If you’ve fallen behind in your bill paying we don’t have to tell you how stressful this can be. You’re probably receiving calls from your creditors or even debt collectors. The last thing you might want to do is talk with your creditors but you could negotiate with them, as well as with debt collectors, to improve your situation. Here are the best tips for doing this.
#1. Don’t be a drama king or queen
No matter how annoyed or angry you might be with the person on the other end of the line you need to stay calm. Losing your temper will get you nowhere. If you find you’re on the verge of losing it, tell the customer representative that you need to talk with him or her later and then hang up. If that person is not treating you considerately tell them when you call back you’ll be recording the conversation. This generally works to keep those people on good behavior.
#2. Don’t be afraid to ask questions
If you’re talking with a debt collector who says that you will be sued or that they’ll garnish your checking account if you don’t pay up, ask for specifics. “Just when can I expect to be notified of the lawsuit?” Or “when will you be able to withdraw the money from my bank account?” There’s a good chance that some of the threats the debt collector is making are illegal so the more information you have from him or her, the better.
#3. Have your story ready and stick to it
That customer service representative on the other end of the phone doesn’t want to hear a 30-minute long story with all the details of why you can’t make your payments. However, you do need to advise her or him of your hardship situation and that you’re trying to get caught up. It can be helpful to work out your story before you make that first phone call. It should be no more than a few sentences long. For example you could say, “I’ve had to take a significant cut in pay and can no longer make my payments but I do want to get square with you,” or “my wife lost her job so we have only half as much income. I do want to work something out” or “my interest rates have gone up so dramatically I just can’t keep up any longer but I hope we can work something out.” The important thing is to be truthful and tell all of your lenders the same story. As a very wise person once said it’s hard to remember lies but easy to remember the truth.
#4. Always take notes
Before you pick up the phone make sure you have a pen and paper ready so that you can take written notes when you talk with a customer service representative or collector. Write down that person’s name, when you had your conversation and what it was you discussed. This will both help take the emotion out of the phone call and provide you with a record if there’s ever a dispute about what was discussed.
#5. Decide what you can afford
Again before you make that first call sit down and go over your finances very carefully to determine what you can afford and only agree to realistic amounts. You won’t gain anything if you agree to payments you really can’t afford. It’s usually possible to settle a debt if you can come up with the cash to resolve it. But make sure it’s an amount you can afford. If you agree to a payment plan be sure to understand your monthly payments and the total amount you’ll pay over time.
#6. Keep your bills from going to collection
If you have missed payments or if you’ve been late you may be able to work out an agreement with your creditor before it’s sent to a collection agency. A late or missed payment will damage your credit score but if the account goes to a collection it will result in even more damage. There is a prevalent myth that so long as you’re paying something towards a debt – even as little as $5 or $10 – it can’t be turned over to a collection agency. That’s just not true. And once a debt goes to a collection agency you have no option. You must deal with a debt collector.
#7. Get it in writing
If you are able to get to a payment arrangement or a settlement agreement be sure to get everything in writing before you pay that creditor a single cent. If not, the terms could change and it would be your word against the customer service rep or the debt collector. There have been numerous cases where people have been hounded over balances they believed they had paid off years ago.
#8. Put it behind you
If you pay off an account that’s gone to a debt collector or catch up on an account this will do nothing to improve your credit unless you can get your creditor to agree to remove the late or missed payments from your credit reports. If this is not possible you need to just put the past behind you and start work on rebuilding your credit.
#9. Get some help
If you simply can’t work up the courage necessary to negotiate with your creditors or if you are not able to come up with repayment plans that work for you, you might want to contact a credit-counseling agency for help. These agencies have a lot of experience working with creditors and could help you work out a debt management plan (DMP) that would put you back on track. The best ones of these are nonprofits and charge little or nothing for their services. In fact, your first session with one of these agencies will probably be free.