subject: Eliminate Credit Card Debt With Informal Bankruptcy [print this page] One difference between formal bankruptcy and informal bankruptcy is the first stops payment to all creditors, while the second stops payment to selected creditors.
Yes, that means on the surface informal bankruptcy offers no protection from creditors. But, it is important to make the distinction between secured and unsecured creditors. By stopping payments to unsecured credit card banks to eliminate credit card debt, you are strengthening your financial position to pay secured creditors, like home mortgage banks and car loan holders. Those holders of secured loans are the ones who have the best legal recourse to reclaim what you owe them.
The Federal Reserve Bank requires credit card banks to reserve money for bank debts. They operate under the assumption that some people will not be able to repay their debts, and their toothless debt collection efforts reflect that assumption. They threaten credit card debt lawsuits and promise bad marks on credit reports, then pass charged off debts onto outside debt collectors.
Commissioned debt collectors and collection attorneys get about 30 percent of what they collect for credit card banks. They rely on threats, lies and/or legal firm letterhead to scare debtors into paying, according to the Credit Card Debt Survival Guide. They know some will be more difficult to collect from than others. So they concentrate their efforts on the most vulnerable debtors. They do not expect to collect from everyone.
Junk debt buyers usually buy credit card debts from the credit card banks for less than 10 cents on the dollar within a year of their discharge and after the banks' debt collectors have been through the accounts for collection opportunities. Debt collectors for junk debt buyers make larger commissions about 50-60 percent. They are more opportunistic and avoid debt savvy consumers who are difficult to collect from, according to the Credit Card Debt Survival Guide.
So the moral of the story is knowledgeable resistance on the part of the consumer is what works in informal bankruptcy. The key is proper written responses to written communications from debt collectors demanding original documentation of the alleged debt, according to the Credit Card Debt Survival Guide. Small mistakes on the part of debtors during their response to collection attempts are what tip off the collection professionals to their weakness and vulnerability.
