Degrees of Debt
Creditors are in business to make money. As such, they do not want to lose customers.
However, the further behind a consumer gets on their payments, the less a creditor will be inclined to want to maintain a relationship with that consumer.
There are four degrees of debt that a consumer should be acutely aware of. Knowing these four degrees of debt can determine the steps a consumer can take.
First Degree: Thirty days or less past due
It is a fact. Unexpected emergencies can create financial trouble for the average family. Fortunately, creditors realize that bad things do happen to good people.
However, it is important that the consumer immediately communicate with the creditor and explain any unexpected financial hardship that will cause a delay with a scheduled payment.
Creditors should have an alternative plan available for consumers that can reduce the burden for a temporary period.
Some options may include re-financing of the debt, temporary suspension of interest, interest payment only, deferment of payment, moratorium of payments, or a temporary suspension of credit card privileges that should not have a negative affect on the consumer’s credit record.
The sooner the consumer makes it known to the creditor that they are in need of help, the better off the consumer will be.
Creditors are more able to assist consumers within a thirty-day window of the payment past due date.
Second Degree: Sixty to ninety days past due,
You might think that trying to resolve your past due debt on your own without the creditors help should be applauded. After all, you got yourself into this mess, you should be able to get out of it on your own - right?
Wrong!
The creditor will not care about your strong efforts or your good intentions. What matters is that the payment is late, period.
If you have waited between sixty to ninety days to contact the creditor you still may be able to get help. However, the creditor may compel you to pay the arrears on the debt.
A negative mark may appear on your credit report but the creditor may still be in a position to remove any such mark upon receipt of your past due payments.
Third Degree: 120 to 180 days past due
If you find yourself past due 120 to 180 days, most likely the creditor has made a decision to turn your past due account over to a collection agency.
In some instances, you may be assessed with late fees, interest, collection fees, processing fees and any number of other charges.
You and your account are now in a world far removed from the rest of the regular on time paying consumers. Your credit report has more than likely been dinged with a derogatory remark and your credit score has plummeted to new lows.
A collection agency will now exert hard collection tactics meant to compel and demand that you immediately satisfy your past due account.
Fourth Degree: Past Due over 180 days
The window of opportunity to communicate with the original creditor is now closed. Creditors focus on maintaining and handling more current accounts. Collection agencies have more control over the excessive past due account.
Negotiating a reasonable payment arrangement becomes more difficult and the pressure from the collection agency to get you to pay the past due account in full becomes extreme.
Your account may be evaluated to determine if the involvement of an attorney is necessary. Filing for a judgment by the creditor may also be considered.
Carlos D Cruz
ccruz@debtcreditlearningcenter.com
http://www.DebtCreditLearningCenter.com
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Add comment April 2nd, 2008
