How to Properly Handle a Delinquent Account
A delinquent account is an unfortunate part of many people’s credit history. For some people, the balance just gets too high to be managed, and for others their inability to pay may be due to a loss of income. Whatever the reasons, it is in your best interest to be rid of a delinquent account as soon as you can.
What Is a Delinquent Account?
A delinquent account occurs when you fail to pay your minimum monthly bill on time. In most cases your overdue account will not be reported as such until at least 30 days have gone by past your original due date. At this time, you will generally begin receiving phone calls from your creditor, and they will try to get you to pay by card or check over the phone to make sure that your balance is caught up.
The real problems begin when you do not have enough money in your bank account to cover an over the phone payment. It is usually at this time that people will start avoiding answering the phone if an unknown number pops up on the caller ID. Although it may be scary, and not a little embarrassing for many people, it is necessary that you do the responsible thing in order to get your debt taken care of.
Assessing Your Needs
Before you run out and prematurely declare bankruptcy, you need to take a good, honest look at your financial needs and situation. Are you in between jobs but anticipating working again soon? Are you on a brief medical leave? Have you no feasible way of paying any bills anytime soon?
Deferments for Temporary Setbacks
If you are only temporarily short on funds, call your creditor and begin a discussion about your delinquent account and the possibility of a temporary deferment. If a deferment is granted, you will be able to go up to six months without making any payments on your debt, without it being held against you. This is common for college graduates before they have found any gainful employment and need to start paying off their student loans.
Negotiation for Long Term Setbacks
Unfortunately, as is the case with many people in this economy, there may come a point when your debt is simply not manageable and you do not have the money to cover all of your bills. When this happens, you need to take proactive steps before your credit score is permanently ruined.
Call your creditor and negotiate lower payments. Remember, they do not want you to stop paying on this debt, and they certainly don’t want you to declare bankruptcy. Let them know that you are in a financial bind, and although you still want to make some sort of a payment, you can no longer afford to pay the full minimal payment rates. Perhaps you can only pay $20 or $30 a month. Depending on your creditor, this may be ok. If this is the financial institution that is financing your vehicle, however, $30 a month will not be enough to keep them sated.
Play the Waiting Game
This does not mean avoid making payments. If your delinquent account has been passed over to a collection agency, you actually have a very good chance of being able to pay off your debts for a fraction of the original price. Many of these companies will be thrilled that you are even trying to make their grossly reduced payments, and will continue to work with you. Continue making the minimum payments and you will occasionally be given offers to settle your debt for less than 50%.