If you’re behind in your payments

If you’ve been getting notices or telephone calls about overdue payments, take the initiative to call those creditors. That may be a frightening prospect. If you’re far enough behind in your payments that you’ve been getting collections calls, you probably want to avoid conversations with your creditors. When accounts get to the telephone collection stage, creditors tend not to be kind and soft-spoken. But you’ll find that by making this call yourself, rather than waiting for the next collection call, you can transform a relationship where you are on the defensive into one where you and your creditor are working together to solve the problem. When you call, tell your creditor that you’ve entered a program to get your debt under control, and that you’d like to work out a payment plan. As a start, ask for a 30-day moratorium on your payments. That will allow you time to pull your records together and come up with a plan for paying down all of your debts. If your credit hasn’t already been shut down, suggest yourself that further borrowing be blocked. That gives another signal that you are serious about repaying the debt. Creditors worry most about people who are ignoring their debts or who are actually being dishonest and trying to escape their obligations. By calling and telling the creditor that you’re working on a debt repayment plan, you put yourself in the “good” camp of honest customers who are making a genuine effort to pay what they owe.

If you can’t negotiate a 30-day break from the payments, find out what amount will satisfy the creditor. Pay that amount promptly. Your goal is to get back to a trusting relationship with the creditor, where the creditor knows you will honor your commitments.

Before the 30 days are up, and after you’ve had a chance to go through the rest of the steps in this booklet, call back and work out a repayment plan. At that point, you’ll know how much you can pay every month without creating problems with other creditors.

Here are some guidelines for making these conversations productive:

• Be honest. Explain that you’re trying to get your debt under control and be open about where you are in the process. If you haven’t finished tracking your spending and adding up the numbers, tell the creditor that you’ve realized your budget is out of balance and you’re doing the work now of coming up with a new spending and debt repayment plan.
• Be prepared. Have the information you’ll need in front of you when you call. Make sure you know exactly how much you owe and when the payments are due. Be ready to offer a payment plan if you won’t be able to pay the amount that’s due by the date on the bill.
• Put the conversation on an equal footing. If a creditor calls you, don’t get into a conversation right away. Politely ask them to hold on for a minute while you get out your records. When you get your copy of the bill and any notices you’ve been sent, get a paper and a pencil, too. When you get back on the phone, let the caller know that you’re ready to talk now and that you’ll be taking notes on the conversation. Start by asking them to give their name again and the name of the company they represent. Write the information down. Ask for the caller’s telephone number and address and write that down, too. By doing this, you put the call on more of an equal footing. The caller knows who you are and has details of what you owe. Now you know who the caller is and you have the information at hand that you’ll need to discuss a payment plan.
• Be businesslike. Remember that debts and their repayment are strictly business. A collection agent may try to make you anxious or put you on the defensive as a way to get you to agree to a payment plan. If you make it clear at the start of the conversation that you’re ready to work out a reasonable payment plan—one that’s acceptable to your creditor and within your means to follow—you can keep the conversation at a businesslike tone and keep it from becoming emotional. If the creditor yells on the phone or speaks in a rude or hostile manner, end the conversation and suggest trying another time when both of you can talk in a reasonable tone. If this happens more than once, ask to speak with the collector’s manager and request another contact at the company.
• Don’t agree to more than you can manage. If a creditor is pressuring you to pay more or repay a debt more quickly, you may be tempted to agree to higher payments than you can really afford as a way to get out of an uncomfortable conversation. Don’t do it. You’ll just fall behind again, and you’ll have lost the trust of the creditor. It’s far better to be honest and agree to pay only what you know you can afford.
• Follow up with a letter. If you and the creditor or collection agent agree to a repayment plan that includes reduced or missed payments while you get your finances back in order, follow up with a letter to confirm the agreement. An agreement like this usually includes the suspension of your credit privileges, so you may be sending your credit card with your letter as confirmation that you won’t try to use it. Use a proper business letter format when you write. Keep one copy for yourself and send two to the creditor, asking them to sign and return one to you. Send your letter by certified mail, return receipt requested. When the signed receipt card comes back to you, keep it until you receive the signed copy of the agreement. Send a copy of the letter with each payment you make— and be sure to make those payments on time.

Getting Out of Debts (Step by Step Instructions)

• Do you have a debt problem?
• Why it’s so easy to get into debt trouble
• Four steps to reduce your debt
  Step 1 - Admit that you have a problem and commit yourself to fixing it.
  Step 2 - Stop debt spending.
  Step 3 - Make a spending plan.
  Step 4 - Pay down your debts month by month. Pay them off one by one.
  
  
• Ask for Financial help
• If you’re behind in your payments
• What about bankruptcy?
• What you should know about your credit record
• Making your money work for you