Paying off debt can become scary.
And there is a little-known world in debt collections...
I know. I worked in it.
Paying off debt is one of the big pieces to overall estate planning. Living debt free brings peace of mind. For various reasons, you or your loved one might be in debt. For the older generation, debt also brings with it many other elderly issues.
If you have debt, the inside world of debt collections is something you must
understand. I worked in some capacity within the field of debt
collections management for over ten years. I have the "inside scoop," so
to speak. Many of the "debtors" were baby boomers and elderly. And many
do not know the details of the
debt collection laws
that control what collectors can do or say to you, about scare tactics,
subtle threats, and illegal approaches. This page is a must-read.
The information on this page offers a general guideline in very simplified terms -- a peek into the world of debt collections. It is really much more complex. But it will give you a basic idea about this sometimes very startling world.
When paying off debt becomes unmanageable, you need to take debt assistance steps soon. Debt can become one of the very serious elderly stress issues. Or some elderly think they are too old to care about their credit report or collectors hassling them. They may get into the “You can’t squeeze blood from a turnip” mentality. They may ignore their debt or refuse to answer the phone, and hope it will just go away. Probably not.
Or that they are too old for anyone to bother for long.
If you own a home or property…beware!
PLEASE NOTE: We are not attorneys. This information should not be construed as giving legal advice, but only as helpful information through personal experience. There are professional organizations that can assist you.
A True Story
Here is a true story that I personally witnessed (and, sadly, one of many). Joseph was 93 years old and in a nursing home with dementia and other illnesses. He kept getting letters from a collection attorney about his outstanding credit card debt that was by now about 6 years old. He, of course, did not even know he was receiving the letters. Joseph's son finally called the collection office to let them know the situation and to please not bother him. T
he office did not care. And they would not talk to the son unless Joseph gave permission, which he could not do since he had dementia and was not aware. They were told they must produce Power of Attorney, which the son was finally able to do.
However, the collection office would not let the debt go. Why? Joseph owned property. So they sued 93-year-old Joseph in a nursing home, and took him to court. He could not attend, naturally, nor could his family. The collection office obtained a default judgment against Joseph and got a lien against his home.
They also succeeded in garnishing his bank account, because Joseph had income other than Social Security, disability, etc. Some of this income was not "exempt." The credit card account is still in arrears with interest constantly accruing, constantly increasing the debt balance. When Joseph dies the lien against his property must be satisfied and the collection office paid off.
They would not write off a debt even for a 93-year-old man with dementia in a nursing home, because he had property. This whole scenario, and dealing with the lien after his death, caused great stress to the family.
What Can You Do?
With credit card debt the clock is always ticking, and interest is building up (accruing), making paying off debt more difficult. If you miss a payment with credit card debt, your interest rate can automatically increase, per the terms of the contract. And your debt total then increases.
If your debt feels overwhelming, call the credit card company and explain your situation. You might ask for a new payment plan and request lowering the interest rate. If you are elderly and trying to work something out, there is a good chance they will cooperate. Even a small effort at paying off debt helps.
And if you are being called by collectors, especially if you feel you are being harassed, there are federal laws that govern collection activities to protect you, called the Fair Debt Collection Practices Act (FDCPA).
If you ignore paying off debt, various events will be set in motion. Welcome to the world of debt collections.
What Can They Do?
This is what can happen...The original creditor (the credit card company, a bank, medical facility, etc.) will try to collect on the debt first through their internal collection process. If that does not work, then they may send it to an outside collection agency. They work on commission and want their money – they can be aggressive. These are the guys that most often give debt collection a bad reputation.
Some, though, may help you with a debt reduction plan. If they can’t succeed with getting you to cooperate, they’ll send your account back to the original creditor, who will probably do a “charge off” -- they close your account. I
t may be closed out with them, but I can almost guarantee it is not totally forgotten. It may must be getting ready to go into the next phase. This all, of course, can be reported to the credit bureaus and show up on your credit report.
If you’re still not paying off debt...
your account can then be sent to a collection attorney who also gets a commission. They will first try to collect by letter and phone, but then may sue you and take you to court. Their goal is to get a judgment against you, and a lien against your property, if you have any, and garnish your bank account or paycheck, if possible. A judgment also goes on your credit report and will cause big problems for you.
Or they may give up and return your account to the original creditor. It can then be sold to a debt buyer. This is a very different level of debt collections. They now own your account and can be quite aggressive to get you paying off debt to them.
Remember, all this time interest is building up (accruing). All of these steps can take years and by the time you hear from a debt buyer you may have thought everyone gave up on you and you’re safe. And you’d sort of forgotten about that old debt. So you may not put two and two together, realizing this is that old debt. It will now have ballooned, sometimes far beyond the original amount, so you may think they are scamming you. But it is perfectly legal.
Sure, there may be some scammers out there, but most are very careful about federal and state debt collections laws.
If you’re still not paying off debt,
the debt buyer also can sue you and get a judgment, and lien against
your property, if any. Any of this can cause problems with your estate
should you die, and will leave a mess for your heirs to deal with.
Getting out of debt seem overwhelming?
As you can see, paying off debt, even if in small amounts, can save a lot of future headaches.
Before you decide to shrug if off and take your chances, check out options. There are debt reduction plans that can help you. Talk to an expert in the field of debt assistance -- perhaps an attorney who is familiar with debt collections, or Legal Aid.
You can ask a financial advisor about
debt settlement programs or a consolidation loan. Federal and especially
state laws regarding debt and collections can change, and an expert in
the field will stay up to date with this.
When considering a debt consolidation review, always make sure you check credentials. If you prefer, there are many Christian debt relief companies that can help.
The sooner you take steps for paying off debt in this process, the better. Seek help and enjoy debt free living.
To Work After Retirement