DEBT NEGOTIATION Dealing With Debt Collectors Taking Control

DEBT NEGOTIATION Dealing With Debt Collectors: Taking Control!

Your Presentor: Adrian Klenz Financial Literacy Specialist HUD Certified Housing Counselor At Western Dairyland 715 -836 -7511 ext. 1151 aklenz@westerndairyland. org

Go from this….

To this…

First some stats… � � � There are roughly 4100 debt collection companies in the United States. They employ roughly 450, 000 people Businesses placed $150 billion dollars in debt into collections in 2010 Debt collections companies recovered $40 billion By 2016 there will be an expected 23% growth in the debt collection industry. Source: Huffington Post 9/21/11

A Nation Of Debt � � � July 29, 2014 report shows 35% of Americans have debt in collections. (USA Today) Average of $5, 200 in collections. Late payments is the biggest factor in your credit score 35%. 25% of adults have never checked credit. (Find. Law. com) 40% of people failed basic credit quiz (Consumer Federation of America)

THIS IS THE MOST IMPORTANT SLIDE IN THE PRESENTATION � � � DEBT COLLECTORS BUY DEBT FOR ABOUT 5 CENTS ON THE DOLLAR. So if you owe $100 to a cable company they probably sold that debt for about $5. DEBT COLLECTION COMPANIES HAVE A RECOVERY RATE OF ABOUT 16 -20%. THEY DON’T WANT YOU TO KNOW THIS! THIS IS YOUR ULTIMATE WEAPON!!

ZOMBIE DEBT COLLECTORS • • • 94 % of mass bought debt has little to know information. Expired debt bought for as little as a penny on the dollar. Collected roughly $3 billion dollars in expired debt last year.

Getting Started: Step 1 Get the facts: www. annualcreditreport. com �

SHINE A LIGHT!! • Look at all 3 credit reports: Transunion, Experian, & Equifax. • Make a list of all your debts. Make sure you know everything out there. • Roughly one-third of credit reports have errors • Check yearly • Debt collectors pray on people’s lack of knowledge.

Statute of Limitations Positive Credit-7 years � Late Payments-7 years � Collections-7 years � Chapter 7 Bankruptcy-10 years � Chapter 13 Bankruptcy-7 years � Foreclosure-7 years � Public Records-7 years � Tax Liens/Student Loans-until paid �

Statute of Limitations cont.

Add it up � Go through the three reports and add up your total debts. Keep in mind you aren’t sure if they are accurate yet. It gives you a sense of what you will need to pay off your debts assuming they are legit.

Prioritize Debts Secured vs. Unsecured The loudest isn’t the most dangerous!!

Step 2: SAVE � 50% for new debts (less than 1 year to 4 years) 25% for old debts 5 -7 years. � Lets say you owe $2500 try to save $1250. � Remember how debt collectors buy for pennies on the dollar? Remember how they only settle roughly 16 -20% of total owed? �

Hardship/Explanation Letter

Cease Letter

BEWARE!!! The $1000 rule � These letters don’t make your problems vanish. The debt doesn’t go away. � Keep notes and a file on your debts. Phone calls, letters. Dates, times, and names. � CERTIFIED MAIL � Keep copies of everything! �

Court Summons � If you get a court summons NEVER ignore it. Make sure you show up.

Judgment Proof? � � � Sometimes it’s a good idea to mention public benefits. Mentioning bankruptcy can get their attention but you have to be careful. Don’t lie but don’t be afraid to “spice it up. ”

The Fair Debt Collection Practices Act � � � � Debt collectors must call between 8 am-9 pm (your time zone). If you ask them to stop contacting you in writing they have to honor it. Can’t talk to 3 rd party without identify their name but they CAN”T state you owe money. Can’t threaten you, swear, or call repeatedly. Can’t advertise or publish your debt. Can’t threaten jail. Can’t threaten legal action unless they are actually going to take it.

AVOID REPAYMENT AGREEMENTS � � � Debt collectros are sneaky. They want to get you to enter into an agreement so they can keep you on the hook for as long as possible. The only exception is if your debt is over $1000 and there is the fear of being taken to court. If you have to enter into a repayment agreement you must get it in writing!!

So you have saved enough money. Now what?

Step 3: Validation � � � This is a consumers biggest weapon in dealing with debt collectors. Sadly it is rarely used. You have a right to make the debt collector PROVE you owe them a debt. Remember 94% of mass bought debt has little info. Consumer Financial Protection Bureau #1 complaint is…

Sample Validation Letter

Validation cont… � � You must make sure to send all validation letters via CERTIFIED MAIL. Keep copies for your files. Watch the calendar. They have 30 days to respond. What will happen…

Step 4: Settlement Letter

Settlement Letter cont. � � Once again make sure to send the letter via certified mail. Keep a copy for yourself. Don’t pay until you get their agreement to your offer in writing. Always pay with money order or cashier’s check.

�Remember certified mail!!!

Step 5: Follow Up � � � � Don’t trust the debt collectors to be honest. Write Transunion, Experian, and Equifax to ask them to update your credit reports. Check your credit reports yearly Roughly one-third of credit reports have errors Keep your records Beware the zombies!! Be patient!

� If you aren’t confident about dealing with debt collectors yourself, seek the help of a financial counselor, credit counselor, or an attorney. Community action agencies like Western Dairyland often have someone like me on staff who can help you.

Questions? Adrian Klenz aklenz@westerndairyland. org 715 -836 -7511 ext. 1151 THANK YOU!!