It is impossible to accurately predict the future. The same is true with your finances though you are gainfully employed at the time you secure a loan or credit. Downsizing, or clos-ing down the business of your employer or illness are some of circumstances you have no control that could lose or reduce your income.
Losing or reducing your income leads to your inability to pay your monthly bills including loans and credit cards payments.
When you are on default on your payments, credit grantors usually assign your accounts to collection agency whose collection agent would hound you and threaten you to bring to court if you would not pay the full amount outstanding.
In some cases however, a collection agent may agree to reduce your debt if you could offer reasonable cash settlement. When you deal with a collection agent you have to be careful, otherwise, another collection agent would collect a balance of your debts plus interest in arrears despite having paid in full the settlement amount.
A good example was a lady who successfully negotiated with a collection agent to reduce her debt from $7,000 down to $3,000 inclusive of interest. She borrowed from her friends and relatives to generate $3,000. She was instructed by the collection agent to send her payment through a bank.
She followed the instruction and got a receipt from the bank for the amount of $3,000. She was happy of the settlement she had made with the collection agent believing in good faith that she has no more debt from that creditor represented by the collection agent.
About six months later, other collection agent called her to pay a balance owing of about $3,500 from the same creditor she already made full cash settlement of $3,000. She reason out that she already made settlement on the said account and provided the new collection agent of the receipt she got from the bank.
When she was asked if there was a written document that the payment of $3,000 was a full settlement, she could not produce, for her settlement agreement was only verbal. The new collection agent said, that the $3,000 payment she made was only a partial payment of her debt, thus, she still has a balance owing of $3,500.
The lady has to choice, but to pay the balance of $3,500 for she could not produce a written proof of the cash settlement agreement.
In dealing with collection agent, you have to be prudent particularly on cash settlement. You have to always confirm it in writing sign by the authorized person of the collection agency where the collection agent works and always get the original copy before making a payment.
Moreover, upon making a payment you have to get a “Release,” a written document indicating that your creditor has no more right to sue you for you already have fully settled your debt.
Adam Aspilla is a Senior Financial Counselor of the Debt Clinic of Canada Inc. and the author of the book, You Can Negotiate All Your Debts. He also writes a biweekly column, “What Matters In Life” in “Taliba Newspaper. For free initial, professional and confidential consultation, please call 905-306-7572.