Are you frustrated with your debt and feel like you’re stuck in this rut? Today we’re going to see how you can negotiate your debts to lessen the stress and get you closer to your debt free goals!
Paying Off Your Debts and Dealing with Debt Collectors
Usually when people make money goals for the year, paying off debt is in the top three but many struggle to achieve that goal.
Depending on where the pandemic caught you on your financial journey, you may have had an extra struggle. Perhaps a drop in income meant slowing down or even pausing your debt payoff plan.
That can be a real and huge burden because those balances are lingering or worse, growing. If it makes you feel any better, you're not alone. Debt is weighing down on a lot of families.
According to Experian, 90% of adults in the US have at least one credit card on their report And of those 75% carry a balance month to month. The average balance for that group is over $5,000.
The average balance on a car loan is $19,700. And Then you have student loans. In 2020, the average balance was $38,000. While there is some relief for federal loans, with the pause in payments, if you have private loans, you're still dealing with them on top of everything.
Hopefully things have improved in stabilize but now you're at the point where you're trying to figure out how to jump back, in which debts to tackle first, and what payment plan makes the most sense for you.
Which is why I'm happy to have attorney Taylor Kosla be a part of this episode.
Taylor is a partner at Agruss Law Firm, a team that's focused on helping people deal with debt collection.
In this episode, we're going to look at:
- ways to negotiate with your creditors,
- protections available to you through the fair debt collections act, and
- a possible opportunity for you to have an attorney assist you without you paying out of pocket.
Are you ready? Let's get started!
Handy Tools to Pay Your Debt Off Faster
- Best Budget and Money Apps: Personal Capital, Tiller, Mint
- Grab Your Copy: Jumpstart Your Marriage and Your Money
- Join Our Thriving Families Community on Facebook
- Sample Letter Disputing Errors on Credit Reports
- The Great Debt Dump
- Which Debt Payoff Method Is Right for You?
Thank You to Our Sponsor Coastal!
Support for this podcast comes from Coastal Credit Union! If you’re living in the Raleigh Durham area and looking to bank better, come check out Coastal today.
We’ve been Coastal members for a few years have been happy with their services.
They have wonderful services and accounts to make saving easier including their competitive money market accounts!
As I mentioned in the episode, if you're a Coastal member and are thinking of consolidating your debts, check out Coastal's options to refinance!
Elle Martinez: Let's start off with the best case scenario. Your finances have stabilized and you're now ready to get back into your debt free plan. Perhaps you've kept payments, but it was the minimum or maybe little less than that. So the balance has grown or you've had to pause your payments while taking care of more essential bills.
So now you're ready to get back into the swing of things. But you're wondering. How can you approach this?
Attorney Taylor Kosla walked me through a few key steps with negotiation that you can use to work with your debts and make them more manageable.
The first is be proactive and reach out. You have to resist that instinct of avoiding and ignoring calls which is difficult, especially if you were dealing with financially tough times.
Something that you want to consider though, is that because so many people have been financially affected by the pandemic, creditors may be more eager to work with you then you expect.
Taylor Kosla: I'd like to start off by saying the biggest advice I give to our clients and just about everyone I meet is if you have debt, don't ignore it.
Based on my experience debt collectors creditors, they'd rather get something rather than nothing.
Elle Martinez: The second point is verify the debt. Before you send any money over, verify the numbers.
This could be a situation where your original debt has been sold to another company. Sometimes they don't have correct information on the accounts. So you want to make sure that that balance is accurate.
Taylor Kosla: People that have debt, especially post COVID, they're getting hit with their behind them auto bills, credit card bills, medical bills, especially with COVID.
It can be an overwhelming experience. So you'll want to negotiate the debts down, but you also want to be well-informed of what your debts are.
What are the balances? What amounts are due? How old is this debt? I think now is the time because the debt collection industry is booming, that collectors are probably going to try and sneak in some of those old debts.
If you make a payment on an old debt, that'll actually revive, the statute of limitations. Do your homework know what the accounts are, and you can ask a collector, ‘I want you to verify this account for me', and they should send you documentation showing, what they're collecting on when the account was open, when it was charged off, what the balance is, and what fees or interest has been incurred ever since.
Elle Martinez: Third, run the numbers yourself. When you're working with creditors and debt collectors, they're going to try to get you to commit to a higher payment. That's their job. But you're the one that has to live with this so go through your budget and work out the numbers beforehand.
You should consider both what you can afford on a monthly basis and as Taylor points out a one-time payment to settle it.
Taylor Kosla: You should negotiate your debt on and you need to be honest with the collector. Collection agencies get more upset, if you commit to something that you can't maintain so be reasonable.
I think 99.9% of consumers with debt, they want to pay it off. Often times either with a payment plan or a lump sum payment. Debt collectors and creditors really like a lump sum payment.
They're oftentimes willing to shave off decent amount in order to get that money in their pocket, because the longer that debt sits out there longer that you wait to start making payments to get that resolved, the more fees and interests are getting tacked on it.
That balance just keeps going up and up and it's going to be a lot harder for you to dig out of it.
Elle Martinez: If you are able to come to an agreement, make sure that you have it in writing. You want the terms to be clear and to make sure that they honor that agreement.
Now if they aren't willing to work with you on a sustainable payment plan. You do have a few more options. You can work through your own debt payoff plan, whether it's using a method like the debt, snowball, avalanche, or lasso. I have entire episodes that walk you through the details and one this year about how to find the best solution for your situation.
Another route that you may want to take is consolidating and refinancing your debts. Some families have found it to be a very helpful option because they can take multiple high interest loans and merge it into one that's at a lower, more manageable rate.
If you're happy with your current bank or credit union, reach out to them first. See what they have to offer, but then also shop around. You want to make sure that you're getting a competitive rate.
If you are a member of coastal credit union here in the triangle area, I'm going to include a link in the show notes to make it easier for you to find that page and reach out to them.
Hopefully you can take this information and use it to come up with a payment plan that you feel comfortable with but if you're dealing with an aggressive debt collector, That's beginning to harass you We're going to go over some ways that you can protect yourself and what rights you have.
How the Fair Debt Collection Practices Act Can Protect You
Elle Martinez: Debt cannot only financially squeeze people but when the collectors start harassing you it can be emotionally stressful as well. In some cases, it crosses the line and becomes abusive. That's where the fair debt collection practices act comes in.
The purpose of the FD CPA is to help give you some protections and limit abusive debt collectors.
Your credit cards, medical debts, and consumer debts like your mortgage or car loans are covered under this.
We'll get into how it can protect you from creditors that are harassing you, but it can also help you with your credit report.
Taylor Kosla: a good way to keep track of your accounts and what's going on with your credit is regular check your credit report. By federal law you're entitled to a free copy of your credit every 12 months.
I recommend going to annual credit report.com and go through that report line by line to see if there's something inaccurate, especially with medical debt.
I see a lot times consumers have health insurance that should have paid a bill, or maybe the insurance company paid the hospital bill, but they didn't pay the physicians bill that was associated with the hospital.
Those bill slipped through the cracks. They ended up on your credit report, that collectors are coming after you now for it. You want to keep ahead of that stuff by checking your credit report.
My firm handles fair credit reporting act cases, which allows us to help consumers get an inaccurate information removed from their credit report.
There's a dispute process to request, a negative and or inaccurate information be taken off your credit report. If the bureaus don't fix it after that, you can file suit.
Elle Martinez: Now here's where it can help you with a collector or creditor that is harassing you under the FD CPA, that collector can't contact you at unreasonable hours. Either before 8:00 AM or after 9:00 PM, unless you agree to it.
They can't contact your work. If you inform them, they're not allowed to.
And they can't contact you. If you have already have informed them that you hired an attorney. Plus they can't discuss your debt with anyone except you, your spouse or attorney.
If you're thinking, okay, I'm in debt. I don't have money to hire an attorney. Taylor has some good news for you.
Taylor Kosla: One of the great things about that law and the debt collection is there's, what's called a fee shift provision.
So consumers don't actually have to pay my attorney's fees. The bureaus and the debt collectors do.
on top of that, you're entitled to statute for damages, which are between zero and a thousand dollars and actual damages.
If something was inaccurate on your credit and you were denied an auto loan, or maybe you got a higher interest rate on a loan on that actual money out of pocket as a result of the inaccuracy is something that you can claim under the statute.
The debt collection act, which is a protection for consumers being harassed by debt collectors.
It also is a fee shift provision. It's great because again, our clients can reach out to us and we can help them at no cost to them. They're entitled to statutory damage between zero and a thousand. Now.
Actual damages for a debt collection case usually occurs when a debt collector threatening to file suit, or they're making these empty threats that they don't intend to take.
That consumer then pays them $500 because they're afraid of getting sued. That's actual damages, money that they spent based on the false representations made by the collector.
Elle Martinez: These are just a few of the big provisions that this act has that can cover you when you're dealing with creditors that are harassing you. And if you want to learn more about the services that Taylor's firm offers, just go to agrusslawfirm.com.
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