Collections
Unfortunately if you do not make your payments as promised in some cases your file will be assigned to a collection department.
In the past this was an internal department but now with the size of most credit card and other lenders all collections are eventually assigned to a third-party collection agency. These companies normally collect a percentage of the debt they collect as their fee.
Collection agencies have to follow rules and you can normally find these rules for your state or province by simply calling your local government or searching online. Type in your” province or state name” and then Collection information into your favorite search engine and you will get lots of suggested places to begin reviewing your rights.
Collection agencies must follow basic rules when attempting to collect on a debt or judgement from their clients. These rules can vary from region to region so it is best to find your local agency and read about your rights.
Collection agencies cannot abuse you or threaten you. They can’t discuss your file with anyone but you without your consent. They must follow many rules so it is to your benefit to investigate these rules if you face a collection or seizure order.
Seizures are normally done after a judgement has been granted and the ownership transferred back to the lender or original owner.
It is important to know your rights when faced with a collection or seizure so make sure you investigate your countries laws and rules and your regional government laws and rules.
If a collect breaks them you can report them to the government and they will investigate for you. Never be afraid to do this to protect you and your family from abuse.
Bankruptcy and Orderly Payment of Debts OPD
Neither of these are a great option and your situation is desperate and in need of action to begin rebuilding and repairing the damage.
This chapter will give you an overview of both these options.
First thing to note is that every state and province has their own rules and regulations when it comes to both Bankruptcy and OPD’s. It is important that your first step is to gather all the information on your options when faced with either of these options.
When do I consider these options?
Normally you will not be looking at either of these options until one or more of your creditors or companies you owe money to tells you about them. This is normally the first time you even consider them.
Your situation has become desperate; you have many unpaid bills in various stages of collection or arrears. You are paying more interest each month then your income and your situation is only getting worse. Collectors are calling you and you need immediate help.
At this time you have a number of decisions to make. You can attempt to take care of this yourself or you can look for help.
OPD Orderly Payment of Debt
You can contact debt counselling services, trustees or your local government agency and ask for help. There are both FREE and paid services. Many debt counselling services charge fees and will then represent you when dealing with your creditors (people or companies you owe money too).
They will stop all harassment from collectors and other agencies trying to collect on debts. They will arrange a settlement with these folks and make a payment program for you. They use this payment to pay off a portion of each debt after they negotiate a payment settlement in the beginning.
This service normally falls under the group of OPD and would be registered as a R or I 7 on your credit report.
The advantage to this method is that the debt is not written off and it means you end up paying of a portion of the debt and the creditor gets some money back. This really has little positive effect on your overall credit report as any inquiries see that you are in the middle of a forced debt repayment program.
New lenders will not grant you more credit while in an OPD unless it is at large interest rates and have large fees attached to the offer.
This means you can’t begin rebuilding your credit until the OPD is fully paid off and has been settled. This can take anywhere from 1 to 5 years. During this time you will not get any new credit and must wait to begin the rebuild process years down the road.
Since we know it takes 1 to 2 years to rebuild your credit it will be a long time before you can start to rebuild your credit and get things back to normal.
Bankruptcy
This is a serious step and the damage will be around for 7 years on your credit report. It is a serious blow to anyone’s ego and can paint you as a loser.
The reality is that it happens to all walks of life. We get into a bad situation with our finances and the only way back to a normal situation is by making a last desperate act.
A bankruptcy is like “Do over” option. When there is little chance you can ever repay your debts or can recover from your mismanaged financial errors you can take this step to correct things.
All collection attempts must be stopped and all creditors are notified that they can make one last claim at a bankruptcy meeting of creditors. They can then present their case and register their debt with a trustee or lawyer.
The trustee will than review all the bankruptcy clients assets and debts. Every client has the right to keep a home with a small percentage of equity in it. They can keep a car as needed for work and you either own it outright or are up to date on the payments.
If you owe a car loan and are in arrears the car lending agency can make a claim to seize their security if you are not making your payments.
They allow you to keep most furnishings unless they are luxuries along with clothing and other basics.
They will sell off any luxuries or real estate that is not your primary residence. These assets are turned into cash to help repay the creditors.
Once this is done a meeting will be arranged with the creditors and they will be notified how much they may or may not receive.
The creditor then may or may not attend the meeting but will receive official notice of who gets paid and how much they are being paid.
Once this is done and the payments are made the client must pay the trustee their fee for this service. Once that fee is paid the bankrupt client is discharged from the Bankruptcy and can begin the rebuild process.
This whole process can take place in 18 to 24 months even less in some states and provinces. This means you can begin the rebuild process faster and get things back to normal sooner.
Ever state and province has very specific rules and regulations in regards to filing bankruptcy or going into an OPD so it is critical to investigate your local rules before choosing this option.
A rule of thumb: If you can pay off all the debt in 2 years or less an OPD is a decent choice. If it will be longer then this time frame you should seriously consider Bankruptcy.
I don’t believe you need to suffer more than 2 years since in all likely hood you have been suffering for a few years leading up to this decision. Cut to the chase and make a choice and begin the rebuild process.
Once you make the choice you will feel relief and can refocus on the rebuilding process and this is what this book and the website www.fixmycreditinfo.com are all about.
Don’t beat yourself up any longer get some advice normally at least two or three opinions from a credit counselor, a banker or lender, and a trustee. If they all point to an OPD or Bankruptcy than check the time you figure it will take to pay off the debts and make your decision.
You can recover from this and the rest of this book will help you to do just that.
