11 (13?--you know, the one where you pay back a portion), then its better if I file alone maybe since my income currently sucks.
I don't have health insurance, so if we marry I'll get some through his job (assuming he doesn't lose it soon, which, if Detroit goes down, he might).
Things are SO screwed up right now in this country. I'm NOT a slacker and neither is he, and neither of us spend money like we have it. We both acquired debt from marrying the wrong people and staying married to those people way too long before saying OMG and bailing. He refused to pay his marital debt (most of which he didn't know existed) immediately after his divorce, I tried for seven years to pay mine, but I've had it at this point. I'm 55, I just lost my job, and I live in Michigan. I 'll NEVER be able to pay that debt off now, not if I live to be 120. Plus I hate Citi. I really do. Having seen the inside of banking, I'm so disgusted at this point I don't know who I'm more angry at--them or myself.
Then there's the medical mess. I know people who have had to get divorced to avoid losing their home to medical debt. They still love each other, they live together, but the whole financial systen is so FUBAR that people make these personal decisions that look insane on the surface because of the underlying financial crap. I think it's really, reallly messed up.
Thanks for the advice. I'm thinking pretty soon here, Citi & friends will be so overhwhelmed with defaults no amount of bailout money will save them. I wouldn't cry if that happened. I'll have the same amount of nothing no matter who goes down, so let it rip, I say. (o:
Pamela,
You know what is not funny, that I have been pretty much doing a lot of work for free for a lot of my clients(Which I enjoy a hell of lot more than getting paid for my services). And I would say a solid 85%, have so many of the same issues you are having.
I tell them pretty much the same thing, not to worry about what happens because they can't take what you don't have, so quit stressing yourself to give it.
As for the medical system, I have come to a rather heartless conclusion on it. I think all forms of insurance should be outlawed! It is an industry designed around fear and control. The exact opposite of the things that cause human happiness. I know that a lot of the medical advances we have were payed for by that collective pulling of money, but not all of them really.
Plus, I am not sure where all the doctors got the Idea they were entitled to such a better life than any other professional. I view being a doctor like any othe civil servant you are there to serve not get rich. Lastly, without the insurance their wouldn't be the crazy lawsuits and those cost being repassed back to the consumer.
Lastly, I am not sure medical advances have helped society, here comes the cold blooded part. I think the biggest ills of the world come from overpopulation and the constant rampant consumption that comes from it. It doesn't make sense to me to spend so much money on the older population just so you can keep them around to make sure they burn up every last dollar they have, I truly believe corporate America likes to give people enough health at the end, to ensure they spend their entire life saving on prescription drugs and healthcare, and they rob the taxpayer also at the same time.
I think tha AARP has duped a lot of seniors into creating a powerful lobby, that has hurt the younger generation by exhausting huge resources on them, and taking the large sum of wealth they have accumulated and put it into corporate coffers at the expense of the younger people in their own families.
Without insurance medical costs would be reasonable, because you would see a lot less profit motivated doctors and a lot more I am here to help types, who would take a chicken if that was the reasonable amount to charge. Basically, a price system that followed the human approach of the poor pay very little and the rich pay much more.
As for debt, we should all default and make it illegal to practice usury in this country and adopt the FairTax and do away with all agencies and bureaus as none are needed.
TMG
Great hub, TMG! Many thanks.
BTW, I don't think its "heartless" to abolish all medical insurance. The third-party payment system, especially Medicare, is the primary driving force behind spiralling costs. My wife's OB/GYN no longer accepts any third-party payments and he's lowered his fees since he doesn't have to devote so much of his practice to paperwork and compliance issues.
To PGrundy, "we have to know what they can and can't do to us if we marry our debts. If we marry and end up losing our house".
When my husband and I got married, we wanted to keep our finances separate. I had debt and he didn't. I got rid of my debt, including a judgement, and we were financially fine for about 15 years. Meanwhile, the credit card companies offered us cards. We each got cards, and the other didn't sign the app. I found out after he died, that was a smart thing, as a lawyer told me that I would not be liable for credit card debt that only he signed for. (I live in Ohio and don't know if this is state-specific.) That helped with the $40k of debt he had accumulated due to his disability and cancer for five years before he died.
Another thing we had done five years before he died was to establish a living trust. We put our condo and cars in the trust. That way, when my creditors filed judgements against me after I ignored them for five years, they were unable to attach the cars or house because the titles are not in my name.
In summary, check with a local lawyer to find out if the creditors can only come after you for your debt. See about putting your home in a trust. Mine is a living trust, but a more secure type of trust is a pure trust, which will cost more.
TheMoneyGuy, how can I get rid of the judgements, and is there a chance they will accept a percentage, or just let the whole amount ride while they collect exorbitant interest rates ad infinitum until I cough up the total?
TMG, this is a great hub.
Can you do this with private student loans?
Steven,
Yes, you can, but if push came to shove, I would use credit cards or something else to pay off the Student Loans. Because, under current bankruptcy laws Student Loans both Government and Private cannot be erased in Bankruptcy. By, transferring the debt, if you find yourself in Bankruptcy you can get rid off it so that you have a fighting chance of rebuilding after your your case is adjudicated.
TMG
Thanks so much. You have given me hope.
Your Welcome!!
TMG
Great advice TMG!! Very timely, and as always, Very Well Thought Out Hub!!
Excellent information.
Far too many cannot step far enough back to see that if you are in debt up to your eyeballs the last thing you need to worry about is your credit score.
Learn to be frugal, stash your cash or store it in something else of value ( banks don't want hundred pound bags of rice and beans ), and go enjoy life.
If you are single and enjoy fishing, grab a pole and go live on the river for a while. There is no reason at all to feel remorse or guilt for defaulting on a loan to a bank.
Personally, I love getting calls from debt collectors. Why? Because at that point I know that the purported original creditor ( who more often than not loaned you nothing, wrote that nothing off, and then got reimbursed for it as well ) has signed off on it and the debt collector is a third party interloper who can be scared off quite easily with a bit of legal sorcery.
Again, great, practicle, spot on advice.
Thanks for the information. Now if we could only get poeple to actually do this.
Savings Queen
Thanks so much for the advice. It really helps to hear from someone in this situation. Being a student who just graduated from a prestigious school (in student loan debt already) and am unable to find a job (of course, in this economy) in California right now means I am unable to pay off my immediate credit debt. I keep trying to tell creditors there is no way to pay off debt right now, but they don't get it. It's nice to know people like you exist.
Hi TMG,
I found this website because I am just so upset. I am 21 years old and I have three credit cards that are way over the limit and I do not have a job and I am getting married in August, so you can see I have a lot on my plate. Now my question concerns the lawsuits that the collector companies are threatening me with by mail, and they are calling my family's home, even though I do not live there. I had been paying off my credit cards like a good little borrower up until I moved to Florida and lost my job, my fiance works for minimum wage and we have other more important bills that need attention, so I could not continue to pay them. The last three payments I made simultaneously to each credit card went through as far as I was concerned and then I received letters that two of the credit card companies didn't accept my payments, lord knows why. So after that blow I just gave up. I had already spent what money I had left securing ourselves a place to live and couldn't repay them. I am terrified at this point. I have been searching for a job for 8 months and I have also owed my cards for the past 8 months and as I said I was sent to collections. I do not know what to do, I thought about finally calling them in an attempt to tell them 'look I do not have a job and I can't pay' so if they do take me to court at least they cannot say I didn't mention anything. Please ease my fears. I am so worried because I have a clean record and I want to keep my future. Thank You. Christina
Christina,
Let them sue you!. Don't worry it won't happen though, and here is why. If they sue you in a court of law, all they will have at the end of the case is a judgement against you. This little paper gives them the power to garnish your wages if you had any.
The thing about it is this, once they get a judgement, all you have to do is file bankruptcy and the judgement will go away, and guess what they wasted the money they spent taking you to court. So they are not going to waste their money on something that fragile.
They would much rather pester you and make it hard for you to obtain credit in the future.
Write them a letter telling them only to correspond with you in writing. This should quell the harassment to your family. Send it certified mail. That way you can take them to court if they do not honor the request.
TMG
TMG,
Thank You. I am going to do that right now. : )
I am so glad that I found your hubs, so much common sense and useful information.
Great hub.thanks for all the info,you helped me a bunch!
Money Guy ... it was no surprise to hear that you are an insurance agent, as your stements go on for paragraphs before you make your point and your point is misguided. I bet you feel that variable life policies are a great investment as they "protect you" from the principal amount (the amount the owner pays) is guaranteed over the life of the policy - with expense charges of 4 to 6% (read pays broker high commissions) for selling expensive, poor performing investments.
tourmaline2777 says:
12 months ago
Great Hub and terrific answer MoneyGuy!