Don't Let Past Due Bills Become Collections
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Past Due Bills - Collection Agency Debt

It happens to a lot of folks. You're doing well, financially but you run into a bit of financial trouble and things start to fall apart. You suddenly find yourself in a position where you can't pay all of your bills, you're getting calls from creditors and collection agencies. Many of your bills are past due, and you already have a judgment against you. How do you cope with it all? Not everyone breaks down and files bankruptcy at this point.

Here's How you can get through this:

End Those Collection Calls

First things first: stop any phone calls or letters that you think are harassing. You should expect your creditors to call you if you owe them money. You should expect collection agencies to call too. However, you don't have to be harassed over debts you don't owe or debts that you previously have negotiated (or are in the process of negotiating).

Send a Cease and Desist Letter

A cease and desist letter prevents a collection agency from contacting you for any reason. The upside to this approach is that it will stop the collection phone calls. You can also expect to stop receiving letters in the mail. The downside to this approach is that the collection agency might file suit in court. If the amount is large enough, and the collection agency hungry for the money, expect to be sued over your debts.

Send a Letter for Debt Validation

Validating a debt usually results in a decrease in phone calls. Sometimes they stop altogether. Likewise, letters stop coming in the mail. The point of asking for validation is to stop creditors from contacting you about debts that you don't owe and to prevent collection agencies from purchasing old debts and collecting on them twice. In some cases, collection agencies don't strictly follow the law and may not be able to validate your debt. If this happens, the calls must stop and you cannot be pursued for the debt anymore.

Make a Plan

If you do legitimately owe money to your creditors, the obvious solution is to pay them off. Sometimes, this is easier said than done. What you need to do is formulate a plan. Write down your financial goals, where you expect to be in 5 years, how you want to pay off your debts, and how your creditors can benefit from a payment arrangement with you. Writing all of this down is important. You don't want to get on the phone with a creditor and start "flying by the seat of your pants" during the negotiation process.

Yes, you will be negotiating your debts. You can negotiate the terms of repayment or the total debt amount. The important thing is that you communicate something mutually beneficial to your creditors. If you call your creditors on the phone, be sure to get any agreement from them in writing. Alternatively, you could write a letter to each of your creditors. This would naturally result in getting something in writing from them.

Once you and your creditors have come to an agreement, it's time to actually service your debt.

Borrow Money From Unlikely Sources

Retirement accounts and cash value life insurance policies are excellent places to find money. Paying off your debts should take priority in your life if you're being called by creditors or you have a judgment against you. You can always repay your retirement accounts with interest and secure your future retirement. It's a simple matter dividing up your total borrowed amount over a set number of years and adding a little extra to make up for any lost investment return. Your credit rating is often much harder to fix.

Make a Budget

One of the best ways to cope with past due bills is to write down a budget. Don't underestimate the power of writing things down. To do this properly, you must write down every single expense you have. Entertainment or miscellaneous expenses could be categorized under one heading, called "entertainment," and one-off or unpredictable expenses can be budgeted out of any savings you have (or will have).

The basic rule in budgeting is that you must make more than you spend. As obvious as it sounds, it's a major reason why you're behind on your bills in the first place. Writing out a detailed budget forces you to be objective about your financial situation. Every source of income shows you where you're making your money. Every expenditure shows you where it's all going.

Scheduling bills is another way to enhance and solidify your budget. When you're making more than you spend, you shouldn't fear automatic bill payment systems that are commonplace in online banking. Set up your bill payments once, and forget about them. Every month, your bank will make the payments for you from your checking account - on time, guaranteed.

If you spend more than you make, the solution is to either make more money or spend less. If making more money is out of the question, focus on your top one or two values in life, and cut out everything else. Everything. Focus on the essentials in your life that will keep you fed and provide some form of psychological stimulation. It's going to be difficult, but you're going to have to make cuts somewhere. If you've defined your most important financial values, those cuts will be much, much, easier to make. You won't feel depraved, and you'll be much more likely to stick to your budget and stay out of financial trouble.