Why Ignoring Your Debt Is The Worst Idea Ever
Do you avoid or ignore handling your debts? Are you holding out for the statute of limitations to pass, or hoping the debt will just go away? If so, you may want to reconsider. If it’s been months or years since you’ve made a regular payment on your debts, you’re not in a good situation.
Debt is a serious problem. The average household debt is $137,063, Debtconsolidation.com reports, and credit card debt totaled $978.9 billion in 2016. This debt continues to rise every year.
The cause of the debt crisis? For most people, it was caused by living beyond their means. Even teenagers admit to going into debt at an early age just to keep up with their friends. Clothes, smartphones, tech gadgets, parties, vacations, massages, and other luxuries are all enticing, but if you have to put a phone or vacation on your credit card, you probably can’t afford it. Avoid the temptation to buy expensive things you can’t pay for in one shot.
You may not have known what you were getting yourself into, but financial mistakes have to be reconciled at some point. Ignoring a debt in hopes that it will go away is a terrible idea.
1. Debt collectors can sue you at any point in time
The moment you fail to meet your payment obligations according to your agreement, you can be sued for your debt. If you can’t pay it, the court may order your wages to be garnished.
Before you think you’re safe because you’ve negotiated a new payment plan, think again. You may be surprised to learn that your credit card company can sue you even when they’ve agreed to accept an altered payment arrangement from you. Only honoring your original agreement will protect you from being sued.
For example, if your original agreement is to pay a minimum of $300 per month, but you negotiate that down to $250 per month, you’re riding on the good graces of your credit card company. You might pay $250 per month for an entire year, never miss a payment, and make extra payments on the side, and they can still legally sue you for the remainder of your debt.
Just because you haven’t heard from a collector, doesn’t mean they aren’t getting ready to file suit against you. It’s risky to be on an altered payment plan, but it’s even riskier to ignore a debt.
2. Debt collectors can be easy to work with
Despite what you may read on the internet, debt collectors can be easy to work with. Many people successfully negotiate their own debt just by having a casual, polite conversation with the agent on the other end.
Being polite is a breath of fresh air to a debt collector. “Being a bill collector is stressful,” Michelle Dunn says. “Some people will scream and yell at you, call you names, hang up on you, and cry.” The job of a bill collector is emotionally damaging, and it’s essentially a job where you subject yourself to abuse all day long.
When you’re polite and reasonable, a debt collector will be more likely to help you out and give you the best deal possible. Just like car insurance claims adjusters, collection agents are given the ability to negotiate your debt within certain parameters. If you owe $700 and want to settle your debt immediately over the phone for $500, there’s a good chance they’ll take it.
3. Interest is a beast
Ignoring debt makes your interest pile up with incredible speed. When you ignore a debt long enough, you might end up owing more interest than the original debt.
If you’ve got a debt with a snowballing balance due to interest, cut it off at the pass as fast as possible. If you can’t pay the total amount, or even make reasonable payments, consider debt consolidation services. A debt consolidation service will negotiate a settlement amount with each of your creditors, and then bill you monthly until you’ve covered the settlement amount plus their fees.
4. Choose your debt remedy services wisely
Do your research before consolidating your debt. Some consolidation services charge a flat percentage of the total debt you owe after negotiations. Other services are actually a loan that comes with an interest rate that accumulates each month based on how much debt remains. Avoid a consolidation service that acts as a loan if possible. Don’t put yourself in a position where you have to go into more debt to get out of your existing debt.