Scared of dealing with creditors

Dear Dave,

I’m afraid. I earn $30,000 a year. I’ve got a credit card with Household Bank and I got six months behind on my payments. I owe $1,600 on it. I contacted them when I was able to start making payments again and they chewed me up one side and down the other. I’ve never been treated by anyone like they treated me. They had me crying. Then they offered me three payment options that I couldn’t afford because they wanted big money up front.

When I told them I couldn’t afford that, they threatened to garnish my wages. If they do this, I’ll be in big trouble with my employer. What can I do to get them to calm down and work this out? I want to pay this bill because I owe the money.

Nashville, TN

Dear Lori,

Wow! That’s a bad one to have to deal with. That bank actually lost an $11 million lawsuit for illegal collection practices when one of their collectors threatened to blow up a lady’s workplace and then threatened to take out a contract and have a “hit” placed on her. These people are out of control, as you found out, and they are not nice to deal with.

For this amount of money, they aren’t going to do anything to you. It costs them more to file suit on accounts of this size than they can collect by suing. They could get a civil judgment, because you owe the money, but they won’t. They determined long ago that it’s not economically feasible for them to sue for this money, so they had to find a collections procedure that works. Since they have no real leverage to make you pay – they have to bluff. It’s a poker game. They discovered that if they make people emotional – angry and afraid – you will pay them. They have become experts at this and the person you spoke with was probably working loosely from a script.

I suggest you get Caller ID and, if you don’t already have one, an inexpensive answering machine with a memo button that will let you record conversations. Then, when you talk to them again, tell them up front that you are recording the conversation. This will drive them crazy, but it will probably also make them back down a bit because some of the tactics they are using are a violation of federal law. Do not tell them where you work and do not give them your work phone number. Also, never give them electronic access to your checking account or send post-dated checks. You have to keep control of this situation.

Next, you need to get on a written budget right away. You need to plan where you are going to spend all of your money before you get paid. Send this company a copy of your household budget. Let them know what your financial situation truthfully is and how much that leaves you to pay them. Be honest in showing them where all of your money went in the budget and attach a check for the amount you’ve shown them you can pay. You do this over and over again whenever you are able to pay them. You should also let them know that you will speak with them by telephone, but there are two ground rules. First, they can only call you at home and only once every two weeks. That’s all that’s necessary to communicate these ideas. If they call more frequently, either don’t answer or hang up the phone once you realize it’s their company. Second, they must speak to you in a reasonable and respectful manner. If they stop being civil, you’ll hang up. It’s amazing – when you hang up the phone, they stop talking.

You’ve got to take back the power on this issue emotionally, because this is an emotional game to these people.


How do you get loss of value appraised?

Dear Dave,

I was in a car accident that wasn’t my fault. Everything is going smoothly so far with their insurance paying everything. However, I know my 2001 Honda Accord is going to lose value – since it has been wrecked with $6,000 in damage – are they responsible for paying for that lost value as well? If so, how do I determine how much value has been lost due to this wreck?

Tiffany I
Johnson City, TN

Dear Tiffany,

The person who hit you, and their insurance company, is also responsible for reimbursing you for that lost value. If I were you, I’d go to the used car manager at your local Honda dealership, give him all of the details on your car as well as the damage being repaired, and ask him to write you a letter stating how much value was lost on the car – even though it has been repaired. It may cost you a little bit of money, like $20, because he’s providing you with an appraisal service, but it will be worth it. Wrecked cars have lost value, even if they’ve been fully repaired. Take that letter to the insurance adjuster and explain that you’d like to be repaid for that lost value as well. It’s their job to make you whole again.


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