If you’re like me, you have found yourself in seriously tough financial times. You are barely getting by from paycheck to paycheck (and in some cases, that’s not enough). You can no longer make the monstrous minimum payments on your debts without robbing Peter to pay Paul. Eventually, you can’t even do that.
Then the collection calls begin to roll in. At first, it is just like one or two a month, then a week, than pretty soon they can come on a daily basis, and multiple times in a day. It is like being lost in a money desert with no cash in sight, while the creditor buzzards are breathing down your neck. You want to escape, but they just keep hunting you down.
What do you do now?
The magic words
For me, I needed to stop the calls. This wasn’t going to happen just by wishing for it. I had to stop dodging the phone when it rang and take some control. At this point I said the magic words. Are you ready for them?
These magic words immediately told the creditor that I was seriously in debt and unable to pay the huge minimum payment. (Please! Minimum payment? There’s nothing minimum about them.) At this point the creditor asked what amount I would be able to pay, so I threw out a number that I could handle. In this case it was a little less than half the minimum payment but an amount I felt confident I could pay on a monthly basis. I also said that the APR was way too high for me at 21% and he told me that with the Hardship Plan that he could offer me, the APR would temporarily go down to 11% for the duration of the payment plan. In this case, we agreed on a twelve month plan, during which time they would no longer assess late fees to the account as well.
Now the interesting thing is, this same creditor who I just negotiated the Hardship plan with, had told me a year ago that they don’t negotiate at all, that APR’s were permanently fixed, as were minimum payments. They had denied any possibility to work out a deal with me at all. Oh what a difference a year of economic hardship for the country has made!
“Final Payoff Plan”
If things were so dire for me that I couldn’t have handled the terms of the Hardship Plan, I could have requested what is called a “Final Payoff Plan”. But this is a permanent termination of the account and set up with terms that will allow for the eventual payoff of the remaining debt. I believe (though I haven’t confirmed this) that the Final Payoff Plan is more detrimental to my credit standing than the Hardship Plan. Although, when your credit is already shot and you just want to get out from under, this may be the way to go.
Ugly truth about creditors
The thing that angers me most is that many creditors will not come out and tell you about these plans. You have to say the actual magic words, “Hardship plan” or “Final Payoff”, in order for them to discuss it with you. So don’t be afraid to ask about negotiating terms of your account with them. The worst case scenario is that they say “NO” and you have to consider going through a credit counseling agency, (no, not debt reduction agency – because I have heard only horror stories about them), or perhaps a bankruptcy attorney. There are some highly reputable credit counseling agencies and they can really help with negotiating when the creditors are unwilling to work with you directly. For more information on them: NFCC.