Knowing Who To Pay Can Be One of the Most Frustrating Aspects of Debt Trouble
Debtors in serious trouble often havn't paid anything on their debts for a long while. That usually means the original creditor (OC) has handed the debt off, sometimes permanently. There are two types of businesses which can contact you next, and it's important to know exactly what you're dealing with so that you can make the right moves.
The first type of creditor helper is the collection agency (CA). A collection agency attempts to collect the debt on behalf of a creditor in return for a fee (typically 20% of whatever is collected). Collection agencies may have a lot of discretion in settling debts or only a little discretion. Within the boundaries that the agency itself sets, the clients call the shots. That means that while a CA has an account, it may still make sense to deal with the OC if the OC will cooperate with you. In some cases, the OC may be able to recall the account from the CA or otherwise adjust the situation with a degree of flexibility that the CA will not exhibit, particularly if the CA has been abusive. On the other hand, there may be actions that you can take (such as requesting validation), that will essentially force the CA to return the claim to the OC. A full exploration of the strategies available to the debtor is beyond the scope of this article.
The second type of creditor helper is the Junk Debt Buyer (JDB). The JDB purchases debts from OCs, and once the debt has been purchased, the OC is typically out of the picture (with some key exceptions that sometimes provide opportunities for some debtors). Large OCs typically sell first to large JDBs. JDBs typically hire CAs to attempt to collect, and in some cases will employ law firms to file suit on their claims. JDBs will also sell debts that are not paid to smaller, regional JDBs, who may in turn resell to even smaller more local JDBs in a more or less well-established food chain. The debt sells for less at each stage, and eventually someone either collects on it, or it gets reduced to judgment (and perhaps resold as a judgment to yet another series of JDBs), or it becomes dormant and nobody ever picks it up again.
So long as you have a penny to your name, the last possibility is a remote one.
Debt Hope: Down and Dirty Survival Strategies ($8.99 delivered as a .PDF):
