It is an all-too familiar scenario these days: You are one month, then two months, then three months late on your credit card bill. You recently lost your job, your high-paying automotive gig at Chrysler. No fault of your own, it’s just that the economy has tanked, and you were a victim.
Now while you had that job you were not irresponsible. You paid your bills on time. In fact, you took your Mom’s advice, and paid your creditors AHEAD of time. In fact, they sent you letters month after month with offers to save money, and other such perks because you were such a valued customer.
But time brought about a change. You have been behind on your bills. They’ve been calling. “Why do I not see a payment this month?” “I can’t pay, I’ve lost my job.” While they may display some pity for awhile, the bottom line is that they want their money, not a lot of excuses.
Then comes the warning: If we don’t receive a payment by 12: 00 noon today, your account will be charged off, or sent to a collection agency.
Yes, the dreaded collection agency. If a collection agency gets your account, I needn’t tell you your credit is in trouble. The three bureaus–Experian, Equifax, and TransUnion–will all have your number. Your credit score seriously will tank. A poor credit score, I tell you, will cause apartment complexes to look upon you with disfavour when it comes to renting an apartment; a cell phone will be a bit harder to come by; and some employers will not hire you. Your credit says something about your character. If you don’t pay your bills on time, that says something about you as a person, and potentially maybe as an employee.
Collection agencies can be quite rude. They can lord it over you: after all, you owe their client money, and they can treat you any way they darned well please, right? Not so fast. There is no law in the land that says you even have to answer such calls. When I didn’t quite understand my rights, I at one time thought they could take me to court right away, and get my wages garnished. It is not the case. In fact, a collection agency operating under legal means will send you a notice in the mail that you will have 30 days to respond to. Most time you have a month to respond to the validity of a debt, before you even have to make an agreement or promise to pay.
But after that 30 days expires– if you accept the debt–you should begin to make some kind of payment arrangement. It’s best to call them–provided you have a means of getting the money. You should set up a payment arrangement. If you can only afford to give them, say $50 a month, tell them that. It is up to them to accept it or not accept it. But believe me, they will accept any money they can get. Because here is how collection agencies work: They are paid a cut by the original creditor for whatever monies they collect from you. It may be 10%, 15%, or whatever.
WHAT HAPPENS IF I DON’T BOTHER TO DO THIS, OR IF I DEFAULT AFTER MAKING SUCH PROMISES?
The threat of further collection action is real. Your credit could be in further trouble as they continue to take collection action against you to the next level. If you break a payment arrangement, they could take you to court. You may receive what is called a summons and complaint. This happened to me back in 2004, when I was unable to find suitable employment. A certain credit card company was sick of my not paying them (not that there was anything I could do, for I couldn’t pay them). So they turned my file over to the court. I ended up having to either call their office to set up a payment arrangement, AND I had to high-tail my butt to 36th District Court in Detroit. I had to file an ANSWER to the court, AND set up a payment arrangement to pay the court the monies. It was about $60 per month.
This is where it REALLY gets serious, folks. I was obligated to pay, because now a judgment was lodged against me. Once there is a judgment out against you, it is an automatic red flag to potential landlords, banks, or sometimes even employers. That is worse than a charge-off. Do not let it go this far, or your life will be miserable.
If you should miss a payment, you could be garnisheed at any time. What will happen in most cases is that a writ of garnishment will be taken out against you in that county. The sheriff will go to your place of work and send your job a copy. By law your job must send a copy to you, and what that means is that at least 25% of your check will be turned over to your creditors per week, or every two weeks, depending on when you get paid. As one who has been through a wage garnishment, it can really hurt. They can go into your bank account too, take any tax refunds that would have otherwise been due you, etc. Imagine working for a company like Associated Content, or any online service that has a Pay Pal account, and all of the money you make writing for AC, Mylot, Helium, or any such company using Pay Pal, being seized by your creditors! It will go on and on–maybe for years–until every penny is paid. Imagine your rent money–all of it–seized in this manner!
Now mind you, by law there must be a writ of garnishment sent. But do they always do so? I have heard of garnishments being attached to people without notice. In the case of one person, who owed back child support, their account was garnished without prior notice! In fact, I have heard of people being left with virtually $10.00 a paycheck because of such garnishments.
And another thing: You can be fired by a company for garnishments. Now you are protected from termination by a company for a single garnishment. Anything above and beyond that, is up to the company’s discretion. Companies usually lean to such actions because garnishments produce a lot of paperwork for employers. Anything like legal action can really stress an employer out–the idea that the employer has to do extra math when figuring out its payroll because of irresponsible people like you who don’t pay their bills on time? I know, if I was an employer who had such a deadbeat working for me, I would be like, “Grr-rrrr! IS THERE A WAY THAT I CAN BE RID OF THIS PERSON???!!!”
Pay your bills, on time. If you know you can’t pay, don’t make such bills. In my case, in order to stop the garnishments, I ended up having to file bankruptcy. Bankruptcy is not a viable solution, for it stays on your record from 7 to 10 years. But at least it was a brand new start, and it enabled me to get rid of my credit card debt.
I have learned another lesson: When a credit card offer comes my way–right away I make a beeline for the wastepaper basket. In these uncertain economic times, I cannot afford to get into a situation where I cannot keep up the payments. They can start out pretty easy–say, about $10 a month. But with interest added, and as you increase the usage of the card, the payments can add up and get out of hand quite rapidly.
My main takeaway for you: Don’t live on credit. Don’t spend money you don’t have. The Good Doctor has been down that road, and it ain’t a pleasant one.
