subject: When Creditors Don't Cooperate [print this page] When Creditors Don't Cooperate When Creditors Don't Cooperate
When Creditors Don't Cooperate
Most attempts to get out of debt sound great because you usually hear the success stories. But what happens when the creditors refuse to cooperate? The principle to remember is this: don't give up too soon. Often when the debts are delinquent, the original lender has already turned the account over to a collection agency. The collection agency is less prone to cooperate and more likely to sue. But unless the debt has actually been sold to a third party, the original lender can still control the proceedings.
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Generally speaking, the local credit office of a national company has only limited ability to negotiate once a loan has been declared delinquent. So your best chance to reach an agreement is to request the name of the regional or district credit manager and try to work out a settlement with him. You must suggest a reasonable plan, and you will usually need a third party reference, such as a counselor.
However, there are times when the best efforts don't work. That is usually because the debtor has made frequent promises that were not kept or because he failed to respond to the many warnings the company sent out before pursuing legal action. The actions a creditor normally takes will fall into one of three areas.
Armed with a court order a creditor can indeed come into a debtor's home to repossess an asset. If the collector is refused entry, he can simply bring a sheriff's deputy with him the next trip and order the debtor to comply. Failure to comply with the court order can result in arrest and additional expenses.
Most loan contracts contain clauses that allow the creditor to collect all costs associated with legal action or repossessions. You need to read any contracts you sign very carefully because the costs of such actions can be significant.
Once the merchandise is recovered, the creditor may choose to sell it and apply the proceeds against the outstanding debt. The difference between the loan balance and the sale proceeds is called a deficiency, and the creditor has the right to bill the debtor for that amount plus all costs associated with the repossession and sale.
In states that allow it, a creditor can petition the court to attach the wages of a debtor once a legal judgment has been issued. This can be a great shock to the unsuspecting debtor, as well as a source of great embarrassment. Unfortunately, it usually occurs at a time when everything else is going downhill financially. I remember the first time I encountered a garnishment. A pastor asked me to meet with a young couple who were having severe financial difficulties. They had misused credit cards, department store loans, retail appliance loans, and so on. They were unable to meet all their obligations, and rather than face the creditors, they had taken the traditional ostrich approach. One of the creditors was a leasing company that specialized in rent-to-own contracts for furniture and appliances. Once their account was sixty days past due, the leasing company moved swiftly and received a judgment to repossess the furniture. They then re-sold the furniture for a ridiculously low price to the same company that had sold it originally and then sued the young couple for the deficiency, plus $400 in collection fees.
