Utah Central Credit Union

Talking with a creditor is sometimes scary. It’s something most people would rather avoid. And probably for good reason. They think they will open themselves up to harassing phone calls, received threats about losing their house, their car or having their wages garnished – even taken to court.

So here are my five rules for working with creditors:

1. Create a specific repayment plan and timeline for resuming normal payments. Secured loans like mortgages and car payments come first, then credit card companies and medical bills.

2. Explain how you got in the financial jam. Write out a script. List actions you will take and ask for help – like getting interest charges or late fees dropped. You may also ask them to report your payments as “on time” even though they payment is reduced.

3. Call your creditor. Make sure you’re talking with someone who has the authority to approve any changes to your account. If not, ask for a supervisor.

4. Present your solution and always tell the truth. Creditors have heard every excuse in the book. Stay composed and work out a compromise.

5. Supply documentation. Once your plan is approved, send the creditor a letter explaining everything you’ve agreed to, including your plan of action and desire to keep a good credit rating. Make copies so you have a record. And stay in constant contact until the problem is resolved.

Besides making that initial call, it sounds like the hard part might be coming up with a plan to dig out of your financial mess.

Sometimes we get so busy with life we really don’t know how much we have in our bank account, when bills are due or how to restructure a financial payment plan.

But I do know this, these problems can’t be ignored and if we fail to face them head on, creditors will take collective action that could be financially devastating.

So it’s better to be proactive.

At Utah Central Credit Union we have financial counselors that members can talk to. Additionally, we use a national agency that has experts available on a daily basis who are very knowledgeable about credit issues and can help design a sensible plan.

Another source is the National Foundation for Credit Counseling – the nation’s largest financial counseling agency. They have over 700 accredited offices in all 50 states.

You can also call the Consumer Credit Counseling. They also offer professional trained and certified counselors who are available via phone Monday-Friday as well as Saturdays. These initial counseling sessions are free and there is a free budget evaluation to get you started. Enrollment is a debt management plan is very inexpensive at only $39 with a small monthly fee of $4 for each account – but some of these fees may be waived.

A third recourse is the Association of Independent Consumer Credit Counseling Agencies that will offer budget tips, financial education, referrals and can design a debt management plan.

Once you go into a special debt reduction program with creditors you won’t be able to use those credit cards while you’re working off your debt. So you’re going to have to go on a financial diet.

It’s best to deal with the original creditor as they are most likely to arrange a compromise solution. Once your account has been turned over to a collection agency – you have less room for negotiation and they are primarily focused on getting payments from you – as much as they can.

Be aware that a debt collector can sue you to recover the money you owe. If they sue and win a legal judgment against you they can garnish your wages or instruct a third party like a bank to turn over fund from your account. Federal benefits like Social Security, Medicaid, or student assistance cannot be garnished.