Creditors and the Collection Process
Falling behind on monthly payments is never an easy thing for most people. In the case of your creditors, you owe them money and their job is to collect that from you, regardless of what you are going through. They have a system in place to handle delinquent accounts that every debt is run through. Most creditors follow the same process with slight variations on their internal policies. Understanding how this system works is an important strategy in debt settlement and it will also let you know what to expect as you progress through this program.
There is a course of action that is set in motion when a debt first becomes delinquent. Most creditors won't even notice an account that is past due until it has reached 30 days late. Once your account becomes 30 days behind it will be transferred to the creditor's internal collection department. You will receive plenty of mail at this point reminding you that you are late and your credit could be damaged, you may also get a phone call or two.
As your account gets further and further behind the creditor's collection department will become more active in trying to get you to bring the debt current. This is important to understand and distinguish, while you are less than 90 days delinquent. They are not trying to get you to pay the balance off; they only want you to bring it current at this point. That is how they make all their money, by leaving you stuck in the never ending cycle of paying monthly minimums. There are very few creditors that will start considering settlements prior to 90 days delinquency, in fact most will not even start considering settlements until you are about 120 - 180 days behind.
After an account is more than 6 six months behind, the creditor is required to charge it off. An account being charged off is an important step in the eyes of the banks. It means that they have given up on the debt and now considered a loss. Most creditors would much rather settle a debt than charge it off. This point is our best opportunity to get a very low settlement, while the debt is still with the original creditor.
Once the debt is charged off there are usually three general approaches they take.
o Collection Agency - The original creditor may retain ownership of the debt. They may use their own internal collections or hire a collection agency to collect the debt on their behalf for a commission.
o Debt Buyer - If they do not want to incur any more expenses trying to collect they will sell the debt off for anywhere from 7 - 30 percent.
o Legal Department/Law Firm - Many debts make a stop in the internal legal department or with an outside law firm. This is where the determination is made as to whether or not its worth it to pursue with legal action.
After a debt is charged off it may jump from collector to collector and it may be bought and sold several times. Our job is to track these debts down when settlements are ready for proposal. Settlements can be reached with a creditor, collection agency, law firm, or debt buyers. Some of the details and negotiations may be different, but the end result will always be saving you money.
Falling behind on monthly payments is never an easy thing for most people. In the case of your creditors, you owe them money and their job is to collect that from you, regardless of what you are going through. They have a system in place to handle delinquent accounts that every debt is run through. Most creditors follow the same process with slight variations on their internal policies. Understanding how this system works is an important strategy in debt settlement and it will also let you know what to expect as you progress through this program.
There is a course of action that is set in motion when a debt first becomes delinquent. Most creditors won't even notice an account that is past due until it has reached 30 days late. Once your account becomes 30 days behind it will be transferred to the creditor's internal collection department. You will receive plenty of mail at this point reminding you that you are late and your credit could be damaged, you may also get a phone call or two.
As your account gets further and further behind the creditor's collection department will become more active in trying to get you to bring the debt current. This is important to understand and distinguish, while you are less than 90 days delinquent. They are not trying to get you to pay the balance off; they only want you to bring it current at this point. That is how they make all their money, by leaving you stuck in the never ending cycle of paying monthly minimums. There are very few creditors that will start considering settlements prior to 90 days delinquency, in fact most will not even start considering settlements until you are about 120 - 180 days behind.
After an account is more than 6 six months behind, the creditor is required to charge it off. An account being charged off is an important step in the eyes of the banks. It means that they have given up on the debt and now considered a loss. Most creditors would much rather settle a debt than charge it off. This point is our best opportunity to get a very low settlement, while the debt is still with the original creditor.
Once the debt is charged off there are usually three general approaches they take.
o Collection Agency - The original creditor may retain ownership of the debt. They may use their own internal collections or hire a collection agency to collect the debt on their behalf for a commission.
o Debt Buyer - If they do not want to incur any more expenses trying to collect they will sell the debt off for anywhere from 7 - 30 percent.
o Legal Department/Law Firm - Many debts make a stop in the internal legal department or with an outside law firm. This is where the determination is made as to whether or not its worth it to pursue with legal action.
After a debt is charged off it may jump from collector to collector and it may be bought and sold several times. Our job is to track these debts down when settlements are ready for proposal. Settlements can be reached with a creditor, collection agency, law firm, or debt buyers. Some of the details and negotiations may be different, but the end result will always be saving you money.