How do debt collectors know when you have money to pay bills?
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If you're behind on your bills, you'll get calls from bill collectors, but if you're unemployed and totally broke, you may notice that other than an occasional letter, you seem to drop off their radar. But as soon as you get a job and have some cash rolling in, your phone starts ringing again, almost like magic. How do debt collectors know you've got money? Simple – they use technology to know when they can likely shake you down for what you owe.
Why debt collectors stop pursuing you
Once a debt collector finds out you're unemployed or are earning such a small amount that they know they can't collect from you, they will essentially put your file into uncollectible status. In addition to having to pay their collectors an hourly wage, collection agencies' bread and butter is getting you to pay up and keeping a cut of it, or if they've bought the debt, they keep all of what they collect after the cost of what they paid. Either way, if they know you have no money to get, they'll give up.
Why debt collectors start pursuing you again
The most successful debt collectors are those that use research and technology tools. One of the best tools at their command is credit report monitoring. Some debt collectors purchase credit monitoring information and as soon as they see your credit score start to improve, they pounce. Your credit score will improve once you get a job and start to pay some bills so, essentially, as soon as you start to try and get yourself right financially, collectors make it even harder for you to do so.
The right way to improve your finances
If you experience a period of unemployment or underemployment, you'll get behind on your bills and may see them pile up. It can get worse and worse until you're completely under water. Once you do get a job and start trying to pay bills, everyone pounces. They often will get very militant once they know you have money. This can mean that even though you're trying to pay your back debts, no one is patient, no one is willing to work with you and everyone wants to be first in line.
In order to try and get you to pay them first, collection firms may get super aggressive. This means they may call you several times a day, may file a lawsuit and may do everything they legally can (and some things they legally shouldn't to harass you into paying them). This isn't fair, but it's a harsh reality that can exist with creditors once they smell blood in the water (i.e. cash in your bank account). This may sound strange, but the best thing to do may be to pay none of them.
How bankruptcy helps
If you start chipping away at your bills and all your creditors play nice, cooperate and let you take care of them as soon as you can, that's great. (It's a miracle, really.) If so, you should go that route so long as you can afford to and won't end up paying a mountain of interest and fees for the debts being outstanding for so long. Also bear in mind that the item will be on your credit for seven years from the date of your last payment and will show negatively for a long, long time dragging your FICO score down.
If your creditors aren't playing nice, filing a Chapter 7 bankruptcy may be a better option. You'll be able to unload your unsecured debt including credit cards, medical bills, old utility bills and other unsecured lingering debt. You may even be able to unload old unpaid taxes as long as the returns were filed on time. This means that you can have a financial fresh start to go along with your new job and can enjoy peace of mind free from lingering debts.
To find out more about getting out of debt via bankruptcy and to see if you qualify, contact the law offices of John T Orcutt for a free consultation at one of our convenient North Carolina locations.