subject: Debt Relief To Eliminate Debt? Depends On What Kind Of Debt. What Is Debt Anyways? [print this page] Debt relief is as close as a phone call, and settlement debt services may be the way to go. But first you have to understand what happens when you are going through the seemingly endless spiral of financial ruin. Here's the first thing to understand and accept. It's your debt and it's up to you to pay it off, or it's at least up to you to take the consequences for NOT paying it off. That said, let's look at the consequences of not paying off certain kinds of debt. The types we'll look at in this article are auto loans, unsecured credit card debt, and secured personal loans.
Car Loans. Check your creditor first - they often have programs where you can move up to three payments to the end of your payment schedule to help you through difficult times. Do this before you fall 30 days behind on your payments in order to avoid a ding in your credit score. An auto loan is a secured loan which is secured by, you guessed it, your car. If you can't pay your car loan for about 5-6 months, sometimes shorter, sometimes longer, they'll take your car. A towing company will come to your door, serve you notice, and take your vehicle right there on the spot. They will sell the car at auction, apply the sales amount, minus any fees to tow and store the vehicle, to your account, and then either mail you a check if your car had any equity or send you a bill if you owed more than your car sold for. Either way, you'll get a solid negative to your credit score and if you still cannot pay off the remaining balance, they will continue to report no-payment each month to your credit because the remaining balance is now a rotating line of unsecured debt.
Unsecured Debt. Unsecured debt is usually from credit cards, though some loans that were initially secured may have a balance of unsecured debt, like when your car gets repossessed or your home forecloses and you had a second mortgage. When you can't pay your unsecured debt, obviously the credit bureaus hear about each month of non or late payment. They will call you every day, like any other creditor, and ask you again and again, even if you talked to someone just the day before, the same questions over and over - this is where your interest payments go. Their collections department will try for a while to get you to pay, but if you can't or don't, eventually they will "write it off" and sell the debt to another debt collector. The bigger companies seem to do this more quickly than the smaller ones. What they do is sell your debt to another company for maybe a tenth to a quarter of what you owe. The collection company that buys your debt will now be the ones calling you, and sometimes these folks get nasty. But here's the deal with unsecured debt: it's unsecured which means that they can't come and take anything from you, they can't garnish your wages, and they can't put you in jail. If collection companies say anything like this, they're breaking the law. Watch out for the, "Any collection attempt MAY include wage garnishment, legal charges, or selling your debt to a 3rd party for collection." They'll do the 3rd in an unsecured debt situation. The first two are just scare tactics and the "may include" is what makes this legal.
Secured Personal Loans. Yuck. This is where it gets ugly. Mortgages and auto loans are secured, but usually only by the house or the car. A secured personal loan is when you've "personally guaranteed" a loan or a loan that you placed some sort of collateral on. You REALLY SHOULD know whether or not you've got a secured loan out there so if you are unsure, chances are you do not have one. If you've had to list items and their values on a loan application, chances are you DO have a secured personal loan. If you fall behind or stop paying on these loans, your creditor will have to hire a lawyer (which they'll tack the lawyer fees on to what you owe) to begin recovery proceedings. They can take anything that you listed and sell it to apply that money to what you owe them, or they can garnish your wages or get the feds to withhold your tax refund to pay your debt. A bunch of ugliness here - never get mixed up with these. (Never again in my case. I learned first hand.)
