Prioritizing Your Debt

So you finally got some extra money, and made the decision to spend it wisely, now the next logical question is where do you put it? Naturally, you want to put it towards improving your credit score, which will make your life a lot easier for you. Paying off your debts will improve your credit score, but which debt do you pay first? Consider your debts. You have two kinds. Secured debts, debts with assets backing them up, are debts that can result in your things being repossessed or taken back. These include your home and your cars.

Unsecured debts are those with no assets backing them up. If you fail to make a payment on your credit card, the bank isn’t going to come to your house and take back the shirt you bought at the mall. A debt collector might call, but the credit card company is not going to take away your place of residence or your transportation to work.

This means that your secured debts have to be your number one priority. Consider debts that if you don’t pay your wages can be garnished. These include IRS debts, any child support payments, and student loans. If you don’t pay these, your paycheck is at risk.

Any services that you need to continue using are important as well. If you aren’t paying your doctor bills, that one doctor is not going to see you again, which can be a real issue if you have to see that doctor on a regular basis. Once you have satisfied all of the urgent debts, you can start to really work on making headway with your credit cards.

Hopefully, your family and friends are the most understanding out of all of your creditors. Let them know you are totally committed to repay the debts but make them a lower priority. Work on your credit score primarily. This is because the higher your credit score, the lower your interest rates will be when you are paying back all of your creditors, and that’s all of them- credit card companies, auto lenders, and mortgage lenders. A high credit score can make a high payment as small as possible.

Mallory Megan works for Rapid Recovery Solution and writes about medical collection agencies

Debt Collectors And Debtors Have Showdowns In Courts

It is true that Americans with outstanding debts will usually suffer from a number of punishments. Collection letters, phone calls, unfavorable credit scores and a chance to wind up in court are examples of retributions for non-compliance.

An alarming new trend that is growing is debtors suing debt collectors first. Any violation of the Fair Debt Collection Practices Act is reason to take a collector to court. It may be true that in a declining economy suing a debt collection agency instead of paying off what you owe may be your only choice. There were 8,347 consumer lawsuits filed against collection companies in 2009. That’s a 55 percent increase over 2009 and double that number filed in 2007.

A portion of the debtors are plaintiffs suing for the first time, who suddenly find themselves unable to pay debts, and they feel that they have been wronged by aggressive collectors. Others compulsively sue. Usually these people have debts worth tens or hundreds or thousands of dollars. It is their hope that favorable judgments may put them on a “collections blacklist.” If he has sued 4 out of 5 debt collectors, debt collection agencies are probably going to want nothing to do with this strange character who puts time and effort into lawsuits when he could be looking for a sense of structure, and a job.

One example of a current lawsuit in action was from a woman who alleges that the collection agency never offered her proof it was entitled to collect. Seriously? Most debt collection agencies adhere closely to FDCPA laws, but even that law is foggy on certain practices such as whether it’s legal or not to leave a voice mail. Basically, the FDCPA hit the scene in the 1970s and needs desperately to be updated to today’s technology.

You might not want to know my opinion, but here it is. I was contacted by a debt collector who left a message on a third party phone, asking for me and letting me know she intended to collect a debt. This is a big no-no. I could have called her and given her hell, but I know why I have the debt and even though I may be broke, I intend to pay it back. To me, it seems like the economy is not getting better any time soon as the number of people who refuse to hold themselves accountable for financial decisions they made in the past grows. I hate to say it, but a debt is a debt, whether we are in a recession or not.

Mallory Megan works for a debt collection company.