Debt Journey

by Pic0o

I considered a throwaway name for this, but considering this two or so year debt journey happened due to making a stand and resigning from what I agreed with, I figured standing by it would resonate better.

Credit and debt is a fickle situation.  I wonder how many people on the streets fell to this cycle.  Luckily for me I have supportive friends and family that helped put most all of this into my rear view mirror.

Back story: At the time with no job, I had debts from credit cards, utilities, student loans, and mortgage bills.

Student Loans:  Hands down, these are the most persistent and brutal collectors.  They have a massive phone number collection system and are heavy on calling in the early afternoon or in the mornings.  You can get loan forbearance, but typically only for a few months.

Mortgage:  Anything short of the foreclosure process will be short of talking to a brick wall.  They (mortgage bank) can make name and address errors, but to negate the error you have to send a physical letter to some corporate office.  Applying for deed-in-lieu status ended with undefined criteria and documents you submitted being invalid in 30 days, so you will need to resubmit and not be told what is missing for the documents to be accepted by the bank.  This is nightmare country with Groundhog Day levels of repetition.  The bank will continue writing you mortgage bills, even with over two years of not being in the property and being in the slow process of foreclosure.

Credit Cards:  This gets interesting.  Welcome to flavor country.  The original bank of the credit account will stack late fees for six months (($35 late payment charge + APR) times six).  Once the six month cap is hit, typically the debt will transfer to a third-party debt collector (nearly always an Limited Liability Company [LLC]) or a legal office.  From either of these two options, you tend to see a three-tier settlement option.

• Seventy percent of the balance settlement for a one time lump sum.
• One hundred percent of the balance due over a two year payment plan.
• Some variance of the lower balance (approximately 80 percent due) over a shorter one year or less payment plan.

All the while, varying levels of collection calls will come to your home or mobile phone.  These calls may be required to verify they have the right person, depending on your state laws.  If you are asked to verify who you are, you can counter with asking what agency or corporation they are calling on behalf of.

Best bet, do not answer the call.  As the message disclaimer says, "Any information collected will be used to collect a debt."  You can explain your situation to the phone caller, but they do not care nor will they document it.  They are merely calling to collect a debt and schedule a payment plan.  It is their job and they may have been on a similar page with collections, so I try not to shoot the messenger.

Also, a huge note, keep your paper statements.  Being able to read the original account balance before the debt was sold to a third-party is epic negotiation leverage.  Oddly enough, after the lawyer letter, you may start hearing from "capital group" collection services.  This is the final stage before they serve you court papers.

If you can manage a lump sum payment, 50 percent of the balance may very well work to settle the debt and close the account.  The sad humor is that a $2000 debt was actually about $1400 before the six months of fees bumped the balance to $2000.  So that 50 percent settlement is closer to a 20 percent discount from the balance before it capped out in fees when you were unable to make a payment.

Another interesting tidbit is that some collection lawyers will rifle through public court documents to try and sell you their services and claim you have to be in court for something you were never served or summoned for.  While I was at the courthouse for another account, those lawyers were shocked about the use of public court records for grimy phishing for clients.

Recapping:  Bulk payments are your best bet.  Callers will spam your line while you are out trying to find a new gig and source of income.  Bank mortgage officers do not care and collection calls are looking for your information to collect a debt and to get you on a payment plan.  Income or not, they do not care.  They are just doing their job, so I avoid shooting the messenger.  Keep the conversation in perspective, though.

Hopefully this read prevents others from being crushed by the debt industry.