Sometimes life can be mean and make you go through the experiences that you would have never even thought of. We’ve all been there.

All of your credit cards are maxed out, no raise in two years, kids are asking for new toys, and there is no money for paying the bills. Quite a situation!

So what are your options?

First of all, keep calm. It’s completely ok to feel scary and embarrassed when you are unable to meet your obligations. If you don’t have anything to pay, you simply can’t.

But you also can’t ignore the fact that your credit card company expects to be paid. They follow a traditional collection protocol to pass your account to a head one way or another.

And believe it or not, credit card companies feel no regret in filing lawsuits to collect.

Most of the people experiencing financial difficulties have never been in such a position before. So they really don’t have an idea about what happens when you’re unable to pay.

As attorneys say, “There is no excuse for ignorance of the law.”

Therefore, here is some valuable information so that you know what’s coming and don’t feel blindsided.

A lot of grief can be avoided if you recognize the fact that it is vital to understand how the debt collection system works and act accordingly.

Navigating Through The Credit Card Collection Labyrinth

The very first thing that you need to understand is that credit card companies don’t believe in taking things personally. It’s hard to hear, but you’re no more than just a number to them.

They take a practical approach and know that delinquencies happen, whether it’s a good economy or a bad one. They have effective systems in place and your account moves from one stage to another in a very straight-forward manner.

Take a look at the general blueprint for most credit companies during the delinquency’s first 6 months:

  • For the first 3 months, the company tries to collect the money through their own means.
  • For the next three months up to the sixth month, they may continue their own efforts, or they may offer the collection work to a debt collection agency.
  • Upon the completion of six months or more, the account is generally charged off.

Don’t be so thrilled. You’re not out of the woods yet because of a simple reason. Read on.

A Charge-Off Is Way Different Than A Write-Off

Even though both these terms can be confusing to some people, they are definitely a class apart.

A write-off means that a debt is forgiven and the debtor is free from any further commitment.

A charge-off is known as an obligatory reclassification (to meet the terms of fiscal regulations) of a debt upon reaching its limit of 180 days past due. Thus, you still owe them money.

Apologies for letting the daylight in.

The next step taken by credit card companies after an account charges off depends upon their company policies and the depth of the case:

  • Some companies handle collections with the help of the in-house team for a few months more.
  • Some opt for a debt collection agency to take care of the collection efforts (credit card company continues to own the account).
  • Some send your account straight away to an attorney for litigation.
  • Others might take a totally different approach, where they sell the debt to a debt purchasing company, which makes the purchasing company the rightful owner of the account. They can choose to negotiate with you or send your account directly to litigation.

So, this means that more delinquent your account becomes, there is more chance of facing a lawsuit.

Don’t let this happen to you. Bounce it off the table when you have the chance.

The Verdict

If you’re facing financial difficulties, be confident and try taking a counteractive action as soon as possible. Don’t let them hang around.

Being positive in such a situation is one thing, but you should also know that no amount of wishful thinking is going to make things better for you financially. They’ll still be mooching off you when you wake up in the morning until you decide to do something about it.

Remember, there’s nothing to be embarrassed or ashamed of. Sometimes, things spin out of control. The main thing to focus on is that situations can be turned around in your favor with determination and effective financial planning.

Take help from professionals who know how to deal with such matters. You might think that there is no hope for your situation, but you never know they might have more alternatives than you comprehend.