When debt collectors are dialing day and night it is easy to start feeling scared, pressured, and depressed. Some people ignore every letter and call, which can be dangerous in its own way because this strategy can lead to a lawsuit.
But scrambling to pay debt collectors can be even more dangerous, especially if you let them talk you into certain strategies that can really harm you in the long run, financially.
Paying debt collectors barely helps your credit.
Paying debt collectors does not raise your credit score by any significant margin. The new scoring methods do ignore past collections debt if you’ve zero’d it out, but these aren’t the FICO scoring models used for home or vehicle purposes.
The truth is, by the time a debt has gone to collections the only real purpose of paying it is for your peace of mind, and to get the debt collectors off your back. If you have one or two small debts it might be worthwhile to make room in your budget to make these payments happen.
If you have dozens of debts in collection you’ll just end up throwing bad money after good.
The original creditor has already been compensated.
There is a difference between the original creditor and the debt collector sent to collect the debt.
The original creditor generally writes the debt off on their taxes before passing the debt to a collector. If they contract a collector, anything they get back becomes gravy: they essentially get paid twice.
If the collector buys the debt then the creditor gets paid twice because the collector buys the debt.
We’re not suggesting you should run around taking out a bunch of debts just because you can do it “without really hurting anyone.” That would be stealing, and using bankruptcy to cover shopping sprees you never intended to pay for is against the law.
We’re just saying that if you get into serious and unavoidable financial trouble you’re hardly hurting anybody by taking a step back and looking for solutions that don’t involve paying your creditors. The creditors themselves wouldn’t hesitate to declare Chapter 11 if it benefited them to do so. Why should you?
Raiding your retirement fund or taking out another loan won’t help.
Raiding your retirement fund is almost always a bad idea. Bankruptcy exemptions that cover retirement funds are quite generous as a rule. In most cases, we can protect the entire retirement fund, as long as you don’t touch it.
Why would you sacrifice your future just to keep an obnoxious caller off the phone?
There is a better way.
If you’ve got dozens of collectors calling constantly consider bankruptcy. We can help you get all of your debt collectors off your back, can raise your credit score, and can essentially give you a fresh financial start.
Contact us to schedule your free consultation today.