Debt Prison

* Reasons not to file Bankruptcy or Settle Your Debts

* Restrictions on Wage Garnishment for Debt Collection.

How To Stop Bill Collectors From Harassing You

By Debt Prison on December 1, 2008

A reader at Sample Debt Validation Letter asks how to get a collection agent to stop harassing her. Of course the quick and easy solution is to pay them! But if you find yourself unable to pay, there are a few things you can do to make life easier for yourself. Always keep in mind, that no matter what they say or how they say it, the goal of a debt collector is to get YOU to cough up some cash. And often they’re willing to do and say anything to accomplish this task.

I had a lady from a collection office call me and harass me about a credit card I have. She even called my cell phone and left me a very rude message saying that she hoped her attorney sued me for every dime I had. She then sent another message on my cell saying she was giving me 24 hours to call her back.

Who can I report her to? And how do I get her to quit harassing me? The debt is an old credit card and has a balance of 2800.

Rhonda

Stop talking with these people on the phone.

First of all, once you enter the world of defaulted credit card debt - what good is it doing to talk to these people on the phone? If you had the money you’d pay them (right?). But since you don’t have the money… discussing your personal crisis with these bill collectors… will leave you angry, embarrassed, or scared. And possibly all three. Therefore, when I defaulted on my credit card debt I wrote them registered letters (kept the receipts) and explained to them my situation. Here’s how the phone calls work.

“Hello”

May I speak with Barry?

This is him.

Mr. Barry this is Jahid Patel calling from Citibank.. you are 60 days past due on your account. Can you make a payment today over the phone and get this balance up to date?

Nope

Well Mr. Barry… can you make any payment today… how about $100

Nope

Well Mr. Barry how about $50 could you afford to pay that today?

Etc, etc, etc”

Now bear in mind this is an extremely civil example of how the conversation would go. Once I had a collector call me at my job (damn I gave them my number when I got the credit card). She asked me if I could make a payment right now. I said no that I was at work and preferred to discuss this matter through the mail. Within about 10 seconds she proceeded to tell me that this was going to their ‘legal department’… which I promptly told her “Great.. get on with it” and that was that. It never went to their legal department.

The point I’m trying to make is that if you don’t have any money to pay them with.. write these bill collectors a letter (registered) and don’t talk with them on the phone. The only purpose it serves is for them to get you on the phone and proceed to tell lies and intimidate you. Being in Debt Prison is difficult enough without these types of conversations further ruining your day.

Should you change your phone number?

Changing your phone number may not be a bad idea if you have multiple creditors with whom you’re defaulting on. This way you’ll force them to deal with you via snail mail. However, if your particular phone number is important to you then there are other options.

If you have a home phone and a computer there’s a little trick that you may find beneficial. I had a desktop computer that I left on all day. I also had a phone line plugged into the back of it. I downloaded phone tray for free. Phone tray is a free caller i.d. and call blocker combined into one. Once a bill collector calls you, you can program their number into phone tray and then select how you want their call to be blocked. I always gave them the “We’re sorry, the number you are trying to reach has been disconnected or is no longer in service.” Phone tray has a variety of audio cuts that you can use. The only problem I encountered is that the phone would still ring once if it was a bill collector. So if the phone rang more than once, I knew it was actually someone I wanted to talk to.

Cease and Desist

You can also write a collection agency (not the original creditor) a ‘Limited Cease and Desist’ letter. This informs them to only contact you by snail mail. Keep a copy, send the letter registered, and attach the usps receipt to your copy of the letter. Keep all correspondence within a folder under lock and key.

I would also like to request, in writing, that no telephone contact be made by your offices to my home or to my place of employment. If your offices attempt telephone communication with me, including but not limited to computer generated calls and calls or correspondence sent to or with any third parties, it will be documented, considered harassment, and I will have no choice but to seek a legal course of action against your office. All future communications with me must be done in writing and sent to the address noted in this letter by USPS.

You can also throw in the kitchen sink and write a Debt Validation Letter. I recommend the kitchen sink if you feel that the collection agency isn’t treating you fairly.

Other options for Rhonda

1. Call her back and tell her you’re broke because you had to wine and dine her husband.

2. Tell them to get a judgment if they can because you are ready to shut them down in front of the local Judge who happens to be your brother.

3. Tell them at every dime they wouldn’t be getting much cause as a woman in the USA you only earn 60% of wages of fellow male co-workers.

Now on a serious note… talking on the phone with bill collectors is usually a bad idea 90% of the time.

Don’t call her back unless you can pay all of the debt back in one final swoosh.

If it goes to court you can go and represent yourself (not as scary as it sounds) in which case the judge may declare you owe the money and you can pay a little each month until the judgment is satisfied.

But there’s not much you can do about her rude manner. She’s got your number and it’s her job to call and push and push until they get a payment. Put yourself in their shoes… how would you collect money from people who didn’t or couldn’t pay? The other option is to record the conversations if it’s legal in your state. Inform the collection agency that you have a recording of their violations of the Fair Debt Collection Practices Act. And that you are prepared to file suit against their company if these violations continue.

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* Reasons not to file Bankruptcy or Settle Your Debts

* Restrictions on Wage Garnishment for Debt Collection.

When Can I Start Settling My Debts?

By Debt Prison on December 1, 2008

A reader at How to settle your debts on your own wants to know when he should start trying to settle his unsecured debt. He also wants to know which one to settle first. Now bear in mind that you can’t miss a payment in October and expect to settle your debts in November or December. Credit card companies and collection agencies aren’t stupid! If you could afford a lump sum settlement that soon after having missed a payment…. then common sense will tell you that the debtor can afford to continue making the minimum payments.

My wife and I owe more or less $40,000 on our credit card debt and an unsecured loan. We plan to settle our debt on our own. We stopped paying our credit card bills two months ago and they immediately started calling and harassing us. Also, I lost my job so my wife is the only one working and we can’t afford to pay the minimum monthly payments. We’ve got a $25,000 unsecured loan and more or less $15,000 in credit card debt. I don’t know when will I start sending them letters and who’s the first one I will talk to and negotiate with. And I’m worried that if I don’t take action in the near future they will sell my account to a collection agency! Please help – thank you very much!!!!

Angelo

Hey Angelo,

First off it’s too early to even start discussing settlement with these guys. That’s because you need a cash lump sum to settle with the collectors. And if you could afford a lump sum you could afford the minimum payments. You’re gonna have to let this thing sit for at least a year most likely. Meanwhile you can just tell them that you’re broke for the time being and will make payments when you have money… but for now you’re living from check to check to eat.

Sometimes the original creditor will not settle the debt – they sell it off to a collection agency instead. If they sell or assign the debt to a collection agency then I suggest you exercise your rights under federal law and write them a Debt Validation Letter. This is just to insure that the collection agency is following correct procedures.

Now let me ask you this question…

Would you rather have to deal with this crap (collectors calling, judgments, wage garnishment) for the next three to ten years… or would you rather get a job (or two jobs) and work like crazy to pay this debt off in full. That’s about your only options…
Now if you can’t or are unable to work then the best thing to do is settle with these guys later on. But in the meantime you might want to change your phone number and deal with your collectors through the mail only. And then there’s always the possibility of getting a judgment slapped on you in civil court. Bear in mind the better record keeping you undertake the better off you will be. See also, How to deal with collection agencies.

Also, is there anything you could sell to help get you out of this jam? Can you sell your cars, your houses? Can you downsize to cheaper cars or cheaper houses? Can you move in with a relative and pay no rent? You and the wifey need to have a serious discussion and think of these types of questions.

If you do decide to settle I would use the ‘debt snowball’… starting with the smallest debt and working my way towards the largest. I’d initially try and settle for 50 cents on the dolllar with the debt of lowest balance. Bear in mind that I would try and settle based on what the balance is RIGHT NOW. Not what it will be in one or two years.

That’s because once the credit card companies and collection agencies get through tacking on their satanic onslaught of fees, penalties, and interest… these debts could easily double in balance before you’re ready to settle them. So what may be a credit card balance of $4,000 today… may be 8 or $10,000 in two years. I would inform them that I’ll settle for 50 cents on the dollar based on the original default amount… in this case I’d offer $2,000 for the initial defaulted debt of $4,000.

Good Luck and Happy Holidays!!!

Barry

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Restrictions on Wage Garnishment for Debt Collection

By Debt Prison on November 30, 2008

Many debtors that have defaulted on their credit card debt or other unsecured loans are concerned about their wages being garnished. Often collection agencies will threaten to turn your debt over to their ‘legal department’, or take you to civil court to get a judgment, or garnish your wages. Well what can they really do and how much of your wages can they actually garnish? Relax… I found this very important information for you… at no charge.

The U.S. Department of Labor has developed The Federal Wage Garnishment Law, Consumer Credit Protection Act’s Title 3 (CCPA) - which defines how much of a person wages can be garnished by debt collectors via a judgment. The best way to overcome your defaulted debt is to gain knowledge. The more you know about what can happen in the ‘real world’ (not the world of phone calls with debt collectors and their often empty threats) the more likely you’ll be able to get out of debt, salvage your credit report, and get on with a happy life.

Here’s what you need to know from the above mentioned Act

What are the restrictions on wage garnishment?

The amount of pay subject to garnishment is based on an employee’s “disposable earnings,” which is the amount left after legally required deductions are made. Examples of such deductions include federal, state, and local taxes, the employee’s share of State Unemployment Insurance and Social Security. It also includes withholdings for employee retirement systems required by law.

Deductions not required by law—such as those for voluntary wage assignments, union dues, health and life insurance, contributions to charitable causes, purchases of savings bonds, retirement plan contributions (except those required by law) and payments to employers for payroll advances or purchases of merchandise—usually may not be subtracted from gross earnings when calculating disposable earnings under the CCPA.

The law sets the maximum amount that may be garnished in any workweek or pay period, regardless of the number of garnishment orders received by the employer. For ordinary garnishments (i.e., those not for support, bankruptcy, or any state or federal tax), the weekly amount may not exceed the lesser of two figures: 25 percent of the employee’s disposable earnings, or the amount by which an employee’s disposable earnings are greater than 30 times the federal minimum wage (currently $6.55 an hour).

For illustration, if the pay period is weekly and disposable earnings are $196.50 ($6.55 × 30) or less, there can be no garnishment. If disposable earnings are more than $196.50 but less than $262.00 ($6.55 × 40), the amount above $196.50 can be garnished. A maximum of 25 percent can be garnished, if disposable income earnings are $262.00 or more. When pay periods cover more than one week, multiples of the weekly restrictions must be used to calculate the maximum amounts that may be garnished. The table and examples at the end of this fact sheet illustrate these amounts.

What about child support and alimony?

Specific restrictions apply to court orders for child support or alimony. The garnishment law allows up to 50 percent of a worker’s disposable earnings to be garnished for these purposes if the worker is supporting another spouse or child, or up to 60 percent if the worker is not. An additional 5 percent may be garnished for support payments more than l2 weeks in arrears.

Are there any exceptions to the law?

The wage garnishment law specifies that the garnishment restrictions do not apply to certain bankruptcy court orders, or to debts due for federal or state taxes.

If a state wage garnishment law differs from the CCPA, the law resulting in the smaller garnishment must be observed.

The world of defaulted debt is no different from any other aspect of our lives. The more information and truth you acquire on the subject… the sooner you’ll be able to escape from Debt Prison. If you are new to the world of defaulted debt please take the time to read my best articles listed below.

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Should I file Bankruptcy or Settle my Debt?

By Debt Prison on November 26, 2008

A reader at How to settle your debts on your own asks if she should file bankruptcy or try and settle her debts on her own. She doesn’t have enough money to make minimum monthly payments and the collection calls have began. They make too much to file Chapter 7 bankruptcy but not enough for a monthly payment plan. They have $50,000 in unsecured debt.

I got behind on all my bills and took on a second job, then realized that even with the second job I couldn’t pay all the bills. I tried Credit Counseling and was told I don’t make enough money for a pay off plan. I was told I have to file bankruptcy. I make too much money (on paper) to qualify for a Chapter 7. Is there any thing I can do on my own?

A bankruptcy lawyer said I would have to do a Chapter 13 but to me that just seems like a payment plan with worse credit. I dont want a trustee looking over my shoulder for 3-5 yrs and taking tax refunds and christmas bonus. My husband and I owe $50,000 in loans and credit cards. All unsecured. We have a house and truck payment. Our house isn’t worth anymore than we paid for it and we pay $362/month in PMI. So theres no equity to tap. Our credit is in the 500’s since we’ve been behind on everything and the collection calls started this month. They’re non stop. We have no savings but a few hundred after mortgage, food etc, per month its just not enough to go around.

We owe 21 creditors not including truck payment, mortgage and regular bills like phone insurance etc. Please can you give me any advice? I have two children who keep asking why I won’t answer the phone. I understand I made this mess and must own up to it which I will – I’m just not sure how to and still live a semi-normal life.

TM

Hey TM,

You’re either need to make more money and get caught up… or make less and file chapter 7. Otherwise this sounds like you’re going to be stuck in the middle. You’ve probably already asked yourself this but…

Can you sell anything to generate cash?
Can you move in with a relative who charges no rent and then rent out your current house for income?
Can you sell the truck and drive a junker for two years?

You’ve either got to drastically lower your bills or generate more cash.

Your in the same position I was in… but your debt is higher. Another option is to not pay and try and settle with them later on. But you’ll need some cash available to settle with the original creditor or collection agency. I would also recommend changing your phone number and dealing with these collectors via mail. Many people stop paying, meanwhile they save up money (outside a bank of course), in hopes of settling the debt later on when the collectors are ready to accept 50% or less on the debt. Granted it’s very aggravating negotiating with these folks on the phone but the other option for them is to try and get a judgment against you to repay the debt. Even then there’s no guarantees that they can get the money out of you.

So if you can’t see anyway to generate more cash I would save money like crazy and try and settle the debts later on. To me, this seems a more intelligent choice since the bankruptcy police isn’t standing over your shoulder and your credit is ruined anyway. Meanwhile I would find a way to reduce my bills and bring in as much money to save as possible. These creditors aren’t going away and you (and your husband) need to decide on a plan and make it work. I hope this helps.

Best regards,

Barry

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