Have you ever found yourself struggling with credit card debt payment? Are you avoiding a collections agency? Any amount that is reported to a credit bureau for being due in the past is known as delinquent debt. It is easy to repair the debt and move forth while it’s still in the initial stages. But if a debt remains longer than necessary, the creditors start getting aggravated and force you to make the payment as quickly as possible. The more your creditor pressurizes you, the harder it gets for you to get out of the situation.
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Debt delinquency is extremely dangerous to your credit score. With a damaged credit score, it becomes difficult to refinance your loan. Also, you find yourself unable to get reasonable interest rates. If your credit score is in a downward trajectory, your job applications might get turned down, and you might even find it difficult to rent an apartment. Ignoring the issue is the worst thing you can do. When battling delinquency, most borrowers tend to avoid creditors by not returning their calls, emails, and text messages.
In most cases of debt delinquency, the creditor seizes the borrower’s property or car, to satisfy the debt. If you are going through debt delinquency, here are a few things you must expect.
Stage # 1: First 30 Days
Thirty days after the due date, the creditor will send you a reminder that your payment is due, and you need to make it fast. If you have a good credit history, the creditor might show some leniency, and not report your case to the credit bureau. However, you will have to pay late-feel charges. In most cases, your inability to pay the debt within the due period starts damaging your credit score. However, in some cases, you might get a 30 day grace period.
If you fear that you won’t be able to make a timely payment, inform your creditor beforehand. If you reach out before they do, they are most likely to cooperate. Whatever you do, always be honest with your creditor. If you have been fired from your job and are unable to pay the debt, you might as well seek financial advice.
Stage # 2: 60 Days Since Due Date
This time, the creditor won’t be too generous, and you might even experience slight harshness in their tone. They might even warn you about the negative impacts of not making the payment on time. You will also be charged with further penalties, which will worsen your credit score even more. Even now, you are in a position where the creditor would cooperate with you if you exhibit honesty.
If you haven’t had a word with your creditor yet, now is the time to make a call. Contact them as quickly as possible, and explain to them why you are unable to make the payment. The more you procrastinate to talk, the more money you will have to pay, and your credit score will continue to drop.
Stage # 3: Three Months Since Due Date
Now, the time is closing in when the creditor might have to declare your account uncollectable. If that happens, the creditor might have to hand the case over to a collector. Experts say that once you are past the 60 days, the impacts of delinquency can get more severe.
In such situations, you have a few good options that can help you out of the problem. Either you can go for account reactivation, by coming up with a payment plan with your creditor. If your reasons are genuine, your creditor might agree to a lower interest rate with reduced payments.
Or, you can work with a credit counseling company that can help you pay your debt off. Credit counselors handle such cases daily, and using their experience; they can help you come up with a payment plan. Doing so, you will be making monthly payments to the counseling agency that will forward the payment to the creditor. The payment plans made by credit counseling agencies last for somewhere between 3 and 5 years. This method is cost-effective for the fee charged by counseling agencies is mostly nominal.
Stage # 4: The Debt Collectors
The fourth stage of the debt delinquency timeline is also known as the charge-off. At this point, the credit will mark you uncollectable. At this stage, your account will most likely be sold by the creditor to a third party, which is a debt collection agency. In the meantime, the creditor will inform the credit reporting agencies that a debt collection agency has taken your account. Now it is the collections agency’s job to get the payment from you.
If your case is handed over to a collection agency, make sure to cooperate with them as much as possible. Feel free to confide in them and be forthcoming about the reasons behind your inability to pay. Furthermore, never avoid them by not returning their calls and text messages. Your willingness to cooperate might keep you from getting sued by the collections agency.
Stage # 5: Getting Sued
If you continue to avoid the collection agency, they are left with no other option but to file a lawsuit against you. If you have been ignorant of the previous stages, this stage is not one of them. In most cases, the court may allow you a period of three to four weeks to respond. So, before you return, make sure to go through the lawsuit for any errors.
If the collections agency has sued you, try not to overcomplicate the matters. You can dispute the charges, file for bankruptcy, or countersue the collector.
If you are dealing with debt delinquency, the worst thing you can do is ignore the stages mentioned above, and avoid the creditor. Since the beginning, stay in touch with your creditor and be vocal about your financial problems. If you are lucky, the creditor might lower the monthly payments and the interest rates, and that is exactly what you need.