Debt Collection - what to do

[percyk]

Debt Collection - lost

Hi everyone.

I just found out that one of my CC is going into debt collection and idk what to do.

Approx 13k and the CC company told me that I should receive a letter in 7-10 business days from the collection agency

At this point idk what I should do. Obviously I know ruin my credit score but do I pay this off so it will show paid on my Credit report ? I cannot pay the lump sum but I can do monthly payments. Never happened to me before so I am not sure what to expect. I considered line of credit to pay it off but realized my score is so shit I probably can’t qualify.

Is it possible for me to improve my credit score in the next year or two if I make timely payments to the debt collector? Even if I eventually pay it off let’s say in a year, will I even qualify to get mortgage anymore if it shows as in collection - paid ?

I’m just stupid with poor spending habits the past 2 years and now I’m scared and I definitely won’t let this happen again.

 

[mashley44]

@percyk Well the debt collection company will contact you. They will likely push to get as much from you as fast as possible. They may also phone you a lot. This happened to my ex once. You can send them a cease and desist letter (registered mail so you can prove they get it) and then they can only contact via mail. Be prepared for some tough negotiating and threats on their part, they are used to dealing with many people who will not pay or lie about repaying.

Assuming you can come to reasonable terms and you make the payment schedule they will likely be reasonably civil. Depending on your situation you may be able to negotiate a reduction of what is paid. There are in Canada, at least, non profit debt counselling services where you can get a consultation and they can help you to negotiate this, prepare you to deal with the collection agency and give you help in moving forward with creating a budget, etc. Avoid any for profit debt counselling service.

I think the biggest thing I can say that helped us when we went through this is to be honest and open about what you can repay and then stick to the plan. Once we had to miss a repayment date but we called in advance and they were OK with that and worked with us. Try to avoid threatening and abusive language as that will only play into their hands if it goes to court. And see a counsellor if you can, it takes a lot of the fear out of the situation and the collection agency will use fear to try and get as much money as fast as possible.

 

[percyk]

@mashley44 Thank you for your input.
How long did your ex take to rebuild her credit ?

 

[mashley44]

@percyk We eventually bought a house and folded her debt in with the mortgage. After 7 years her credit score was clean and she had been using a credit card and makeing all payments so that helped.

 

[percyk]

@mashley44 Oh wow, that’s awesome to hear!
One thing I’m worried about is my lease on my car is expiring soon and I might have problems renewing the lease… idk if they will check my credit for renewals though

 

[mashley44]

@percyk I think they will, a counsellor might have information about how to deal with that. I owned my vehicles so it never came up.

 

[percyk]

@mashley44 Ahhh I see. Also wondering — if I make monthly payments to the CA, this is different than consumer proposal right? Or would it be the same thing lol also, I read elsewhere don’t ever pay from a bank account but is there other ways of payment ??

 

[mashley44]

@percyk We paid from an account but we had a specific account for just that and with a different bank than what we used for our daily stuff. And yes this will be different than a consumer proposal or a consolidation loan as it has gone to a collection agency. I guess it depends on a number of factors like what assets and other liabitlites you have. I dealt with these guys a long time ago and at that time they gave me a free initial consultation. there may be others out there now. The key is to make sure they are non profit.

https://creditcounsellingcanada.ca/

 

[heismysaviour]

@percyk Once the collection is paid, you will be fine to get a mortgage. Don't worry... you haven't ruined your life forever.

The credit collectors have a 99% chance of veing shitty to you.
It's their job to inspire fear in you so you pay faster. They work on commission.
Don't let it rattle you.
Do what you can do when you can do it.
They won't like it. They may make fake threats... just hang up if you've had enough or better yet...get an email and only communicate that way.

Avoid a consumer proposal. It can bar you from some future jobs by taking one.

Your credits are going to take a hit, but it will recover!

Once you pay it down to an amount close to what you potentially could pay off lump sum, call in and offer a low ball settlement.

Once the debt is cleared, your rating will shoot up just from that.
You could honestly have it back to a fair rating within a year or two.

 

[percyk]

@heismysaviour Thank you .
I’m worried that they’ll keep calling me non stop — is it a bad choice to not answer the phone ? If I do, do I just give them my email to tell them to email me?

Sorry for my ignorance but what’s consumer proposal? Is that like a debt settlement ?

I read on other threads that I shouldn’t pay from my bank account, but is there other form of payments accepted ?

Thanks for responding, wish I wasn’t dumb with money … but lesson learned

 

[heismysaviour]

@percyk It's OK, you're not dumb! We all make mistakes.

Don't answer any of their calls. They will call you as much as they are legally allowed as it's just part of the job description.
*I briefly worked as a debt collector. It's the worst. But I was also very good at it.

Call them when you want to talk to them.
If they are rude, just say, "Sorry, I'm going to end the call if you keep speaking to me like that."
They will shift gears to keep you on the line.

You can get an "account number" for the debt account so you can set it up on your banking like you were paying any regular bill.

Do not give them any information beyond your email/phone number.

Consumer proposal is different from a settlement.
A consumer proposal works on your behalf to lower the debt amount, and the can bundle debts... you give the consumer proposal people money, and they pay the debts on your behalf.
They charge a fee, it's restrictive, and works for some, I'm sure.

 

[percyk]

@heismysaviour Ohhh I see.
However if I would like to make arrangements to pay this off let’s say within a year , is it better then to just answer their initial call and get that account set up?

I know this will stay on my credit report for 6 years even if I paid it in full in a year, but if I’m thinking to buy a place in 2 years, I am assuming lenders will prefer seeing this as paid in full than still being a open account.

Also from your past experience as a debt collector — is there any possibility that let’s say I am able to pay this off as monthly payments within a year and then have this negative report to be “paid to delete” off my credit reports ?

Thank you once again for responding, I really appreciate it

 

[heismysaviour]

@percyk You will need to have it paid off before pursuing a mortgage.
Once your credit bureau shows it is paid and your credit is at least 630, you're good to go, but wait until you score is at least 720 to get better rates.

The debt collectors can not remove it from the bureaus, only show it as paid.
It's not the end of the world to have a blemish.

You can tell the collectors what you will be doing.
They will always call for more, ignore it.

Honestly, just pay how you want to pay and don't call. * Just call in and ask the number to set it up as a bill pay.
You don't get brownie points for calling in, and they don't care. You are a number on a spreadsheet.

Take a deep breath. No one has any control over you, and you already have a clear plan on how you want to handle this.
Future you, (with a mortgage) is already looking back on this wishing you didn't worry so much!

Also, shop around for a good mortgage broker before you even head down that road.
The good ones will counsel you even from where you are right now to where you want to be.

 

[percyk]

@heismysaviour Thank you for your kind and encouraging words. I have asked the same in other threads and it almost made me so hopeless , stuff like I’m screwed for the next 7 years, no broker would want to lend to me etc , I got so depressed.

I do believe in myself and that once this shows as paid in full that mortgage brokers will be able to help me secure a mortgage even though it’s a recent collection …. At least that is what I hope for

 

[heismysaviour]

@percyk I work in finance and am familiar with mortgages.
You absolutely will be able to get one, don't stress!

 

[joda22322]

@percyk Please, someone, correct me if this isn't true. I've never been through this process, but I've heard that if a debt collection company purchases your debt, they have 30 days to contact you, either through phone or mail, and they need a response. If no contact has been made, then they can't proceed with the collection. Again, I'm not sure if this is true. If it is, pass it on to unethical life tips.

 

[percyk]

@joda22322 Hmmm I didn’t know about this. But my debt isn’t sold off as I don’t think Amex sells their debt , they only assign CA

 

[joda22322]

@percyk It was explained to me that that is the reason they can buy your debt at pennies on the dollar. Less risk for them that way. Also, the major cc companies recoup some of the losses and don't have to pay for employees to make calls to collect the debt or send out a bunch or paperwork. Which probably doesn't cost them a bunch anyway. Not with the interest they collect on other cc holders.

 

[joda22322]

@percyk Also, I'm not sure where you're from, but this may be a canadian thing if it's true.

 

[percyk]

@joda22322 I am from Canada !