Getting out of debt...how to handle collectors?

[charley]

As long as where talking about ethics and responsiblities of debtors (customers) to pay their bills (and they should to the extent possible), let's also talk about ethics and responsiblities of creditors (businesses) and collection agencies.

I do believe that most businesses are ethical organizations with the intent of fairness and honesty to their customers, but there are exceptions. In certan industries the exceptions are so common that it's a scandle. Certain industries are rife with corruption that hurts consumers.

 

One is the credit card industry. The only place I'd even consider getting a credit card is from my local bank, or ideally a local credit union. I do not trust all the others who constantly send me unwanted credit card applications clogging up my mail box.

 

Some of these unsolicited, unwanted credit cards may be from companies I'd consider to be legitimate and ethical companies. Chace being one that comes to mind because I think they're an OK company. However, I can get a much better deal on a credit card through my local credit union. My local credit unions offer lower interest rate credit cards, and for sure I know they've checked out the card issuer for me.

 

Many of the unsolicited credit card offers are from companies whom I suspect are not ethical companies. I'm certain many are not to be trusted. Unsolicited credit card offers are the equivalent of a drug pusher trying to get you hooked on something bad for you. The terms of these cards are often bad. The also often offer these cards to people who are not ready to have a credit card.

 

Get your credit card through your local bank, or ideally your local credit union where you have a savings, checking, and debit card already.

 

====================

 

Then there's the medical profession and industry, and hospitals especially. I do believe that most doctors are caring, honest people who want to help you. However, some doctors (a minority I'm sure) are bent on ripping off the medical insurance industry at your expense. Also, some medical insurance companies are bent on ripping you off at the possible expense of your health. Most insurance companies are fair, ethical organizations that take your premiums, and are also there for you when you need them. Others are bent on taking their customers premiums and then doing little or nothing in return when the customer needs them, even when the medical care should be covered by the insurance the customer has been paying for.

 

I'm lucky because I now have very good group health insurance.

 

Drug companies do many good things, but some of them seem bent on finding creative ways to gouge both the consumer and the medical insurance companies.

 

Hospitals. Don't even get me started. Well, to late because I'm started. Some hospitals are good organizations, but many are bent on gouging the consumer and the medical insurance. Some hospitals don't even give such good care either. When my neck was broken, they left my in a room by myself for 3 hours without examining my neck. All they'd done was check my vitals when I came in by ambulance was ask me a few questions, which included my insurance info of course. I was strapped to a board and digging in my pocket for my wallet and unable to see the contents of the wallet due to my glasses being gone. We finally got the insurance stuff cleared up. Then they left me by myself in a room for 3 hours. They finally did start examining my neck 3 hours later, after I'd threatened to leave and tried to unstrap myself from the board. About an hour later they determined my neck was broken and suddenly they had some concern. They released me 6 hours later in a neck collar, crying from the pain (still no pain meds), with a paper prescription for pain meds that I couldn't fill because I couldn't get around well enough to go to drugstore. They still billed for good care though, and I still paid them. I later got my good care from private doctors specializing in spine and arthritis at their private offices.

 

Hospitals are typically non-profit organizations. They take in millions and billions of dollars of dollars, yet they are non-profit organizations with associated tax breaks, tax benefits, and in many cases they are exempt from paying tax. Who else can make millions to billions and be tax exempt?

 

See this link about non-profit organizations. link removed

 

Did you know that most hospitals are non-profit organizations? i.e. - a charitable organization? It doesn't seem that way when you get your bill, does it? The churches and other organizations that typically own or sponsor hospitals are taking advantage of the biggest business tax loophole in history and they're laughing all the way to the bank and are partly to totally tax exempt doing it.

 

How do you think certain church leaders can afford limos and palaces in the name of charity?

 

If hospitals are going to make certain organizations wealthy and avoid many or most of the tax obligations that other businesses must pay, then they could at least do it without gouging the public and the insurance companies so hard. They could also provide better medical care. Many hospitals do provide excellent medical care, but some don't, yet they charge the same either way.

 

So while I do agree that consumers need to behave ethically and responsibly, so should businesses.

 

Now I don't even have room in this post to rail about the unethical practices used by some collection agencies, but I've already covered that in a prior post in another thread and how to counter those practices.

 

The Bush administration tipped the balance of power far in the favor of the creditor and against the consumer. This is especially the case with those questionable credit card companies that send out those unsolicited offers. So if my advice and knowledge may help to relevel the playing field and help the consumer, then great. I request that businesses and consumers both try to be fair and ethical to each other.

[charley]

If a person can pay their bills on time, they should. Be careful NOT to spend more than you can afford, or borrow more than you can pay back on time. Paying your bills on time is ethical and it's also the best way to improve and protect your credit and financial future.

 

However, sometimes people have catastrophic medical events, or other unexpected disasters, or a divorce, or other situations that make it impossible to get out of debt, except by doing some negotiating for a reduced settlement(s) that they can pay, and other techniques I've described in prior posts in this thread.

[CharlesF]

I can see the point about healthcare. Some people go to the emergency room and absolutly can not pay. According to fedral law, the hospitals must treat anyone who comes to the emergency room. The hospitals then increase their cost to the other patients to cover this. If you have health insurance, your insurance company will actually negotiate with the hospital and then pay the bill. If not, you can be stuck with a very high bill (although you can also negotiate).

 

Also, health insurance has gotten expensive. One reason is that people sue the hospitals without limit and sometimes get billion dollar settlements. Some people stay unemployed so that they get govenment healthcare. If the got a job, then they would have to pay a significant amount of their salary for healthcare. This system is screwed up and needs to be corrected.

 

Medical billls aside, allot of people get credit cards and spend them on allot of stuff they don't need. Then, if they spent some amount (say $1000) and want to pay only $700, those who lent them the mony get screwed.

 

As for how ethical the credit card companies are, well they extend credit to some people who they shouldn't. However if they didn't extend credit to these people, they would be accused of discrimination. Remember, you don't have to take the credit. Just throw their junk mail away.

[charley]

I can see the point about healthcare. Some people go to the emergency room and absolutly can not pay. According to fedral law, the hospitals must treat anyone who comes to the emergency room. The hospitals then increase their cost to the other patients to cover this. If you have health insurance, your insurance company will actually negotiate with the hospital and then pay the bill. If not, you can be stuck with a very high bill (although you can also negotiate).

 

True. In my case, they wanted to see my insurance stuff even while I was strapped to a board with a broken neck in agony. Once they had my insurance card and had checked my BP and pulse, they showed no further interest in me for another 3 hours.

 

Also, health insurance has gotten expensive. One reason is that people sue the hospitals without limit and sometimes get billion dollar settlements. Some people stay unemployed so that they get govenment healthcare. If the got a job, then they would have to pay a significant amount of their salary for healthcare. This system is screwed up and needs to be corrected.

 

True enough in many cases. However, in my state, a mostly Republican state I might add, the laws about medical law suits are so heavily tipped in favor of the doctors and hospitals that they are nearly sue proof no matter what they do. I received terrible medical care at the emergency room when my neck was broken, and only some of that was because they weren't qualified. Much of it was because they clearly didn't care. I talked to a lawyer about it later and he told me, "In this state, unless they completely ignored your neck and instead sowed an extra breast on you, then forget about it."

 

Who says those people could get affordable health insurance, or even any health insurance at all, if they went back to work? Many working people have no health insurance. What if they had serious chronic health problems or injuries that required ongoing medical care? I had to cross that bridge myself when I went back to work after my crushed neck at age 25 and again after my broken neck at age 34 (two separate accidents). I've been through that twice and had to cross that bridge twice. Luckily, I do have good group health insurance after returning to work, but many are not so lucky. With all due respect, if you've never been through these things, then you don't understand. I was at one time a rather conservative Republican type. However, life has since kicked me in the teeth enough to show me the other side of the coin. That's how I became a moderate. Truth and fairness are in the middle, not at either extreme.

 

One of several things we agree on is that the medical and medical insurance systems need change and reform.

 

Working people should all be able to get good health insurance that they can afford.

 

Hospitals are a

multi-billion dollar industry

that gouges the consumer and medical insurance. Yet most hospitals are tax exempt, non-profit organizations. Their non profit status is a joke and we all know it.

Most hospitals are filthy rich and not paying any taxes.

 

Medical billls aside, allot of people get credit cards and spend them on allot of stuff they don't need. Then, if they spent some amount (say $1000) and want to pay only $700, those who lent them the mony get screwed.

 

True. I cannot argue with that. However, if the person is in a situation where they can pay most back, but not all (whether their fault or not), it is often in the interest of the creditor to settle just as it is for the debtor. I do not advocate intentional irresponsiblity. However, sometimes a person gets buried and has to dig out. Creditors and collection agencies willingly agree to settlements (sometimes) because it's in their best interest to do so. If not in their best interests, then they don't agree.

 

As for how ethical the credit card companies are, well they extend credit to some people who they shouldn't. However if they didn't extend credit to these people, they would be accused of discrimination. Remember, you don't have to take the credit. Just throw their junk mail away.

 

It is not discrimination to refuse to issue a credit card due to credit history, score, debt ratio, employment history, residence history, or other legitimate financial related reasons. Race is not a question they ask.

 

Those unsolicited credit card offers are pushing a product that was never asked for, never requested. Many times they are knowingly pushing them on people who really should not have a credit card. The terms of those cards are typically grossly unfair to the consumer and they are offering them to people who don't know any better. The credit card industry bears scrutiny for these practices and needs reform. Local credit unions and local banks are much more responsible and trustworthy in their dealings with the public.

 

It should be against the law to offer credit to anyone who didn't request it. This would be better for everyone and would also reduce identity theft, IMO. It would protect the consumers and creditors alike.

 

I say the above with all due respect.

[charley]

If you pay your debt in full, your credit history will say "paid in full". It will indicate late if it was late, but at least it shows you paid in full. If you negotiate a reduced settlement, then your credit history will say "settlement in full" (and also obivously indicate late).

 

Paid in full means you paid in full. Settlement in full means you negotiated a reduced settlement. Obviously right?

 

The thing is that when future lenders and creditors look at your credit history to decide if they want to loan you money and at what rate, they will be less bothered by paid late in full, then paid late settlement in full.

 

Look at it from the point of view of the lender. Imagine you are the lender in the future and a person comes to you asking for a loan. You see on their credit history that they paid late, but in full. You're concerned that they paid late, but at least you know they did pay in full. Now imagine you see "paid settlement in full" on their credit history. Now you are probably more concerned because you know that not only did they pay late, but they did not pay the full amount.

 

thereforeeee, if you are the lender, you would likely charge a higher interest rate to someone who has settlement in full (obviously late), than if they had payment in full (late). As a lender, you'd be less likely to make a loan to a person who had "settlement" in full on their credit history.

 

Also, I assume that "settlement in full" will lower your credit score more than "payment in full (late)" would.

 

If they're going to put "settlement in full" on your history anyway, then I'd definitely go for the lowest settlement possible. However, if they offered to make show "payment in full" on your history, then I'd pay the higher amount - up to $400 more if I could afford it.

 

I think it's worth about $400+ extra to you to get "payment in full" instead of "settlement in full" because settlement in full will cost you more interest on future loans and credit cards, or may cause you not to get the loan at all. It also costs about $300 to $350 to hire a credit clean up firm (last I checked) to challenge repeatedly to remove something from your credit history. If you do it yourself, it still takes that much of your time.

 

This is one reason why negotiating settlements should only be the last resort of someone who really does not have the money to pay in full. If you can pay in full, and it's less than $400 more, I'd paid in full because you'll save a lot of money on future loans. However, if you lack the money to pay in full, then do negotiate a settlement and be a tough negotiator and get the lowest possible settlement you can because it's going to show as "settlement in full" whether you get 20% off or 30% off or 40% off.

 

If I had to try to negotiate a settlement because I had no choice, I'd let them make an offer and then go from there. Try to end up with a settlement where you pay either 80% or 70% or less. Ideally, maybe you can end up paying 60%. If I had to make the first offer, then I'd offer 50%. I don't think they'd accept it, but then they'd make a counter offer and I can haggle from there.

 

Bottom line is that negotiated settlements are a valuable tool of last resort for both the debtor and creditor, but pay in full if you can. This with mediuim amounts of money (say few hundred to several hundred dollars). Now if were talking larger debts into the thousands of dollars, then the "settlement in full" rap on your credit history is less important than the dollars saved. If we're talking small debts, just pay them in full if you possibly can. Yet, if you have no choice (due to lack of money) then negotiate.

 

So if you have money to pay all in full then do so. If not, then pay the small ones (under $400 say) in full. Now look at the medium size ones ($400 to $1,000 say). If you have the money, pay them in full, if not, then negotiate and bargain to the best of your ability for the best settlement possible. Now look at your larger debts (over $1,000). If you can pay them in full, then consider that. If not, then negotiate. If the amount of the larger debt is more than a few thousand dollars I'd be tempted to negotiate in all cases, but at that point with that much money involved, I'd suggest you get some advice from your local loan officer at credit union or mortgage company, or consult your local CPA or attorney, or other qualified credit councelor. For larger amounts of money, I'd be inclined to err on the side of bargaining. i.e. - if in doubt negotitate it out.

 

Now if a larger debt is to the IRS, you need professional consultation with a CPA or tax attorney. The IRS cannot intimidate your CPA or tax attorney. CPAs are my preference for this type help because they know so much about it. However, I will say this, negotiating a settlement with the IRS will NOT affect your credit at all. There would be nothing saying "settlement in full" or anything else on your credit history. At least that has been my experience. However, I'd strongly advice you not to get in trouble with the IRS in the first place, if you can possibly avoid it.

[CharlesF]

What if you go to get your paycheck and your employer says, "I would like to give you 60% of your pay instead of 100% because, well, we are having trouble paying." It is the same scenerio when people negotiate with those who lent them money.

[charley]

Regarding Negotiated Settlements

 

I just wanted to add that although "paid in full" looks better on a credit history (and is better for credit score) than "settlement in full", "settlement in full" is much better than unpaid delinquent (unpaid late).

 

So if your debt is overdue and you can't pay it in full, then a settlement is much better than leaving it unpaid.

 

Just remember that once you negotiate a settlement, it's going to show as "settlement in full" no matter how much of a discount you get. For example a 10% discount (pay 90%) will show as "settlement in full" same as a 40% discount (pay 60%). So if you are going to negotiate for a settlement, then get the best settlement you possibly can.

 

Also, to remove "paid in full" late history off your credit, or to remove "settlement in full" history, you can then resort to repeated credit history challenges as explained in earlier post(s). You can do the challenges yourself, or hire a credit repair firm. See earlier post(s) on challenges.

 

Of course, it's easier to keep credit good in the first place than to repair it. However, once the toothpaste is out of the toob, then paying it off in full or by settlement and then after that repeatedly challenging the history is the only way to repair credit, other than just waiting X years for the history to drop off on it's own.

[charley]

What if you go to get your paycheck and your employer says, "I would like to give you 60% of your pay instead of 100% because, well, we are having trouble paying." It is the same scenerio when people negotiate with those who lent them money.

 

I have had businesses who were my programming or tech supp customers tell me exactly what you siad in your paragraph above and we negotiated notes (payment terms) for the balance, which might be a payment in full over time, or a discounted settlement paid in full at the time. That's unusual, but it happens, especially if you're a subcontractor, which I have been in the past. This has happened to me. I didn't like it either, but that's life and if they're really in trouble and not just jerking me around, then I was understanding. With one local business who I'd made a very complex custom computer program for, I accepted a settlement of $5,000 on a $15,000 overdue debt. So they paid me $5,000 in one lump and no more payments. We still do business on a net 30 basis (pay within 30 days), I support that program, and I hold no grudges, but I won't extend that company credit again. They have to pay within 30 days from now on, or no more support. So I've been on the creditor's end of a negotiated settlement before. I have not been on the debtor's end of it with a business because I paid my bills in full when I repaired my credit, but if in that situation again, I would not hesitate to negotiate a settlement, if I needed to. I have as a debtor negotiated payment plans before with companies, but I paid in full. The only time I've ever been a debtor who negotiated a reduced settlement aka discounted settlement was with the IRS. What I negotiated with them (with help of my CPA) was that they drop their outrageous loan sharking penalties and interest on those penalties and just let me pay the original principal plus interest on that principal. i.e. - no penalties or interest on penalties. That greatly helped me. They agreed and were fair about it since I had extenuating circumstances of a broken neck. God bless the IRS, they're a fine mess, but sometimes they're fair, and that's all I care.

 

A more common scenario is when an employer says to an employee, "We're having trouble so I have to cut your hours" or "Where having trouble so I have to layoff X number of you employees." These are common scenarios that happen everyday all over the USA. Very often the employer does not give the employee the same one or two week(s) notice that they'd expect from an employee who was quitting.

 

Some customers aka debtors are fair and some aren't. Some employers and employees are fair, and some aren't. I cannot argue the human condition or the goodness of mankind and I won't try. I'm only explaining the system and hoping people will use it responsibly. It is ethical and responsible to negotiate a settlement if you have no way to pay in full. If you must negotiate, then do the best you can to get the best reduction you can.

[charley]

While on hold today for over an hour with HP suppote, they made me the goat, but I had time to think, in between making a stink, of a rhyme about beating debt despair, for those who care.

 

God bless the IRS, they're a fine mess. Sometimes they made me swear, while other times they were fair, and that's all I care. All I know, is if you are slow, expect trouble and mo, but in the end, it will depend, partly on knowledge, partly on luck, partly on pluck, and partly on what's just and fair, because to some extent, the IRS does care, and tries to be fair.

 

Consult your CPA. No, that last part didn’t rhyme, but if this poem applies to you, then it’s time.