Dealing with collections

[DawnM]

I know nothing about collections and how they operate.  I need some concrete answers.  I can give advice and suggestions but I don't know enough to have the right answers. 

 

I got a call from a friend who has fallen on some hard times.  She now has a decent job and is trying to dig herself out.  She doesn't have a lot of extra, but she wants to get her credit score repaired and all debts paid off.

 

What can she do to negotiate a settlement for less?  Does she just call the collections company and ask?  They don't seem very nice.  Who else could she call?

 

Help me help her.

 

Thanks,

Dawn

 

PS:  The name of the collections company is Enhanced Recovery if that matters.

[NavyMommy]

Well if she's looking to settle with them for less than she owes that will be another hit on her credit report and look worse than going into collections. If repairing her credit ASAP is the most important thing I would advise she scrape together whatever money she can and pay them off in full. When you settle it's marked as such on your report.

 

Are they calling her / harassing her? The best way to settle is to first save up a pile of money (50-75% of the current debt) and tell them they can have that amount today if they will send a letter saying that amount settles that account in full. They won't take it the first couple of times, but if she persists eventually it will be noted in her file enough times and they'll take it. Once they agree to it, get a money order or a cashier's check and send it that way, NEVER allow them access to your bank account.

 

Also, how long has this been in collections? Some banks and credit card companies have in house collections that have a different name but are part of the same company. In that case the debt hasn't really been sold so they may be less likely to work with her. If this is really old and has been bought and sold multiple times the current company has paid pennies on the dollar for it and will take a higher reduced amount.

[DawnM]

Thank you.  I will pass along the info.

 

She said the debt started about 4 years ago and sent to collections between 3-4 years ago.

 

 

I guess by settling I meant what you said, paying a lower amount and having the debt gone.  Will what you suggest ding her credit?

 

They are not calling and harassing right now because they don't have her current phone number.  They do send her letters.  One said that if she paid in full by January, 2014 she could pay 50% on the dollar, but she had to pay ALL of it.  She didn't have it.

 

Dawn

 

 

[zoobie]

Make sure she actually owes the debt. The collections companies are scavengers and buy old and even bad debt for pennies on the dollar, then try to harass people into paying. Paying the debt collector may have zero affect on her credit rating. Say you owe Bank of Bob $10,000. You don't pay them, and they write off the debt and sell it to Vulture Collections for $75. Bank of Bob reports to the credit agencies that you defaulted on your loan. Vulture Collections wants your money because anything they collect over their $75 gamble is profit. Vulture cannot report to the credit agencies that you "paid your debt" because you never did pay the Bank of Bob. You have to wait for that bad report to come off your credit score with time.

 

She should pull her credit reports now and see what they say. Do not believe ANYTHING the scammy collections people say on the phone. Even in writing, I wouldn't be surprised if they are deceptive. It may be better for her to declare some type of bankruptcy. I would encourage her to seek professional advice from a real financial planner who specializes in debt management. There are scam artists in that field too who take advantage of desperate people. There's an agency linked in this article by the DOJ that should refer her to legit organizations: http://blogs.justice.gov/main/archives/2435

[HelenNotOfTroy]

With debt that old, she should be getting settlement offers regularly. If she saves up enough for half of the debt and responds to the settlement that they send (in writing) after she has the money, it will not repair her credit but it will deal with that creditor and it should be eligible to be removed from her credit report in 3 more years. Whether settled for less than the balance or not, once the delinquent and collection accounts are paid, she can begin rebuilding credit with a small secured credit card.

[Susann]

Dave Ramsey just to have advise on his website/books on how to deal w/collections.

[Clear Creek]

Genesis Financial Management.  They are not a payday loan company or anything like that, they are a non-profit company designed to help people get out of debt.  They contact all the collections agencies and creditors and work out a lower payment, bring all accounts current (so no more dings on the credit report for past due payments), possibly negotiate for lower interest rates on current debt (usually under the condition that no further debt is accrued) and set up a payment schedule with you so that all debts get paid on a monthly schedule.  It is not a debt consolidation loan; they automatically withdraw the money from your bank account each month in one lump sum and send the payments directly to the creditor themselves.  There is no fee for the service, they just ask for a donation for their services - and will continue to work with you even if you can't or won't give them a penny.  They are very, very kind, and it is wonderful to have someone else on your side to talk to the creditors and work out a payment plan.  Oh, and as soon as they talk to the debt collectors, all collection calls stop. :001_smile:

 

We used them twelve years ago to slowly work our way out of debt.  It was a struggle, but five years later we were debt-free (outside of our mortgage).

[AmandaVT]

She should definitely make sure they own the debt. There's a debt verification letter she can and should send them first. If you google "debt verification letter" you should come up with some examples. It basically says "I am not necessarily disputing the debt, but prove that you actually own it." The collections agency has, I think, 30 days to send proof. There are really shady collection agencies out there that will try to collect on a debt they don't own. When I had debt issues after college, I tried to settle everything up with the original creditor when possible. I remember Discover card was very willing to work out a reasonable monthly payment and cut interest way down (possibly even to 0%) until everything was paid up. Then they closed the account in good standing. She should also find out the statue of limitations on debt in her state. In my state it was 6 years, but some states are only 4 years. If she's in a 4 year state, then she can appeal to the credit agencies and have the collection info removed from her credit reports. 

 

http://apps.suzeorman.com/igsbase/igstemplate.cfm?SRC=MD012&SRCN=aoedetails&GnavID=84&SnavID=20&TnavID=&AreasofExpertiseID=24       <-- Statute of limitations of debt

[DawnM]

Looks like her statute of limitations is 15 years.

 

Ok, so I am not sure who all the debt was to, but I do know she owed Sprint $1,200 in bills but also in early termination fees for 4 phones.  The total was around $1,200.  However, they have sold that loan to that company I listed (Enhanced Recovery).  

 

When she got her credit pulled recently to get a loan for a used car, all of the things she owed showed on her credit record, including $1,200 to Enhanced Recovery, it did not say Sprint.

 

So, are you all saying that if she pays this, it won't help her credit anyway?  Wouldn't it show that her debts are paid?

 

Dawn

[AmandaVT]

I was wondering if it was a cell phone bill. I've dealt with Enhanced Recovery. Is she sure she owes the early termination fees? I canceled my AT&T phone at the end of my contract, called to verify I wouldn't get charged and then received a $175 bill a couple of months later. I called AT&T numerous times to discuss and sent proof that my contract was in fact up, but they sent it to Enhanced Recovery for collections. I sent them the debt verification letter and never heard anything back from them and the item was removed from my credit report. Might be worth a try for her. It was on my credit when we refinanced our house and I explained to the loan officer what it was and they weren't worried about it. Good luck to her!

[DawnM]

Yes, she does owe it.  She stopped paying her bills  completely about 4 years ago.  Long story, divorce situation, no job, etc....she just stopped.

 

Dawn

 

 

I was wondering if it was a cell phone bill. I've dealt with Enhanced Recovery. Is she sure she owes the early termination fees? I canceled my AT&T phone at the end of my contract, called to verify I wouldn't get charged and then received a $175 bill a couple of months later. I called AT&T numerous times to discuss and sent proof that my contract was in fact up, but they sent it to Enhanced Recovery for collections. I sent them the debt verification letter and never heard anything back from them and the item was removed from my credit report. Might be worth a try for her. It was on my credit when we refinanced our house and I explained to the loan officer what it was and they weren't worried about it. Good luck to her!