Factors That Collection Companies Need To Consider

In today’s recession, collection companies are not exempt. Starting last year, they first started to suffer from declining liquidation performance, staffing cuts, and increased placements.

Then in January 2009, the U.S. savings rate grew and continued to grow. By May 2009 the rate was the highest level of consumer savings in sixteen years.

Generally, an increase in the U.S. savings rate would mean that debtors will be more fiscally responsible and try to pay off debts that they may owe in case of an unexpected bad turn of events. Unfortunately the first half of 2009 has shown us that this is not what is going to happen and the collections industry shouldn’t expect it to.

One factor that makes the situation worse is that the sustainability of savings growth is quite doubtful because a part of the increase was the result of the Obama stimulus package, which sent one time only disbursements to consumers. Also, in today’s economy any type of consumer savings may be considered a means to keep heads afloat as opposed to future planning. And although savings boost personal income, they slow down consumer spending.

For the first time, collections agencies need to alter their focus greatly. Its not that consumers won’t pay, it’s that they can’t pay. Thus, the future success of collection companies is depending on U.S. economic recovery.

That being said, savvy conclusions can be drawn about the future growth in the collections industry. Better job opportunities would be an amazing gain for the collection industry. If debtors are employed, they are more likely to resolve their issues. Renewed consumer confidence and spending would be a huge boost.

There is an impending tide of pro-consumer reforms that the collection industry can do little about. How it can truly affect change would be the quality of responses they give, and that they are carefully considered and level-headed. Finally, increased access to credit is a necessity for the collections industry. .

Mallory Megan works for Rapid Recovery Solution and writes articles on commercial collection agencies.

The Very Basics Of Debt Collecting Part Two

In article one in this three piece series on the very basics of debt collection, I wrote about the differences between third party debt collectors and in house debt collectors. But no matter what entity or institution they work for, the goals of debt collectors are the same. First, they need to find the people or businesses that owe the debt, and inform them that they are delinquent in their payments. Generally, debt collectors will reach a debtor over the phone, but they are known to send mail as well.

The people who owe the money are known as debtors, or consumers, and some times they might move and neglect to leave a forwarding address or appropriate phone number. At times this is done on purpose to avoid being contacted by the collection agents, other times this is just a mistake. In these cases, the bill collectors might check with telephone companies, the post office, credit bureaus, and former neighbors to get the new address.

If a debt collector gets a hold of a debtor’s neighbor, they are strictly prohibited from telling that neighbor why they need the number, and are not permitted to say that the debtor owes a debt. The process of tracking down a debtor’s new address or phone number is called “skip tracing.” Debt collectors will use computer systems to track when debtors or companies change their contact information on any of their open accounts automatically.

As soon as the collection agents locate the consumers they will get in touch with them to let them know about overdue accounts and to request a payment. Debt collectors generally call from 1-800 numbers and must verify that they are speaking with you before they can proceed. If anyone else picks up the phone, they cannot inform them of your debt, all they can do is ask that you call them back at such and such number.

If a debt collector is able to get in contact with a consumer, and verifies that they are talking to them, they will let them know their name, the details of their overdue accounts, and that this is an attempt to collect and anything said in this conversation may be used for the purposes of collection. To Be Continued In Part Three.

Mallory Megan works for Rapid Recovery Solution and writes articles on medical collection agencies. Also published at The Very Basics Of Debt Collecting Part Two.

When An Older Person Has Debt

Older people are feeling the stress of an economic recession just as badly as those who are younger. Many older Americans might not be able to work due to physical or mental conditions or fragility. However, these people still live in homes with mortgages that are due, and just like younger people, many older people might have maxed out credit cards as well. The situation can seem hopeless – with no employment and little help from retirement funds, social security checks, and Medicare, it may seem like there is nowhere to turn.

However, there are still a few options for older people with debt to consider. One option is to seek a decrease in interest from their credit cards. Reducing the interest rate on a credit card from thirty percent down to ten can result in an extra two hundred dollars a month. Oftentimes, lowering the rate can be a lot easier than it seems. The cardholder can always call the credit card issuer and request that their interest be lowered. If a cardholder has a decent payment history, and there are extenuating financial circumstances, like there are in many cases of older people with debt, then there is a good chance that the creditor will lower the rate. Before making the call, it’s a good idea to plan out what you are going to say. When bargaining for anything, it’s always better to request a lower payment plan than you expect to receive. And if something gets worked out, obtain the name and ID number of the financial representative who offered you the modified interest as proof of the conversation.

Additionally there are plenty of professional intermediaries that can help out older people with their personal finances. There are plenty of nonprofit credit counseling services out there that will be willing to work with you, and work on your behalf with your creditors to get you a lower interest rate.

If the situation is serious, a lawyer should be introduced into the situation; one with experience in bankruptcy would be preferable. An experienced lawyer will be able to evaluate all options with a clear head. Remember: bankruptcy has the capacity to absolve you of much of your debt, but it also has a detrimental effect on your credit score for ten years.

Finally, never just walk away from credit card debt. When you ignore a situation where you owe debt, it only means collections actions, lawsuits, summons, or maybe even eventually having the debt turn into taxable income. Especially for older people in today’s economy, it is essential to protect and care for yourself and your assets. When collectors call, give them a chance – explain your situation and see if a repayment plan can be worked out. Many times they aren’t as bad as they seem, and can often be helpful when it comes to financial advice or helping you hash out a re-payment plan.

Mallory Megan works for Rapid Recovery Solution and writes articles about medical collection agencies. This article, When An Older Person Has Debt is available for free reprint.

How To Avoid An Audit By The IRS Part Two

Another thing that makes the Internal Revenue Service wary is hobby losses. Last year the Internal Revenue Service handed its agents a manual about how to find hobby losses, which is when tax payers underwrite activities they enjoy – like soccer – by labeling them as businesses and claiming a loss on a Schedule C under the guise of self employment. Remember that any Schedule C that lists a loss will be under scrutiny, especially if your new business has something to do with anything enjoyable or fun.

Although there is nothing wrong with doing your own tax return, if you hire the help of a tax preparer, make sure that they are on the up and up. The Internal Revenue Service has pretty much come out and said that it keeps a list of tax professionals that they find wary, but they will not tell you who these people are.

So remember to be cautious of tax preparers who claim that they can get you bigger refunds than others, take their fees out of a cut of the refund, or suggest that you do anything that may seem shady.

And although this may seem obvious to you, many people still do not get the fact that you can’t claim that you don’t owe taxes because the tax system is voluntary, or you have a Fifth Amendment right against filing self-incriminating tax returns. The IRS will just add penalties to the money you already owe because these are “frivolous arguments,” and the courts will support it.

One final thought: even if you are able to pull the wool over the eyes of the IRS, don’t go around bragging about how you did it. Something that a lot of people don’t know is that the IRS is now authorized to pay snitches a lot of money to rat you out!

Mallory Megan works for Rapid Recovery Solution and writes about medical collection agencies. Check here for free reprint licence: How To Avoid An Audit By The IRS Part Two.

Thinking About Filing For Bankruptcy? What You Should Know And What You Should Never Do

Every day, more and more of us fall into debt, and many of us will inevitably file for bankruptcy. As you might already know, declaring bankruptcy is the most extreme of all of the financial makeovers. Most of your debts will be absolved, but financial experts continually warn us that it should be treated as a last resort. When you file for bankruptcy, you might as well get a big rubber stamp that says “Don’t Give Me Credit!” and slam it on your credit report for the next ten years. It may seem like a good idea now, but in the future, when you find that your ability to obtain a car, living environment or even employment may be greatly hindered, it may not seem so great. So, it is absolutely imperative that if you are planning to declare bankruptcy, know what you are doing, and have a good game plan.

Basically, there are five chapters of bankruptcy that you can file for, chapter seven being the most common. What will happen when you file Chapter Seven is that a trustee will be appointed to handle your finances. They will collect any of your property that is deemed up for grabs (non-exempt property), and then they will sell this and distribute the proceeds to the creditors you owe money to. Chapter Nine bankruptcy is available only to municipalities, and since municipalities are municipalities this bankruptcy doesn’t involve liquidation like a Chapter Seven one does, it is more of a form of reorganization.

Chapter Eleven, Twelve and Thirteen bankruptcies are also available. These get a bit more involved due to the fact that instead of liquidation, the debtor is permitted to keep some or all of her property while she uses her future earnings to pay off the debt. Individuals can file for Chapter Thirteen, while Chapter Eleven is mostly for businesses. Chapter Twelve is similar to Thirteen but is more rare on account of the fact that it is only available to “family fishermen” or “family farmers” only in particular situations.

So, now that all of that is out of the way, if you are considering declaring bankruptcy, here is a list of things NOT to do:

We’ll begin with the most obvious. Once you have made the choice to declare bankruptcy, don’t use your credit cards anymore. It may seem like a genius move at first, but it is just not a good idea to recklessly incur more debt that you do not intend to repay. Keep in mind if you take on a huge amount of debt and then suddenly file for bankruptcy, that makes you look mighty suspicious, and creditors don’t like to play the dummy: you could lose your right to cancel out the debt in the bankruptcy. Actually, in 2005, a series of bankruptcy reforms lowered the threshold on extensive purchases, called “luxury purchases” to five hundred dollars and extended the period where you could be caught for abuse to ninety days before filing. So anything that you buy in this time period will be under extra scrutiny. More DONT’S In Part Two….

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