Collection Accounts - What are my options?

Hey guys,

So I have a question for ya'll about negligent debt. I had medical problems that lead to me not working for about 7 months, with no coverage I was unable to pay the majority of my bills.

Well it all kind of snow balled to the point where even with payments and a lower settlement amount there is no way in hell I can afford to pay everything off. I have approx. 10 collections agencies after me right now, I also owe money for driving offenses which have led to a suspended license...awesome right? I sold lots of my assets to help me climb my way out but there is still no way I can get this done.

I would love for everything to be just one payment a month. But from what I can gather the debt consolidation companies require you to own a home to use as collateral.

So the big question is....besides paying things off one by one over a period of time are there any options to consolidate this debt and make a more manageable payment? I appreciate any input that you guys can give me!!!

Thanks in advance,

Josh

Start making the biggest payment you can on the smallest account, and tell the rest of them to back off or they go to the back of the line.

Never pay a collections company! Only pay the creditor.

Go to the original creditors and tell them your story. Usually they will work something out with you and get rid of the collections companies.

The collection companies keep anywhere from 1/2 -2/3 of the money they collect, that is if they even tell the original creditor they collected any money in which case they keep 100%.

This gives the creditor an incentive to work with you instead.

Being as they are medical collections I'd be very surprised if you even knew you owed a lot of the debt before the collection agencies began hounding you.

Record keeping and billing is so bad at most doctors and hospitals that most collections end up not really being a collection, rather they are the first billing a person receives.

If they tell you that they've sold the bill to a collection agency, and they don't normally do that until years later, then just ignore it.

If you talk to them you will get them into a feeding frenzy and you'll find it missreported multiple times on your report so you can't afford to talk to them even once - UNLESS you need to talk to them to find out who the creditor is.

By law they must tell you who the creditor is and give you documentation proving you actually owe the bill.

When they refuse to send it to you just report them to the Attorney General in your state.

I forgot to mention the main reason you never pay a collection agency is that present laws allow a collection agency to report the debt as new when you pay them any money. So a debt that might be years old and not hurting your credit much at all becomes a brand new debt when you pay it and literally DESTROYS your credit.

Thank you for the advice guys! I hate collections companies with a passion so not paying them sounds great. Its good to know that they keep such a high percentage of the money, that will give me lots of leverage when it comes to reaching a settlement!

I really want this to be over, its such a huge pain in my ass! haha

Don't rule out bankruptcy. It's designed for this sort of situation. I'd talk to a financial lawyer or accountant to get their opinion on the matter - a good one, not somebody with billboards or advertisements on bus stops.

I can mail you the Dave Ramsey course materials (CDs, textbook) if you'd like them. Send 'em back when you get finished with them. His thought on debt is pretty much what DILYSI said.

alex wrote: Don't rule out bankruptcy. It's designed for this sort of situation. I'd talk to a financial lawyer or accountant to get their opinion on the matter - a good one, not somebody with billboards or advertisements on bus stops.

I have considered this route...still something I am kicking around in the back of my mind. Its just hard for me to get over the fact that I'd be filing bankruptcy. I know it sounds silly, but I never thought in my wildest dreams I would have to!

JohnInKansas wrote: I can mail you the Dave Ramsey course materials (CDs, textbook) if you'd like them. Send 'em back when you get finished with them. His thought on debt is pretty much what DILYSI said.

I actually just signed up for a Dave Ramsey course that I will be starting shortly! I assume that I will provided with those materials in the course. I really appreciate the offer though, thats very thoughtful of you!

Josh

carguy123 wrote: If they tell you that they've sold the bill to a collection agency, and they don't normally do that until years later, then just ignore it. By law they must tell you who the creditor is and give you documentation proving you actually owe the bill. When they refuse to send it to you just report them to the Attorney General in your state. I forgot to mention the main reason you never pay a collection agency is that present laws allow a collection agency to report the debt as new when you pay them any money. So a debt that might be years old and not hurting your credit much at all becomes a brand new debt when you pay it and literally DESTROYS your credit.

The fair debt collection practices act only requires the collecting party to verify the original creditor and confirm the debtor's identity and amounts owed if the debtor requests it in writing within 30 days from the first communication regarding the debt. Outside that 30 days they technically don't have to, but likely will anyway in an abundance of caution. A decent collection outfit will have a process in place to address dispute letters and it won't slow them down any. It is a federal law and the state AG will likely not give it much attention, one because it sounds like the money is legitimately owed to someone, whether or not the correct party is collecting or not, and two because you have your own private right to a cause of action against them for violating the FDCPA.

Often, the original creditor has no interest in collecting the debt, as it has been either charged off or sold. If it has been sold, they original creditor may no longer have the right to negotiate it or receive payment for it. Sounds like you know who the original creditor is anyway.

Depending on your state's laws, debt buyers have different rights with respect to enforcement. Depending on where you live, it is risky to ignore a collector in part because the amount seems too small to sue over. It costs the same to get a judgment for $250.00 as it does to get a judgment on $25,000.00, and the fees and costs for collection or attorneys fees will be added to it and interest continues to accrue.

One thing to consider is seeking out a loan from a smaller local bank if you have anything to secure it, like cars, bikes, real property, something they can repo if they have to to induce them to lend money.

CLNSC3 wrote:

alex wrote: Don't rule out bankruptcy. It's designed for this sort of situation. I'd talk to a financial lawyer or accountant to get their opinion on the matter - a good one, not somebody with billboards or advertisements on bus stops.

I have considered this route...still something I am kicking around in the back of my mind. Its just hard for me to get over the fact that I'd be filing bankruptcy. I know it sounds silly, but I never thought in my wildest dreams I would have to!

Hey, Donald Trump has declared bankruptcy three or four times. Although I wouldn't hold him out as any kind of moral compass, it certainly hasn't slowed him down financially. Think of it as a strategic move.

The OAG is looking for patterns of misleading or illegal activities which is rampant in the collection industry. Many of the debts they purport to be collecting have passed the statute of limitations or are outright bogus. That's why you report them. The AGs regularly give them large fines or shut their doors. And sometimes the letter the collection agency receives from the OAG causes them to do the right thing.

As far as judgements go it is rare for a collection agency to get one. The burden of proof is higher than for a collection and the damages to the collection agency if they file one when they know they have no real right (I'm having a brain fart and can't think of the right word for this. Maybe it's because it's Friday night and I've used up my allotment of words for the week) can be significant. In other words it's just not worth the risk to them.

I can honestly can't say I remember ever seeing a judgement filed by collection agency in 38 years of working on credit for people.

Bankruptcy lawyer here. Collections laws vary somewhat from state to state, and everyone's situation is different, but it boils down to a few options:

1) The Dave Ramsey method- save up $500 as an emergency fund, take a deep breath, get a second job, pay off your smallest debt first, then the next smallest, and so on until you're debt free, then start saving. Even if you use another option to pay off your debts, it's a great way to start building wealth. Dave Ramsey is about the only one of the financial gurus who makes a damn bit of sense.

2) Settle your debts. This is a good option if you have good cashflow and can put a large amount towards your debts every month. Similar to the Ramsey method, except you bargain with your creditors to accept lump sums (or a few large payments) to settle your debts for less than 100% of what is owed, generally between 35 and 60 percent of the total. Useful, but it still hurts your credit, and any debt that a creditor forgives is imputed to you as income by the IRS, so get ready to pay the tax man next year. The posters who said to deal with the original creditor only are basically right, and you can do this without consultation.

3) Bankruptcy. Most people of modest means qualify for a Chapter 7. This will discharge (get rid of) most unsecured debt, with no tax penalty for doing so. It is a one-time nuke of your credit rating, but it rebounds pretty quickly because your debt-to-income ratio is so much improved. It's not an option if you have significant assets (how much equity you can have in a house/car/retirement account and keep it varies from state to state).

4) Debt consolidation through a "credit counselor" or other agency: Most of these places will charge you an arm and a leg to do the same thing you can do yourself through settling your debts. I have a lot of clients who come in after paying these people hundreds of dollars a month for a long period, and they make little to no headway on their debts. Despite their image, most of these are for-profit companies, and some of them are even owned and run by credit card companies. A fair percentage are total scam artists who will just take your money and disappear. (To be fair, a decent percentage of lawyers are basically the same way).

DO NOT ATTEMPT TO FILE BANKRUPTCY WITHOUT A LAWYER. I wouldn't even attempt to file it with a lawyer who doesn't specialize in bankruptcy. It's too complex, and what you don't know can hurt you.

Go to your phonebook or call your state bar association and look for someone who is experienced in bankruptcy law and/or other consumer debt matters. Talk to them. Then get a second opinion. Find someone who seems knowledgeable and is willing to explain your options. If they instantly suggest bankruptcy, ask about your other options and why they aren't as useful. If you think they're giving you a runaround, walk away. You shouldn't have to pay for a brief consultation.

Best of luck to you. As I tell my clients, you're in a E36 M3ty situation, but not an unusual one.

carguy123 wrote: The OAG is looking for patterns of misleading or illegal activities which is rampant in the collection industry. Many of the debts they purport to be collecting have passed the statute of limitations or are outright bogus. That's why you report them. The AGs regularly give them large fines or shut their doors. And sometimes the letter the collection agency receives from the OAG causes them to do the right thing. As far as judgements go it is rare for a collection agency to get one. The burden of proof is higher than for a collection and the damages to the collection agency if they file one when they know they have no real right (I'm having a brain fart and can't think of the right word for this. Maybe it's because it's Friday night and I've used up my allotment of words for the week) can be significant. In other words it's just not worth the risk to them. I can honestly can't say I remember ever seeing a judgement filed by collection agency in 38 years of working on credit for people.

THIS VARIES STATE TO STATE. Not trying to piss on your Wheaties, but I see collections agencies file suit and get judgment on debtors ALL THE TIME in Missouri. I don't know where OP is, but it might be a creditor-friendly state or it might not be.

You are quite right that collections agencies pull some shady E36 M3 and frequently violate statutes to collect on debts that unenforceable. Some things are universal whatever state you're in.

right now i'm getting letters every month from 2 different collection agencies for 2 different debts, both of which are bogus..

one of them is for a large national bank that has a stage coach on all their billboards.. i closed my checking account with them in the winter of '05/06 some time (forget exactly which month..) with a $0 balance.. got a receipt and everything, and the monthly statement i got the next month said $0 balance.. 3 years later they decide that i owe them $750 for some reason.. so i yell and scream at them on the phone and in a couple of their branches on friday when a lot of people are in there cashing paychecks and they go away after a couple of months.. they sold the "debt" to a collections agency that is now willing to "settle" for $37 or some weird number like that.. i continue to ignore it and life goes on..

the other one is from the utility that provided natural gas to my trailer house in the mid 90's. that account was closed and paid off in the summer of '96- again, $0 balance.. 8 years- yes EIGHT FREAKIN YEARS- later they decide that i owe them $250 and the harassing phone calls and bills in the mail box start. i tell them nope, not gonna pay and very nicely (sometimes :) ) tell them what to do with their debt.. they sold it to a collections agency that is willing to settle for $20 to "save my credit"..

both of those go directly in the garbage can, and neither of them even showed up on a credit report that was run on me by the local credit union a few weeks ago..

Am I alone here? If you owe money, you pay the money. Sorry, but I don't believe bankruptcy absolves you of the need to pay your bills. You come up with a payment plan you can afford, then go to the creditors and give them a payment schedule and then tighten your belt until the worst is over. If the finances improve you increase the payments, and if they worsen you go back apologize and say the payments will be getting smaller for a while. But you keep on making them, however small. I see you have a late model Jeep and a Bike that can be sold to help. Buy a beater to get to work.

bearmtnmartin wrote: Am I alone here? If you owe money, you pay the money. Sorry, but I don't believe bankruptcy absolves you of the need to pay your bills. You come up with a payment plan you can afford, then go to the creditors and give them a payment schedule and then tighten your belt until the worst is over. If the finances improve you increase the payments, and if they worsen you go back apologize and say the payments will be getting smaller for a while. But you keep on making them, however small. I see you have a late model Jeep and a Bike that can be sold to help. Buy a beater to get to work.

Really, you find this to be a reasonable position for a person who is sick for a reason out of their hands.

The problem is with a system that allows good people to be financially ruined by a medical system that regularly fails to fix the actual cause of the illness. Yet they continue to order uber expensive and addictive pain meds without treating the cause.

If you have a $250K surgery and make $20K a year with a family of 5, how would you pay it off.

It must be nice up there on your pedestal.

bearmtnmartin wrote: Am I alone here? If you owe money, you pay the money. Sorry, but I don't believe bankruptcy absolves you of the need to pay your bills. You come up with a payment plan you can afford, then go to the creditors and give them a payment schedule and then tighten your belt until the worst is over. If the finances improve you increase the payments, and if they worsen you go back apologize and say the payments will be getting smaller for a while. But you keep on making them, however small. I see you have a late model Jeep and a Bike that can be sold to help. Buy a beater to get to work.

Hmmm....your house must be made of rose-tinted glass.

You have no major assets, your credit is already screwed up by the collections agency, this is when bankruptcy makes sense. You aren't going to hurt your credit any more than it is.

If you want the "single payment" route then file for Chapter 13, your debts will be negotiated and you will pay monthly to the trustee who will pay your creditors.

In the long run your credit will be back on track much faster through this method than through playing the collection agency games.

And while I'm not a fan of bankruptcy there are certainly times when its called for and this sounds like one of them. Im also less of a fan of collections agencies and could care less how bad they get screwed over in the process even if a person probably shouldn't qualify for bankruptcy.

Really, you find this to be a reasonable position for a person who is sick for a reason out of their hands.

The problem is with a system that allows good people to be financially ruined by a medical system that regularly fails to fix the actual cause of the illness. Yet they continue to order uber expensive and addictive pain meds without treating the cause.

If you have a $250K surgery and make $20K a year with a family of 5, how would you pay it off.

It must be nice up there on your pedestal.

Where did this quarter million dollar debt come from? And income? You should go back and read the original post. He has incurred large amounts of personal debt to the point that multiple collection agencies are after him. Even so, his posts relate to the best way to pay off the debt, not run away from it. You blithely tell him to claim bankreptcy as if his problems will be over. Well, perhaps they will, but the people to whom he is in debt will have to absorb the loss. Sorry, but I have a small business where I have had people renege on their obligations, and it causes ME and MY FAMILY great personal hardship. And for that pompous waste of skin Donald Trump words fail me. Every time he has gone bankrupt he has left hundreds if not thousands of trusting people and institutions in the mud. All in his greedy poorly planned pursuit of wealth. Its this complete disconnect between borrowing and repaying obligations that have pushed the Greeks to the edge. Tomorrow should be quite interesting over there.

bearmtnmartin wrote: Really, you find this to be a reasonable position for a person who is sick for a reason out of their hands. The problem is with a system that allows good people to be financially ruined by a medical system that regularly fails to fix the actual cause of the illness. Yet they continue to order uber expensive and addictive pain meds without treating the cause. If you have a $250K surgery and make $20K a year with a family of 5, how would you pay it off. It must be nice up there on your pedestal. Where did this quarter million dollar debt come from? And income? You should go back and read the original post. He has incurred large amounts of personal debt to the point that multiple collection agencies are after him. Even so, his posts relate to the best way to pay off the debt, not run away from it. You blithely tell him to claim bankreptcy as if his problems will be over. Well, perhaps they will, but the people to whom he is in debt will have to absorb the loss. Sorry, but I have a small business where I have had people renege on their obligations, and it causes ME and MY FAMILY great personal hardship. And for that pompous waste of skin Donald Trump words fail me. Every time he has gone bankrupt he has left hundreds if not thousands of trusting people and institutions in the mud. All in his greedy poorly planned pursuit of wealth. Its this complete disconnect between borrowing and repaying obligations that have pushed the Greeks to the edge. Tomorrow should be quite interesting over there.

my reading of the OP is that things were going good and things were under control until the medical stuff came up.. i've seen first hand how fast a seemingly minor medical problem can spiral into huge financial hardship a few months down the road.. it sucks, but this is the kind of situation that bankruptcy was designed for.

IMHO there are times when you have to just throw in the towel, you have done all you can. The OP makes no mention of how much is owed. If it's, say, $1-2k or some other amount you can swing, then man up and do it. OTOH, if it's $250k and there is just no way, well, the bankruptcy courts are pretty much your only remaining option.

If it goes that way, don't feel too guilty: that's why there are $6 aspirins and crap like that in hospitals. I saw that one in person, my ex wife's grandmother was on blood thinners and aspirin in a complete no no. Yet there were 6 or 7 charged on her final bill. Uh huh. Yeah, right. Get them off the bill or be ready to explain why your personnel gave aspirin to a patient who definitely did NOT need them because it will kill them.

My wife (then girlfriend) got caught up in the college-student credit card debt. She declared bankruptcy in 1998. Our credit scores now are well into the upper 700s and we just bought a house.

I'm not suggesting bankruptcy, but if you can live without significant credit for the next 7-10 years, its an option.

What I'm really saying is... I feel your pain, I don't judge, and there is light at the end of the tunnel. You are a stand-up guy. Many people would post, "how do I avoid this crap?" but you posted on how to handle your debts. That, alone is worth a ton in my book, if not the creditors book.

Chin up, buddy. I've been there before. It gets better.

bearmtnmartin wrote: Where did this quarter million dollar debt come from? And income? You should go back and read the original post. He has incurred large amounts of personal debt to the point that multiple collection agencies are after him. Even so, his posts relate to the best way to pay off the debt, not run away from it. You blithely tell him to claim bankreptcy as if his problems will be over. Well, perhaps they will, but the people to whom he is in debt will have to absorb the loss. Sorry, but I have a small business where I have had people renege on their obligations, and it causes ME and MY FAMILY great personal hardship. And for that pompous waste of skin Donald Trump words fail me. Every time he has gone bankrupt he has left hundreds if not thousands of trusting people and institutions in the mud. All in his greedy poorly planned pursuit of wealth. Its this complete disconnect between borrowing and repaying obligations that have pushed the Greeks to the edge. Tomorrow should be quite interesting over there.

$250K medical debt is not hard to acquire and was a figure I used based on my own experience.

The OP stated the problem debts are medical.

Maybe you should learn to read, please point out where I advised him to "claim bankruptcy".

I am also a small business owner and have had unsettled debts many times, guess what, life happens, get over it.

novaderrik wrote: right now i'm getting letters every month from 2 different collection agencies for 2 different debts, both of which are bogus.. one of them is for a large national bank that has a stage coach on all their billboards.. i closed my checking account with them in the winter of '05/06 some time (forget exactly which month..) with a $0 balance.. got a receipt and everything, and the monthly statement i got the next month said $0 balance.. 3 years later they decide that i owe them $750 for some reason.. so i yell and scream at them on the phone and in a couple of their branches on friday when a lot of people are in there cashing paychecks and they go away after a couple of months.. they sold the "debt" to a collections agency that is now willing to "settle" for $37 or some weird number like that.. i continue to ignore it and life goes on.. the other one is from the utility that provided natural gas to my trailer house in the mid 90's. that account was closed and paid off in the summer of '96- again, $0 balance.. 8 years- yes EIGHT FREAKIN YEARS- later they decide that i owe them $250 and the harassing phone calls and bills in the mail box start. i tell them nope, not gonna pay and very nicely (sometimes :) ) tell them what to do with their debt.. they sold it to a collections agency that is willing to settle for $20 to "save my credit".. both of those go directly in the garbage can, and neither of them even showed up on a credit report that was run on me by the local credit union a few weeks ago..

I'd be prepared to lawyer up if i were you. Once they affect your score, that's going to be sticky.

Curmudgeon wrote: If it goes that way, don't feel too guilty: that's why there are $6 aspirins and crap like that in hospitals. I saw that one in person, my ex wife's grandmother was on blood thinners and aspirin in a complete no no. Yet there were 6 or 7 charged on her final bill. Uh huh. Yeah, right. Get them off the bill or be ready to explain why your personnel gave aspirin to a patient who definitely did NOT need them because it will kill them.

That is sloppy billing and I agree, fight, fight, and fight some more until it disappears. But here is what you don't see on the bill and why it is $6 for an aspirin, it is nursing cost. It isn't possible, or at least at this time, to charge a real dollar amount on the actual time a nurse spends on one patient out of the 12 or more on that shift. Plus let's not even get into liability costs that can be associated with "invasive" procedures. It's any wonder why an IV, for direct fluid and medication intervention, can cost $1k.