Bad debtors have the right to be quiet?

by Lilly on November 4, 2012

In this economy, times are tough for everyone. Job losses, wage cut-backs, work hour reductions, all combined with rising expenses make paying back debt harder than ever. If you find yourself unable to pay your loan, there are some steps you can take to avoid legal action. If you find yourself in a debt bind, try some of the following steps to help prevent legal trouble or bankruptcy:

Talk to your creditor

The first step when you cannot make your loan payment is to talk to your creditor. Let them know what is going on. Your lender may be able to help you get a lower payment, allow partial payments for a while, or may even offer deferred payments depending on your circumstances. Life circumstance changes like job loss, divorce, or a death in the family are all events that some lenders will consider when you cannot make your loan payment. The worst thing you can do is ignore the payment and wait for late fees to collect. This will only lead to additional problems later down the road.

Offer suggestions

It can help to have some ideas in mind before you contact your creditor. Think of ways you can still make payments- even if you cannot pay the full amount. Offer your own ideas for making payments, such as partial payments for a few months, suspension of payments that can be added to the total loan payment, or ask for late fees to be cancelled. If you offer an idea, it helps with the negotiation process. Creditors will likely not offer any of these services on their own, but they may allow them if you suggest them.

Instant settling

Another way that you can prevent legal trouble when you cannot make your loan payment is by offering an instant settlement. This is similar to what debt consolidating companies do. You offer to pay a part of the total amount due all at once if the creditor clears the rest of the debt. It is often difficult to find that much cash all in one place, but if you can manage it by taking money out of a savings account, you could end up saving thousands of dollars in the end. You can also work with free debt consolidation companies if you are not confident in your own negotiation skills. The debt consolidation company may be able to get you a bigger discount on your loan.

Canceling your loan

There are a few ways that you can cancel a loan altogether. One way is by going into bankruptcy. However, you will have tons of legal trouble, bad credit loans for seven years, and may still have to make payments on some of your debt if you go into bankruptcy. Creditors will also allow some loan cancellations under the following conditions:

  • Death: If the person holding the debt has died, it is possible to get the loan erased. More commonly, however, the creditor will expect the next-of-kin to take over the loan.
  • Disability: If you are suffering from a long-term disability, or illness that can lead to death, you may be able to get your loan forgiven. You will have to prove the disability with a completed form by a qualified doctor.
  • Unemployment or economic hardship: Some creditors will allow loan deferment for economic hardship or unemployment. To prove this, you have to show income statements and show the creditors that you are actively looking for a job without success. This rarely leads to a cancellation of payments, however.
  • Military enrollment: If you are enrolled in the military, it may be possible to cancel some or all of your loan debt. This usually varies by the type of debt, and is most common for student loans.

Not paying your loans can have serious consequences, and you should always try to pay as much as possible. However, if you find yourself in a bind, you can try some of the above methods to avoid legal trouble while you regain your footing financially.

About the author

This is a guest post by Lilly Sheperd, an occasional guest-blogger and a full time freelance communication consultant. When not blogging, Lilly likes to travel and read a lot, especially about education and law.




I'm Lilly Sheperd, an occasional guest-blogger and a full time freelance communication consultant. When not blogging, I like to travel and read a lot, especially about education and law.

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