As a continuation of The Stages of Debt Delinquency and How to Avoid Them (Part 1), the following provides additional information regarding how debt delinquency can progress and harm borrowers. While Part 1 of this blog discussed the first two stages of the debt delinquency cycle, here in Part 2, we will focus on discussing the final stages of delinquency.
After the first and second stages of debt delinquency comes the:
- Third stage of delinquency: The debt is 90 days past due – At this point, calls and letters from a creditor’s collections department are becoming far more serious, as you have missed three consecutive months of paying on your debt. As with the previous two stages of delinquency, it’s important that you do not ignore creditors and that you inform them of why you may be unable to pay your debt. For example, if you have recently lost your job, you may qualify for lower interest rates or other programs.
Contacting the creditor directly will be important to resolving the matter. The longer you wait to get a hold of the creditor and explain your situation, the more interest and late fees your account will be accumulating, which can result in snowballing debt.
- Fourth stage of delinquency: Creditors write off the debt – If creditors have not heard from you regarding the debt you owe, they will likely write off the debt as a “bad debt” and try to sell it to an outside collection agency in an effort to get a little money back on the debt. At this stage, the creditors will notify the credit reporting bureaus of the bad debt, and the third-party collection agency will likely ramp up efforts to contact you for payment of the debt.
If you are unable to pay the entire debt (which is likely since you were not able to do so in the past three months), this can be the time to negotiate a debt settlement with the creditor to resolve the issue. If you are able to work out a debt settlement agreement with a creditor, be sure to get the agreement in writing so that you have evidence of the terms of the agreement in case you need it in the future.
Colorado Bankruptcy Lawyers
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