Solutions to Debt Problems Section 6-7
Dec 18, 2015
• “Sometimes you gotta wreck the truck, to get the insurance money, to make the truck payment.”
• -Larry the Cable Guy
Collection Agencies
• Companies that specialize in collection of past debt
• Methods: Collection letters, late-night telephone calls, abusive language, and threats of being fired
• Luckily Congress passed the Fair Debt Collection Practices Act
The following actions are illegal
• Threatening violence, using obscene language, publishing shame lists, making harassing calls at night
• Contacting a debtors employer• Claiming the collector is a Federal agent• Revealing credit information to third parties• Using false or deceptive means to obtain
information about a debtor
Typical Debt Problems
• Young family, more than average number of children but average income
• Parents are care-free and impulsive, buy what they want now
• Move frequently, read less, and don’t take responsibility for their actions
• Single adult is the head of the home
Clear signs of too much debt
• Balances increase, longer repayment periods, still paying last month’s bills as this month’s come in, cash advances on credit cards, and slowly all your income goes to paying debts
Solutions
• Wage Earner Plan or Chapter 13• Alternative to bankruptcy where the court
divides up your paycheck to creditors.• This allows the person to hold on to personal
property
Solutions
• Bankruptcy – Also called a liquidation sale• Where a trustee sells most of the person’s
material items at public sale with most of the money going to the creditors
Pawnbrokers• Hold on to collateral and loan the money at a
high interest rate.• Pawnbrokers loan 40% of the collateral and
charge a rate of 36-50% interest• Often times the person doesn’t
save the money to pay back the loan and lose the collateral
Loan Sharks
• Illegal• Very high rates – • 100-500% interest rate• Collection practices
involve violence