Cheat Sheet

Managing Debt For Dummies

From Managing Debt For Dummies by John Ventura, Mary Reed

If you're dealing with debt, getting calls from debt collectors can be unnerving. Use some basic tips for handling those calls with ease. Take advantage of resources to find credit counseling agencies to help you with your debt and get all of your financial information together before meeting with a credit counselor.

Tips for Handling Debt Collector Calls

A call from a debt collector can be intimidating to say the least. The following tips will help you stay in control and calmly handle a debt collector so you avoid saying something that could create more problems. Keep this list close to your phone so you're ready when you get a call from a debt collector:

  • Never engage in casual conversation with a debt collector. You may give the debt collector information that could be used against you.

  • Don't answer any questions that you don't want to answer, and never share personal or financial information. Don't give a debt collector your Social Security number, the name of your bank, or your bank account number.

  • Ask the debt collector to send you a written accounting of exactly how much you owe. Ask that the accounting itemize the original amount of the debt plus all interest, fees, and collection costs.

  • If you think that the amount the debt collector says you owe is incorrect, or if you do not agree that you owe any money, dispute it. However, don't expect to win this argument on the phone. Put your dispute in writing and send it to the debt collector no later than 30 days after the collector contacts you for the first time.

  • If you don't have the money to pay the debt, just say so, and tell the debt collector not to call you again. Send a certified letter making the same request as a follow-up. Your debt won't go away, but the debt collector should stop bothering you.

  • If you agree that you owe a debt, but you can't afford to pay it in a lump sum, try working out an affordable payment plan. This process can start on the phone, but be sure to get the terms of any agreement you reach in writing before you make your first payment. Another option is to settle the debt for less than what you owe on it. Don't ever agree to pay more than you can afford!

  • If a debt collector threatens you, is verbally abusive, uses profane language, or calls you repeatedly during one day or day after day, take notes. The debt collector is violating federal law with these actions. Write down each violation, including the date and time it happens, the name of the debt collector or debt collection agency, and the specific debt you are contacted about. If things get really bad, share your information with a consumer law attorney: You may have grounds for a lawsuit.

Resources for Managing Your Debt

If you're drowning in debt, a credit counseling agency can be a great help. Use caution when finding an agency to help you mange debt, not every agency is as dependable as they say. Use any of the following resources to find a legitimate credit counseling agency:

Preparing to Meet with a Credit Counselor

If living on a strict budget is not enough to resolve your financial problems, meeting with a credit counselor to negotiate concessions from your creditor may help. Do your homework and get the following information together for your initial meeting with a credit counselor:

  • A list of all your debts. Include the amount of your current monthly payments, the interest rate on each debt, whether a certain debt is secured or unsecured, and whether you have fallen behind on a debt (and by how much).

  • Debt-related paperwork. This includes loan agreements, credit card statements, and any threatening notices you may have received recently from creditors.

  • Your budget. Take a stab at figuring out how much you can realistically afford to pay on your debts, starting with the highest priority ones.

  • A list of what you want from each of your creditors. You may need a temporary or permanent reduction in your interest rate, to make interest-only payments for a while, or a temporary or permanent reduction in the amount of your monthly payments.

  • A list of what you are willing to give up to get what you want. Here are some ideas:

    • You'll stop using your credit card until your debt is paid off.

    • You'll allow the creditor to put a lien on an asset you own.

    • You'll pay more on your debt than what you offered at the start of your negotiations (if you're certain you can afford it) or after you've made a certain number of reduced payments.

    • You'll give the creditor a balloon payment — a one-time larger payment (if you're certain you'll be able to afford that payment) — in the future.

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