5 Stages of Debt Delinquency - Don't Get Sucked In
As a financial counselor, I’ve spoken to thousands of people struggling with debt. Unfortunately the trend doesn’t seem to be letting up, particularly since the job market stinks, the housing market’s worse and banks are remaining tight with their money and credit.
I just read a very good article written by Janna Herron for Bankrate.com that lays out the timeline for delinquent debt. Although you may feel like hiding if you’re behind on one or two credit card payments, realize you can’t hide forever. It’s better to deal with the problem sooner rather than later, particularly since you’ll be accruing high interest charges and penalty fees the longer you wait. Not only that, your credit score will take a nose-dive if you’re late or delinquent on your payments, and as I’ve said in the past, your credit report and score rule your life.
To help you understand the delinquent debt progression a little better, read through these five stages of delinquent debt and follow the recommendations as soon as possible.
Stage 1: You’re 30 days past due
This is if you’ve just missed one payment and you’re behind at the start of the next billing cycle. Nothing bad will really happen; creditors won’t get too upset over one missed payment. They will give you a friendly nudge with a phone call and reminder letter. Talk to them and tell them what’s happening. Perhaps you had an unexpected medical bill or emergency expense. Usually the representatives will work with you.
Stage 2: You’re 60 days late
If it’s been over a month since your missed due date, the creditor will probably hand over your account to their internal collections department. Now you may get some serious calls, letters or emails about the repercussions of not paying your bill. There are legal restrictions on collection agencies that forbid them from harassing you, however these restrictions don’t apply to the original creditor attempting to collect past due payments. It’s a good idea to contact them to work out a payment arrangement. If you have had a reduction or loss of income you may qualify for a hardship program where the interest rate is knocked down significantly, (you may be charged a penalty fee and the card may be closed until the debt is paid off).
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