In this current economic crisis, there are articles floating around the internet and newspapers about how the banks are settling debts for less than the balance you owe and allow borrowers to negotiate the amount of debt to pay. The articles seem to say that people who have amassed large amounts of debt and could not make the debt payments that are now benefiting from bad decisions. As a result of the financial crisis, borrowers are paying cents on the dollar in the balance of their debts.
It is understandable that people are frustrated by this notion. Consumers who have regularly paid their bills on time, in full find this revelation to be unfair. On the surface, it looks like irresponsible borrowers are rewarded, while the rest of the population is expected to continue to pay all your bills on time.
There are many ways that credit card companies encourage borrowers to repay their debts. First, there is the threat of a lawsuit that scares people to pay. Creditors have the legal means to collect payments, such as wage garnishments, going after bank accounts, repossessing belongings and use of debt collectors. In addition to phone calls and court proceedings, the credit rating of a debtor will drop significantly and will take years to repair.
After trying to collect on their own, creditors often sell the debt to an agency collection, which can use more aggressive in their attempts to collect. Debt collectors, some of which are without scruples, can threaten to call the a debtor's employers, neighbors, friends or relatives. You can also use the threat of jail to scare debtors.
Creditors and / or collection agencies may sue the debtor in an attempt to collect, which could lead to the debtors' wages being garnished or assets that were taken (trials depend on the laws of State). If the debtor has no assets to repay the debt immediately, a statement against the debtor, the creditor will miss the statue of limitations on debt collection and continue to collect real indefinitely.
The reality of this situation, the numbers of radical solution that is written about are completely out of the ordinary. People who pay cents to settle their debts are often the end of their financial ropes. They have significant shareholdings, there is no fixed salary and assets. They have been harassed by creditors and collection agencies and have not yet paid. Basically, your creditors and collection agencies on behalf of employees of the creditors have lost almost hope of ever getting paid.
One must also understand that the solution of the debt is not easy or painless. Taxes can be evaluated on the solution, legal issues can and should assist the long-term damage to a credit report and qualifying debtor will not be easy to repair. Ultimately, the negotiation debt is an option for people who are in financial distress and significant, but still want to pay their debt. Not easy, out of jail free card for anyone in debt over their heads.
About the Author:
Mick Bernard is a Credit Consultant from Scottsdale, AZ. His company Credit Strategies is helping consumers clean up their credit nation wide. For more credit tips visit us at http://www.onlinecreditstrategies.com/blog/