How does the debt collection process work on an unsecured loan?
I am 105K in debt(mortgage, student loan, car and the unsecured loan) and lost my former job due to lack of work. I got a new job but I am out 15K/yr. Through much juggling, I am paying off everyone except the unsecured loan on which I am paying 30/month(they want 260/mth) and they are unhappy I am paying them so little and threatening to sue me. I am trying to sell the house to pay off the mortgage and the personal loan and this is still at the original lender level. I am hoping I will get to work with a collections agency first since I can offer them the 30 I am now paying the creditor and when I sell the house I can pay the bill in full and have the credit bureau remove the blotch from my credit by showing evidence of payment. Do they go to collections or sue first?If they do sue,will they garnish my wages or freeze my checking account(no savings) or both? How does the debt collection process work on an unsecured loan?
Tried debt consolidation but my house is not worth enough to do it and having other debt attached to it would reduce my chances of selling the house and paying off the mortgage and the personal loan. I am really looking for info on how the debt collection process works,not how to get out of debt. I have that part figured out unless I get sued. Thanks
Thanks Taja but I am asking what the collection process is. I owe 105K out of which only 9K are unsecured debt. I am paying everybody except for the unsecured debt (to preserve my assets) and paying this unsecured creditor 30 a month hoping to sell my house to pay of the mortgage and the unsecured loan which will get rid of 64K off my debt and put approx 4 K in my pocket to move to an area with a better pay labor market. I am trying to find out (by learning how the collection process works) if I am going to have time to get this done before I have to worry about their coming after my wages and/or checking bank account. In other words, if I can work with a collection agency to which I can offer payments and pay the 30 I am now paying until I can sell the house. I already tried debt consolidation and I can’t get a loan for 105 K with a house that is worth 79K as the only collateral. The rest I owe is my car and student loans which must be paid or they will be worse than this creditor.
BBOYBALL: My mortgage is in perfectly good standing since I pay that before I even buy food. It is the only assett I have and I want to move to an area where I can work without having to commute an hour to do so. That is why I am selling the house: to move and to pay off the mortgage and the personal loan I took out to buy a new furnace and remove asbestos. I am willing to sell for 76K.
The debt collection process
When you default on a loan or pay less than your contractual agreement – for instance, you have to pay a set percentage of the amount owing on credit cards or a minimum payment – your account will be passed to the firm’s own internal debt collection people. They will contact you to try to recover what is owed and to check your circumstances.
Most banks and financial organisations prefer – at least initially – to handle debt problems themselves. However, if the situation continues for any length of time or they are unable to come to an agreement with you, or you ignore their letters and/or phone calls, they may pass the debt on to a collection agency or try to recover their money some other way.
Any debt collection agency used by your creditors must work within the same legal restraints as the original financial organisation and cannot, for instance, try to demand money under threat of physical violence.
Often the letter you receive will indicate that you have to pay the full outstanding balance of the debt with a threat that if you do not, further serious action will be taken. Some people get frightened by this but it is essential you respond indicating why you cannot pay the full amount and sending a copy of your budget and repayment proposals.
Provided that you maintain the proposed payments, update the information in your budget when asked by your creditors to do so and provide evidence (like bank statements and payslips) when they are requested, most creditors should be prepared to help. However, if you do not voluntarily make payments to reduce your debts or keep to your repayment arrangement, the original financial organisation or the collection agency may apply to get a County Court Judgment(s) against you. In this case you will usually be sent a claim form. This gives you an opportunity to respond – either by defending the claim if you dispute it (using the form known as an N9B) or by offering to repay the debt by instalments (using the N9A form which has to be completed with the same sort of information that is included in your budget). In most cases, provided you complete this form, your proposals are realistic and you keep up the payments, no further action will be taken.
If you wish you can attend a hearing and explain your circumstances and present your personal budget but this is not normally necessary as long as you have returned the relevant paperwork within the time allowed and your budget is a realistic one. Failure to keep up the payments agreed can lead to further action. If you are employed and fail to make payments to a CCJ, an attachment of earnings order may be made against you. That means the instalments due will be taken directly from your salary by your employer before the balance is passed on to you.
If you are under a judgment(s) from the Court and fail to keep up payments, the creditor also has the right to instruct bailiffs to recover the amount due. This is the likely course of action if you are not working or are self employed and fail to keep up the agreed payments. Bailiffs might also be sent if you fail to reply to any letter from the Court that seeks further clarification of your position