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Dealing with Delinquent Credit Card Debt

How to lock down delinquent credit card debt so it doesn’t cause problems.

How to lock down delinquent debt

Although you try to be as responsible as possible with your debt, sometimes things can just get away from you. Whether you have delinquent accounts because of the recession, because you used credit irresponsibly, or maybe you just dropped the ball this one time, it all ends up the same way—delinquent accounts hurt your credit and hinder your ability to be financially stable.

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No matter how you reached this point, the really important thing is what steps you are going to take to get out. But you need to understand the types of debts that you have and how “delinquent” they really are.

Fact: A survey showed 59% of consumers pay credit card bills last when money is tight

So how do you deal with delinquent accounts successfully and how do you handle any fallout on your credit?

Step 1: Define the Delinquency

Delinquent accounts come in more than one form, so your first step to dealing with the issues successfully is to determine just how delinquent that debt is. The key point of distinction is whether or not your delinquent account is designated as a charge-off.

Creditors move accounts to a charge-off status when the bill hasn’t been paid.. Charge-off means the account is frozen, but there is still an outstanding balance owed that the creditor wants to recoup.

Although it can differ from creditor to creditor, most charge off an account that is over 180 days (6 months) delinquent. Effectively, this means you have about six months from the date of your first late or missed payment to bring the account current before the creditor lists the account in charge-off status.

So if you can handle a past-due debt within the first six months, it doesn’t get sent to collections – it’s just late. On the other hand, any debt older than six months in usually charged off and sent to collections. At this point, your rights are protected by the FDPCA.

Pop Quiz

What does F-D-C-P-A stand for?

a) Fair debt collection protection act

b) Fair debt collection practices act

c) Fair delinquency collection practices act

d) Funded debt collector protection act

Reveal Answer

b) Fair Debt Collection Practices Act

Return to question

Step 2: Know Who You’re Dealing With

If one of your accounts is delinquent, you will talk to one of three people when you attempt to arrange payment:

  1. The Creditor. If the account is not charged-off, you are dealing directly with the creditor. They will generally be more willing to work with you, understand extenuating circumstances, and more likely to help you adjust your payment schedule so you can get back on track. It’s important to note collections accounts not at charge-off status are not bound by the guidelines of the FDCPA.
  2. First-Party Collections. If your creditor has a large volume of delinquent accounts, they may send accounts to what is known as a first party collections agent before the account is charged off. This is a collections department within that company. As with regular third-party collections, these collections practices are set by FDCPA so even if you think you’re dealing with the creditor, you may be talking to a collector.
  3. Third-Party Collections. Most times when your account is charged-off, it is sent to a third-party collector. They attempt to collect on the debt for a certain period of time and receive a percentage of what is collect if they are successful. Charge-off collections practices are bound by the guidelines set forth in the FDCPA.

So on a past-due account, you’re likely to have more wiggle room to negotiate so you can get back on track; however, the creditor is the one who gets to set the dialogue. Once the debt goes to a collector – whether it’s within the company or a third-party provider – then you can’t negotiate as much, but you can at least set the tone for the conversation under the FDCPA.

What to Expect with Collections

If you are late, miss a payment, pay less than the requested amount due, or go over your credit limit, your creditor will change your account status to “delinquent”; this status change gets reported to the three main credit bureaus so it will be reflected on your credit report.

During this time, it’s important to talk with any representatives of your creditor, even if you cannot pay. At this point a creditor is more willing to listen to you and help you work around any circumstances that could be preventing you from paying. They may even arrange a temporary adjusted payment schedule if you are having trouble. Avoiding calls from your creditor is an easy way to get sent to collections. It can also mean harsher credit penalties.

After 180 days (6 months), the creditor will change your account status to charge-off and send it to a collector. The collections practices must now adhere to FDCPA guidelines. At any point if the collector (third-party or one that works for the creditor) abuses your rights, then you have a case for collections harassment.

Article last modified on August 9, 2018. Published by, LLC . Mobile users may also access the AMP Version: Dealing with Delinquent Credit Card Debt - AMP.