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Debt > Dealing With Debt (1)
HANDLING CREDITORS AND DEBT COLLECTORS
Depending on your situation and the amount of money available for distribution to your creditors, consider working out a payment solution on your own. There are two different types of collectors that may call you. If your account is not severely behind (less than four to six months behind), you will probably be getting calls and collection letters from the original credit institution that offered the line of credit. The other type of collector that you may deal with is a third party collector who represents a recovery or collection agency. Generally speaking, dealing with the original creditor is a more pleasant experience than dealing with third party collectors. With knowledge and understanding on how to handle collectors, dealing with both types of creditors can be handled effectively.
Normally, the further delinquent the account, the more collection pressure you will experience. When an account reaches a certain delinquency threshold it will be transferred or sold from the original creditor to a collection or recovery agency. At approximately 4-6 months delinquency, the original creditor will usually charge an account off and sell it at a discount to a collection agency or recovery agency. When charged off, the original creditor considers the balance to be “un-collectible” by their standards and they remove the un-collectible balances from other active collectible account records. Generally speaking, when an account is charged off, it means that the original creditor will no longer attempt to collect money that is owed and they will usually hire a collections or recovery agency or sell the account at a discount. In most cases, when an account is charged off, the interest stops accruing on the balance and penalty fees are no longer applied. However, legal fees and processing fees can be added which may inflate the balance that the debtor owes. The original creditor usually has a vested interest in preventing the account from being charged off because charge-offs are considered to be a loss. However, if the account does charge off, it can be written off as a loss and the creditor can offset the loss by using it as a corporate write-off. Original creditors are usually more pleasant and proactive in devising repayment arrangements with the debtor.
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