Credit Card Debt --Here's one I had never heard of...
until tonight. I apologize for my long explanation.
My daughter and her husband have credit card debt. Until the new payment fee system came up, they were able to make all their payments. Now, they are having a hard time keeping up. Before anyone says anything about them learning to live within their means...they do. They have not used a credit card in over a year. They do not take vacations, go out to eat, or even rent movies. They do have internet, but my daughter tutors online, which more than pays for the monthly fee. Also, they have been applying for part time evening jobs. No luck yet.
Here's what happened...Their minimum monthly payment went up to $200. a month. The last three months they have only been able to pay $150. (Made on time, never late)
Tonight, she gets a call from a collection agency. The account has been turned over to an attorney for collection. She will be served papers at her place of employment on Friday by the Sheriff's if the account is not paid in full. No other warning, that's it.
The balance on the card is roughly $5,200., but they will settle for $4,120, if it is paid before the 8th of this month. They will not accept a cashier's check or money order for this settlement. It must come straight from the checking account. If it is not paid, or paid by any other means, the balance will remain at $5,200., and more fees will be attached for the lawyers, etc...
My daughter is a mess, so I asked her to call the woman she had been talking to, and give her permission to discuss it with me. I was hoping that she had misunderstood. This person was very nice and non-threatening. She told me that when this file landed on her desk, she could not understand why this was being done. So, she talked to her supervisor who told that her more of this same kind of thing was coming.
She explained that the new guidelines required that 4% of the principal was to be paid every month. Since my daughter had missed that more than once, they were calling up the entire debt. I cannot believe this. They are going after the people who are trying to pay, but fall short.
In my conversation with her, I learned a couple other things. For the most part, credit card companies are now not going after the unemployed, or those who don't make any payments at all.
They are concentrating on, in her words "Young people who have mortgages and car payments".
She also told me that California has so many repossessed homes, that there is no way the banks can hope to sell them. The displaced homeless are breaking into boarded up foreclosed upon homes to find shelter. A large percentage of these homes are being trashed, making them worth even less.
Anyway, I have to wonder what is happening here? Granted, she did not pay the "minimum", but there is a long history of paying on time. Are the credit card companies in such dire straits, that they have resorted to this? Are they hoping to cash in on the folks that can't cough up the balance in the 4 days notice that she was given?
We haven't even begun to see the nightmare that is coming.
MBNA, who is now Bank of America, not only wrote the bankruptcy reform bill, but was the largest contributor to the Bush campaign. I then transfered the balance to a different card and closed the account immediately citing I could not in good moral conscience support a business who supports Bush and conspires to destroy their costumers financially for their personal profit.
Is that the minimum monthly payments were so low that if people continued to pay just the minimum their balances would actually increase over time.
Since this was an existing balance and you said they did not use the card for the past 1 year. I wonder if they could 'opt-out'/'cancel' the card which would preserve them under the older rules? I'm not sure if that is possible.
The rule change was really to keep people from paying such a low monthly amount that they are never paying off any principal. Sounds like you daughter was abruptly impacted. I hope it works out for them somehow.
Apparently this was a 'recommendation' from the Comptroller of the Currency. Banks have been hesitant to implement it because it means they make less money under the new guidelines. The Bankruptcy Act also recommended it. Personally, I think to 'ward off' more oversight the major banks are doing this to appear to be responsible to Congress.
It should not have been retroactive, but anyone paying only 2% per month on their balance, is living beyond their means. 2% should never have been allowed in the first place.
4. they signed a contract. what does the contract say? And...
Edited on Tue Feb-05-08 12:14 AM by msongs
IF the contract specifies these terms then credit card company is honoring the contract.
You may wish to inquire why there is the 4% principal thing happening and if it has been mandated by congress or state/local entities.
these companies have more leverage over people with jobs, mortgages, and car payments, because those people have more to lose from bad credit reports than people with no income. And they are more likely to pay up probably.
good luck. at least it sounds like the collection company is fairly nice, unless they are playing good cop now and will switch to bad cop later (highly likely).
6. Sickening. I am so sorry for your daughter and husband.
Edited on Tue Feb-05-08 12:19 AM by vickiss
This whole situation is going to get way worse. Nightmare is likely a good description.
This is nothing less than economical terrorism by corporations protected by our gov.
Even if their original contract said nothing about this, these places send out so many "change of policy" notices the co. likely changed the terms in one of those. They sneak this crap in every chance they get and with the economy ready to suffer a "recession", they are going to grab every last cent they can before the house of cards falls, imho.
7. One of my family members got in credit card trouble. I didn't particularly
anticipate having to help, but I did. It was many thousands, and I winced like a sumbitch bailing 'em out. But I did it because it would only have gotten worse if I didn't. I can't imagine what people who don't have someone to help do, and how they must feel.
We're pretty much a credit card free group, nowadays. We pay our bills, and if we want something, we save for it. We're helping out a friend who is sick, lately, so we don't have much disposable income these days, but that's a choice.
Edited on Tue Feb-05-08 12:20 AM by twenty4blackbirds
I hold a differing view on your daughter's "living within their means":
Before anyone says anything about them learning to live within their means...they do. ... Granted, she did not pay the "minimum", but there is a long history of paying on time.
To me 'living within their means' means that the credit card is paid off in full each and every time. If there's no money in the bank to pay it, then don't buy it. Otherwise this type of situation comes up when the debt accumulates.
Many financial advisors advise to pay debts first, especially the debts with high interest rates.
I'm sorry about the situation regarding your daughter's financial arrangments. You may want to advise your daughter to live with more limits, and set new habits of "living within their means".
They were able to pay the extra $50. or so out of their savings the last few months. That savings is now gone.
I have asked them to turn their financial matters over to me for the next couple years. I am hoping they take me up on it, but I don't really expect them to. I understand that it would be humiliating for them to do so.
Her father and I worked hard to get out of debt. There were nights, many years ago, when we had canned vegetables and bread for dinner.
14. A $200 dollar a month bill isn't a very large accumulation of debt.
And it could be from health care costs, hospitals or anything. The problem is, that when the Congress passed that horrible bankruptcy bill, they also mandated (in another bill) to raise the monthly minimum payments. Unfortunately for a lot of people, it applied to previous debt as well. As the OP said, they haven't used the card in over a year.
Also, credit card companies are the only entities in this country that can arbitrarily change the terms of a contract, on their terms, on a whim.
I had a credit card for 13 years, at prime rate, never was late on a payment, and always paid more than the minimum. Two years ago, I was called out of town on an emergency (rental property flooded), I thought I'd paid all of my bills before I left town. I missed that one, and when I returned 2 weeks later, I saw I had missed it, and paid 2 days late. They jacked my interest rate up to 30 fucking percent! From 4.25%!
I called them up, and they said they could give me 28.95%. I told them to stick the card up their ass, and transfered the balance to another prime rate card. And just for the record, the bank was Chase.
45. We had two hospital stays that resulted in that much debt
prior to that, we had a zero balance on two credit cards, but not much salary and no savings from an unexpected move. My 5 year old caught a bug, became severely dehydrated, and one overnight hospital stay later we owed $3000.
In the mean time, I'd contact my congressman and Senators just to let them know what their "Bankruptcy Reform Act" has wrought. And they might be able to exert some pressure on the lender to back off a little.
18. Those balance transfers are only available to people with clean credit.
If they've missed a couple payments (and partial payments count as missed payments), they will not be eligible for the balance transfers. Their interest rate will also go up to the "default" rate, which is usually between 29-33%.
16. Be Wary of Credit Counseling/Consolidation Outfits - They're run by the CC industy
Edited on Tue Feb-05-08 12:53 AM by El Pinko
They claim to be "non-profit", but they operate as an arm of the Credit Card industry and do NOT have the consumer's interests in mind.
ACORN is a community group that tries to help working people deal with debt, and unlike those debt counseling outfits, do not have a vested interest.
I would consult them.
Also, keep in mind that a lot of collection companies will make all manner of threats regarding judgments, etc. that they generally do NOT intend to follow through on. It's not in their interest to take them to court for a small balance if they can't pay much anyway. They're trying to scare them into making a payment.
Definitely read over the link posted by El Pinko to the rights under The Fair Debt Collection Practices Act. First, it sounds like the collection agency may have violated the law by claiming that the person contacting your daughter is an attorney and falsely claiming to have started a lawsuit (the serving of papers).
I had a mess of trouble with Sprint a couple years ago. Basically in February of that year, I switched my cell phone service to another company. I called Sprint to cancel my service (I was not under contact or any other commitment). Their horrible billing system continued to bill me until May and they claimed I didn't pay an earlier month. At the time I didn't really keep good financial records so I couldn't prove that I paid the earlier month. However, since I continued to receive calls (which went to voice mail I guess) Sprint considered that I had usage and insisted that I pay them. I called several times to dispute the bill and they eventually sent it to a collection agency. After reading the first notice I read up on my rights and sent a letter to the collection agency 1) disputing the charge and 2) demanding that they cease all contact unless to inform that thy have ceased collection efforts or to inform specific action is being taken.
I heard nothing back from that collection agency. However I got a notice from another collection agency. I sent the same letter that I sent to the first one with a change of the address and date. Nothing was heard from them. I received a notice from a third agency. This time I called the agency and spoke with someone who seemed very nice and understanding and she told me that often if you dispute a debt, the company who claims the debt will just go to another collection agency instead of justifying the debt to the agency it is disputed with. I don't know if that is true or their BS but she also agreed to settle for $20. I took the settlement to get the matter done with.
The second run in with a collection agency involved a plumber I had called when my mother had a water leak emergency on New Years eve in 2006. Unfortunately, the company she would use didn't do emergency service and wasn't available. We both explained to the person we called what the issue was: the main water shut valve off was leaking so the supply would need to be shut off at the street and the shut off valve replaced. Not a very big or complex job. The guy who shows up couldn't close the shut off at the street. He played with it for a few minutes but couldn't get it off. He says that he can't get the valve to turn with the tool that he has but can either get another tool to turn it off or we could call the water company to turn it off but either way he isn't going to be coming back until tomorrow at the earliest. This was about 1 in the afternoon. After an argument with him over doing the job I refused to sign the work order, tore it up, and went into the house.
A couple days later a bill comes in the mail for "service call" from the plumber, including a copy of the incomplete and unsigned work order (taped back together). I called the company and ended up speaking to the owner who was very rude and despite several times pointing out that his technician couldn't perform the job he was called for. The owner then said that I was wasting his time, that he was going to send me a bill for his time on the phone, and sent it to a collection agency if I didn't pay. And it was sent to a collection agency. Which, despite from having a return address and postmark from a town two towns over here in New Jersey, the only telephone number in the notice has an Arizona area code. Cute, huh? I sent my dispute letter, with the names and date changed along with a synopses of what occurred. The collection agency dropped the claim.
Now I am not an attorney, debt collection professional, or anything that would make this professional advise, but...
What I would suggest to you is that your daughter dispute the debt on the basis that she has been paying the creditor. Also note in the letter that you believe that the collection agency has violated the Fair Debt Collection Practices on the basis of falsely claiming that the person contacting your daughter is an attorney and falsely claiming to have started a lawsuit. Also demand cease all contact. Note on the letter that you are sending a CC to your state's attorney general, the FTC, and any applicable state regulatory boards. Send one copy standard mail and one copy certified mail.
I was involved with one a couple of years ago after my husband's business went down the tubes nd they saved our asses! They worked out a workable pay schedule, WAY lower than what I was paying monthly, they lowered my interest rates from 29.9% to 6% (except Sears who wouldn't cooperate so I NEVER shop there anymore) AND it took a month to set up everything and I didn't have to pay my creditors for that month. Also, anytime one of the cc vermin called me at my home, I'd just give the number of the person I was dealing with and they would never call again. (Unless you've been in a situation where you're TERRIFIED to answer the phone, you've no idea what this is like.)
Granted, one must do their homework VERY well as there are lots of unscrupulous people out there, but not all debt consolidators are equal. If you are drowning in debt, look into this option but, do your homework first.
What I said was that they are run by credit card companies - and they are.
The fact is that they work in the credit card companies' interest in this way.
Regardless of how overwhelmed with debt a person is, how huge the debt is in relation to a paltry income, even if they have no house to lose, the "counselors" will ALWAYS push the debtor in the direction of payment plans or consolidation and will not recommend bankruptcy or default, even when that may be the best option for the debtor.
When the debt is relatively small, they may be a good route, but in my case, the payment plan they offered me would not have left me enough money to buy food or pay rent. After some investigation and a lot of thought, I decided that walking away made more sense. I had to sacrifice my credit rating, but it's worth it, and there is a statute of limitations on unsecured credit card debt.
The OP's kids probably would do okay with a CC-industry-sponsored counselor as their debt is pretty small and should be manageable if they get their other expenses down, but personally, I'd rather consult with someone who is not connected to the CC industry - like ACORN.
They have one and that means you need one too. I know it's more money. But sometimes they can be worth thier weight in gold. Then telling her that will have a sheriff serve her at work. To me that's a threat to publicly humilliate her. What is the purpose of them notifying her that they will notify her of a court date while she's at work? Just do it. The lawyer may call them and tell them that they are not contact her at work. All communications including subpeona's are to be directed to him. I also find it strange that they will not accept a cashiers check. The lawyer may advise her to send them a cashiers check. So that if they return it. They have refused to accept payment and forego all right of collection. Any futher attempts at collection will be harassment. You can't keep on calling people insisting on payment and then refuse to accept that payment. That's not debt collection. It's harassment. Debt collection is you send them money and they accept it. Like I said get a lawyer. He may have some pleasant surprizes for them.
27. well, libraries often offer days with free lawyer consultations...
hiring one on retainer at this point wouldn't be that good of an idea, though. don't know if you have a case and likely haven't the funds to pay either. but there's a lot of pro bono work going on out there, so it's never a bad thing to look around for an advocate to speak for you.
39. Good advice. Just MO, but the best money spent right now
would be a CONSULTATION with a lawyer who specializes in bankruptcy. The credit card people are scum, as are the collection agencies.
I am not a lawyer, but it seems to me that they need someone who can show them ways to protect their interests. That would be a lawyer. Consultation fee well spent, IMHO. This whole thing smells to high heaven. Sounds like thug tactics to me.
19. That could be a bluff about the sheriff coming to her work.
I believe collection agencies are not allowed to contact people at work according to law. (And it doesn't make sense to me that a sheriff would be involved in a cc debt; "served papers" requiring what?) Of course, that could have been changed, I don't know, but collection agencies often do things they aren't supposed to do because most people don't know what's against the law and the agencies try real hard to scare people into paying. Good luck to your daughter with this whole situation. These companies are disgusting.
25. I think it's the entirety of finance charges and fees plus 1% of the principal
Edited on Tue Feb-05-08 02:19 AM by fishwax
so if they've been short on a few payments and defaulted to a rate in the high 20s or low 30s, then the interest rate plus late payment fees plus one percent of the principal could wind up around 4% ...
26. Some collection agencies will lie & say anything to get the debt paid.
They are obviously playing hardball but don't have a leg to stand on, plus I'm pretty sure that it's illegal to harass someone at work. I think finding a lawyer and getting a one time consultation sounds like a good suggestion. I hope it works out!
Also, I'm shocked about what you were told about all those repossessed homes in California! :wow:
29. Jt is because of shit like this that I never got a credit card
These sorts of CC hassles have been going on for years and years, but lately have been getting worse. I told myself a quarter century ago never to get a CC and I've never felt the lack. My credit is good, I don't have to worry about these sorts of hassles, and I stay within budget.
What gets me is the increasing proliferation of credit card use. When I was a kid, people didn't use a CC unless it was some sort of big purchase. But as the years have gone by it has become more and more acceptable to use a CC even for small purchases like a cup of coffee. Just insane. In fact the CC companies are encouraging this sort of usage, put that cup o' joe on the card, and keep paying it off for the next five years.
I'm sorry that your daughter and son in law are in this shape. Hopefully that can get out from under this mess, and once they do, go to a strictly cash only basis. They will be better off for doing so.
I carry only one, with a low limit. I pay it off completely every few months, and I know it frosts their asses. The problem, according to the credit reporting agencies, low-limit credit cards look bad on your credit rating. This is all a big, rigged game. The CC companies, AND the government want the populace to be in debt. It keeps the masses compliant so to speak. I encourage people to not get or use credit cards anymore, and start hurting the CC companies for a change.
33. Why does it have to come straight out of the checking account, I wonder?
I've never heard of anyone not accepting a cashier's check. What about if she paid it in cash - the actual bills say "legal tender for all debts public & private" (or at least they used to; I haven't looked at any US currency lately.) Could they refuse that?
I'm missing something, I guess. Sounds very strange that they're dictating where the money comes from and the form of payment like that.
This is one of those situations that would make a person want to get the entire amount in pennies and send it to them postage due. But that probably wouldn't work either. They'd just refuse to accept the package.
60. They tried to do that to me about 10 years ago
I was in college and got in trouble with a credit card. The collection agents wanted my bank account number. I told them I didn't have one. They then asked me to give them the account number of someone else in the house. Like I'm gonna give them access to someone else's bank account. I offered to send them a money order but they refused.
I was paying a credit card bill but I'd just ran out of checks and a new box was still in the mail. So I decided to pay over the phone with my debit card. All my other bills I can do this easily, sometimes with a minor process fee. But the credit card company wouldn't allow it, I had to dig up my banks routing number, the account number, and pay a $10 fee. IMO, it's a scam to make paying the bill harder, so they can charge you more fees.
Especially that the CC company will only take an EFT payment for a "settlement." Most legitimate companies will take payment in full via a cashier's check or money order. They should have been able to work out a reasonable payment plan with the creditor, since they've obviously shown a willingness to pay something on a regular basis. Judging by your post, I would also assume that they didn't recieve anything in writing from the agency. It sounds like the creditor and/or collection agency may be violating the Fair Debt Collection Practices Act. There is more on that here: http://www.ftc.gov/bcp/conline/pubs/credit/fdc.shtm
Good luck, and I hope these sharks finally leave your daughter and her husband alone.
41. I've always believed the correct answer to this sort of situation is "Call my lawyer".
Edited on Tue Feb-05-08 08:39 AM by Tesha
I've always believed the correct answer to this sort of situation is "Call my lawyer and discuss it with them".
*EVERYONE* should have a family lawyer. And the occasional few hundreds of dollars spent on your family lawyer (for a proper will, living will, advance medical directives, inspections of Purchase and Sales agreements and mortgages and the like) can be money very well spent.
And if you have a family lawyer that you occasionally do business with, then when this sort of thing pops up, you simply say something like "I don't understand how what you're asking for can be legal; please call my lawyer at 603-555-1212 and discuss your demands with him/her."
Merely saying those magic words often "breaks loose" an otherwise difficult situation; apparently, if you are perceived as being able to defend yourself, they're not quite so quick to try and take advantage of you.
That line about a Sheriff coming to serve her papers at work is a line of shit too. Collection people are the biggest scumbags on the planet and they just love to try to intimidate people, ESPECIALLY WOMEN. These assholes will simply keep harassing her with calls and letters. That's how they operate. I don't know how many on this board are in the collections industry, but I can tell you that in this day and age, if that's the line of work you're most interested in, GO TO HELL! People that make a career out of playing tough guy from the safety of a phone are spineless punks. What gives these shit-heads the right to intimidate and make peoples lives fearful. It's time we all told the credit card companies, (who have been earning billions in profits, and more than enough to buy politicians), to simply fuck off. We the people aren't going to take your intimidation and harassment anymore. Tell your daughter not to worry too much about it. I don't think they will even pursue a wage garnishment if she's paying what she can. If they took everyone to court for a summary judgment of wage garnishment who owes them a ridiculous interest rate, the legal system would be so flooded, it would come to a screaming halt. Remember this too, they would rather not retain attorneys on their payroll. It's cheaper to hire monkey's to call and harass people.
I defaulted and dealt with them for a while - eventually I got a phone number specifically for them to leave their dumb voice mails on.
I gotta give them credit for being tenacious though. I used to tell them "Sorry, I have no money at all at the end of the month after food and rent to pay you".
And they would go on and on and on like I personally owed THEM money. The funny thing is my debts have been charged off for a couple years, so these collections outfits have bought my debt form visa, MC, whatever, for DIMES on the dollar (balance), and then they act all high and mighty.
Oh, and the other bonus; if you wait them out long enough, you can "settle' the debt for like 30% of the principal. When they call, you just make an offer. They WILL eventually accept it. I've found that it works best to make the offer in writing. Also offer them to pay off the principal, that gets their attention too. In the coming months and years, the CC companies, as well as the collection agencies are going to be getting very desperate for any revenue they can get coming in. We are going to find ourselves as consumers in a good position to negotiate these settlements.
they will tell you anything to collect (and trust me, now that they think she has a lifeline in her mother, they will be even harsher) They won't actually sue for that little money, it's small claims, better to write it off than try and fight to collect (and take a chance that somewhere they forgot to cross a T or dot an I.)
the first thing she should do is basically say "ok, look, this is what I can pay you, month by month, do we have a deal, or not?" offer to set up six months of EFTs in advance on certain dates (in writing, of course). they are almost certain to take the deal, they just want something, anything. it's not worth their while to sue someone for $5,200, it's not even worth their while to keep harassing you too much, if they can get something. They depend on intimidation tactics to get people who are skipping out on debts to pay, but if she really can't pay, they'll work something out.
by the way, you are not helping her resolve the issue by being directly involved. you just made it harder to settle for less than the amount owed, because they now think there is money behind her she can get, if she really needs it.
Read the part about "Stopping Annoying Tactics". The collection agency has already violated the Fair Credit Collection Practices Act. You can google to your hearts content and reassure your daughter that they cannot and will not do what they've threatened to do. However, it looks like a good first step for her to do -today- would be to send a certified letter to the collection agency demanding that they stop contacting her over the phone and that they cannot contact her at work.
Or you could hire a lawyer to deal with it.
On a side note, it looks like you're going to be helping them get their financial house in order. That is a good thing - they aren't being financially responsible as getting oneself in so much debt that one cannot make the minimum isn't exactly responsible, unless there were unforeseen medical expenses, etc. Once you get them on the right track, make sure that their finances include an emergency fund.
Us old fogies have our money tied up in real estate, which isn't selling right now. Many of us are also on fixed incomes with no hope of raising credit to pay credit. In many cases we've 2nd mortgaged and line-of-credit'd all the value out of what real estate we have. We drive old cars not worth repo-ing and we've been wary of jumping on the HD-TV or other big ticket item bandwagons 'cause we remember the Beta fiasco.
There's no point in going after the un-employed or those not making any payment - they're about to become homeless anyway.
Youngin's are still willing and somewhat able to make the attempt to pile credit on top of credit. They have yet to become jaded with the finance company's bullshit.
Jesus had no issue with prostitutes, tax collectors and the non-heterosexual (look up his thoughts on eunuches). He had it in for the money changers.
Edited on Tue Feb-05-08 01:27 PM by backscatter712
I know how fucking horrible having a debt like that hanging over your head is.
In my case, I was "judgment proof" (translation, I was unemployed, didn't own a home, lived in my parents' basement, owned a POS beater of a car that wasn't worth going after either - suing me would have cost more money than they would have been able to recover.)
It is possible to get through this. I've been there, got the t-shirt and the nasty letters and the phone calls, and I eventually did come through to the other side. Today, I owe NOTHING!!! Zero. It can be done.
I'd say lawyer up, and see if the lawyer can negotiate a payment plan or a settlement with them. It becomes a lot more painful to the creditors if the threat to sue turns into a real trial, with endless paperwork, depositions, etc. rather than a five minute hearing with a default judgment. They'll be motivated to cut a deal with you.
Also, the lawyer would know the details on collection law, specifically the FDCPA (Fair Debt Collection Practices Act) and can call them out on violations. If they crossed the line too much, they may be owing your daughter money...
My experience is that since your daughter and husband have jobs and income, they probably WILL come after them with a lawsuit (in other words, they're not judgment-proof.) My guess is that the threat of sending sheriff's deputies to her workplace is to officially serve her with notice of the lawsuit against her. In other words, they won't arrest her, just hand her a whole bunch of papers with nasty legalese threats on them, tell her "You've been served!"
If the collectors are threatening her with arrest, that IS ILLEGAL, a violation of the FDCPA. Lawyer up and call them out if that's the case. Also illegal is threats of public humiliation, calling employers/spouses, making a scene at your employer.
Call an attorney and inform the collection agency that you are represented by legal counsel. They must stop calling you the minute they hear the word "lawyer". It is illegal to continue calling once you have informed them of your legal representation.
Inform the agency you will see them in court. Let a judge decide. They will lose interest very quickly. Even if they pursue it in court, you may be able to get fees and interest waived and settle for a much lower amount.
I had one card debt discharged via legal negotiation at less than half the original amount. In a lease dispute the collection agency disappeared when my lawyer sent them a 3 page discovery request.
Please, get a good lawyer. They know how to deal with these guys.
62. they can't extort the full amount from your children like that
it is better that you do not get involved in any direct negotiation with the credit card company. It is their debt not yours. The settlement needs to be negotiated on the basis of what your kids can truly pay.... not unless you want to be generous and just bail them out. 5K is onerous but not impossible to pay off given time. It is not pleasant but it is a good lesson for them to pay it off by themselves (or at least mostly by themselves... mom can step in periodically with a "present" along the way -- depending on how you are feeling).
The credit card company wants that non-performing asset off their books so they took a write off and gave it to the collection agency. It will not go to court any time soon. Credit card companies are next in line after mortgages and home equity loans to be problematic. You will hear all about it soon.
If the agency is truly serious and hands it off to the attorney, the attorney will write them a letter requesting payment. Courts dont want to be bothered by penny any disputes -- and as large as this seems to you, it is still small amount of money. They want to see the two parties work it out by themselves and not trouble the court. So even if an attorney gets it, he must try and work it out or have one real good reason why not.
So my advice. Get to know the law and document any and all violations of the law. You cant just run around threatening court action. So depending on the verbiage used, that is a violation. Have your kids work out a real budget as to what they can truly stick to. Then they must talk to the credit agency and work out a payment plan. Do not get bullied into doing more than what you can realistically pay. Do not make a false promise and tell them that when they press you. Be firm and clear and repetitive. Tell them you can not do anything more than this and there is no sense in the credit agency being aggressive and pushing you into a promise that you can not keep. Then stick to your guns. Document all conversations and follow up with a letter. When you reach an agreement, get that agreement in writing and stick to the letter of the agreement. Make ALL payments EXACTLY as promised. Really think about what you can do. That way you will not get hauled back into court.
Do not take that write off promised. It is not a real write off. The agency will report the debt to the IRS as income and you will pay taxes on it. If you want to negotiate a lump sum write off get it to be 30-50% of the amount due, so that way you are really writing off money. That is unless it is to your advantage to pay off the debt today and and then pay a little bit more in income tax next year.
There is a reasonable chance that this is a bluff.... They purchased a debt for 5K for some fraction of it. An attorney will charge them $500-1000 to take it to court. Statistically, they don't have much hope of seeing 100% of the money. So they are risking paying the attorney to get a judgment and then still not collecting on the judgment. Add the cost of running an office and paying that person to harass you and that's not a whole lot of money left over. Let's see... they've spent at least 1 hr of salary to harass you. And they must be paying $15/hr to the folks to make those nasty calls (people dont do this for the minimum wage) ... so that's at least $15 bucks less on a thin profit margin.
Also, they haven't put their demand in writing. A court will need to see that. Without it being in writing, the court doesn't know who said what to who. So you have at least some time to deal with this. They need to write you a letter about what they want and when they want it. No letter. No court.
68. A good payment record means nothing if you pay late or not the
minimum even once sometimes with some cards and they get away with it. If there are any assets that they can liquidate to come up with that timely payment they should do it ASAP to get out from under this. It may even require selling a car and taking the bus but it will be better than going through the mess she will have to go through otherwise. If that payment is to a collection agency, then forget it and get a lawyer. The collection agency payment will not help her credit or even get them off her back. They are truly evil people. This is the house that Reagan built.
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