3 Effects of avoiding debt collectors.
Overview of debt and debt collectors
Usually when you hear the word “debt”, it either sends chills down your spine because it doesn’t bring the fondest of memories or it sends you wondering on how best you will deal with it.
Debt is part of daily life and we all come to the point where your current budget can be overstretched such that it is not able to cater for your expenses within a period of time. The only option is to go in for a personal loan at that time to solve that pressing financial need and then have the plan to pay later. It is, however, common that the plans that you have to pay back can falter or backfire. That is when your creditor may hand the issue over to a debt collector or a debt collecting agency. This institution is responsible as a third party for recovering monies that are owed on peoples behalf.
In the event that the debt collector begins to contact you and you do not believe you owe the debt, you can relay that feedback to them and find another means of dealing with the situation. If indeed you owe but you also do not have the current means of paying back, that information can also be relayed to the collection agency so that an agreement can be reached upon.
Debt collectors operate by ensuring that the one who owes the creditor money pays back with about 15% – 40% going to them for their work done. In some cases, the collector has the option of buying the debt from the creditor and then they get their money back when you pay up what was owed.
These are some of the things that can happen when you avoid debt collectors
1. The debt collector will try to use other means to take the money from you.
This includes filing a lawsuit if there is no agreement between you and the collecting agency. They will not stop calling you and may advice you to seek help from the legal aid office in your state/community.
Your attorney will have to come in to provide you with the necessary legal advice about the situation. This will ensure that there is a clear roadmap to how the debt should be paid. Contacting your attorney will give you more information about the debt situation and what you can do to come out of it.
They have a wealth of experience in dealing the matter that you may not have. Without this external help, debt collection can run into years with payments of several legal fees. Whilst, if you employ the services of an attorney, the journey can be shorter and more guided.
2. Your debt will still be pending
Some people believe that by avoiding the debt payment over some time, it will eventually disappear when the 7 year stipulated time is up. In between the time that you owe and the 7-year period where you are waiting for the debt to disappear, it is advised to make some payments to salvage your credit score because it will show up in your credit report.
When you are unable to do this, what will happen is that, the debt will still remain on your credit report. Defaulting 30 days past in your payments of debts will begin to have some effects on your credit. Debts have an effect on your credit report and the extent of finance that you can get when you most need it.
It is in your best interest to see it that its paid off so that it doesn’t stay on your credit record. Making partial payments ,however, does not entirely mean you will not be reported to collections or your debt will be pardoned. The 7-year mark does not mean the actual debt is erased especially if it is left unpaid. You will still be known to owe the creditor even if the debt is no longer listed on your credit report. The debts will still be pending when you miss your agreed upon payments.
3. Your wages will be garnished
Wage garnishment is a term that refers to a court order stating that your employer should take a portion of your pay check and use it to pay the one you owe / creditor. Some of the situations that call for wage garnishments include student loans, consumer debts and child support when its due.
You can have some form of control on how much can be taken so that the effect is not too drastic. It is an action backed a court order and therefore it will be in your best interest not to leave it unattended to nor become unresponsive when the collection agency comes. Wage garnishment is protected by the Consumer Protection Act and ensures that you are not fired because of a single debt situation you fell into.
The Act also puts a limit on who’s wages can be garnished. When it comes to this, your disposable income is considered. That is, your gross salary minus necessary taxes and deductions depending on the country you are in and its laws concerning it. For countries such as the US, your wages can be garnished if your disposable income is above $290 and also if you earn any amount which is 30 times greater than the federal minimum wage. It is therefore important not to keep avoiding debt collectors because there is a price to pay for that.
In conclusion, it is a personal responsibility to manage your debt well because if not, it will be transferred to the collection agency. Making timely payments will save you from being reported to authorities or legal action being taken against you. Getting debt collectors / ending up being placed in collections does not represent the fact that you are paying off all your debts. It rather shows that you are in deep default. You can have credit cards, mortgage and other loans you may have picked which will not be in collection status as part of your debt. Paying your debts will reflect on your credit score but paying late is something that will not be completely removed from your credit report. Its best to face your debt situation with a plan to come out of it, than avoiding debt collectors altogether. It makes the situation worse.