Are debt collectors starting to face reality when it comes to payment of overdue bills? Apparently collectors are starting to feel the squeeze themselves as more American become unable to cover their bills in a declining economy.

The New York Times reported lenders and debt collectors are trying to round up whatever money they can, even if it means forgiving a portion of the borrower’s debts. More collectors than ever before are accepting pennies on the dollars in repayment of outstanding debts.

Don Siler, chief marketing officer at a large collection company working with 7 of the 10 major credit card companies, stated, “You can’t squeeze blood out of turnip. The big settlements just aren’t there.”

Don’t mistake lenders’ good will for charity. They are trying to protect themselves while some people are still ready, willing and able to negotiate some type of account payments. Bank of America has waived late fees and lowered interest rates. American Express and Chase Card Services are expected to do the same.

Debt collectors are currently forgiving anywhere from 20 percent to 70 percent of a person’s total credit card debt. After many instances of collection abuse during a recession, debt collectors are taking a different approach by attempting to negotiate outstanding debts amicably.

So what does this mean for you? Debt collectors are more amenable to making deals so it’s a great time to get your finances in order for the new year. Instead of trying to avoid endless telephone calls and letters from debt collectors, face your debts head-on.

• tally your outstanding debt by making a list of all your creditors with account numbers and addresses;
• review your assets including income, bank accounts, home and vehicles to figure out your worth;
• request copies of your free credit report from the three major credit reporting agencies (Equifax, Experian and Transunion) to find possible credit report errors – if you are a victim of identity theft and the debt does not belong to you, no repayment deal is a good one; and
• discuss your finances with a professional attorney who can advise you of the best steps to take to negotiate your bills.

From negotiating bill settlements to claiming Chapter 13 bankruptcy, a professional attorney can help you do what it takes to become financially free for the new year.

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After the holidays, many people have good intentions about paying off debt until life starts all over again. As other expenses arise, debt collectors start to call to remind you about unpaid bills. If your phone is ringing endlessly, it’s best to face debt collectors rather than running away.

Newsday recently published a valuable article about dealing with debt collectors and resolving unpaid bills. They offer several useful suggestions about handling debt collection including:

Don’t hide from collection calls and letters. Debt collectors don’t go away. If they cannot reach you at home, they may start to contact your family and employers. Before unresolved debts turn into an embarrassing situation, answer the phone and tell debt collectors the truth about your situation.

Don’t pay more than you owe. Never pay inflated dates with extra service charges. Let debt collectors know you won’t pay more than you actually owe.

Don’t pay dead or dormant debt. Old debts may not even belong to you. Debt collection agencies purchase zombie debts and attempt to collect them from the apparent debtor. The debt may belong to someone else with the same name or address. Get your free credit reports from Experian, Equifax and Transunion to review them for possible inaccuracies. Never admit to a debt that isn’t yours or you may wind up paying it anyway.

Don’t stop communicating with collectors. Cutting off communication could encourage creditors to take more drastic actions to collect the money.

Don’t use all your savings or home equity to pay off debt. You will be left with no resources if an emergency arises.

Negotiate the terms. With so many people unable to pay their bills, collectors are willing to accept pennies on the dollar in repayment of outstanding debts. Take advantage of this tough economic times to negotiate a deal with creditors.

Memorialize your conversation. Write the date, time and nature of every conversation with each creditor. Make sure to get the employee’s name or employee identification number so you can reference the conversations accurately in the future.

Never accept abusive collection calls. Collection agents cannot call you continually or in the middle of the night. It is also debt collection abuse to unreasonably threaten you or use profanity during a conversation.

If you are facing debt collection and collection abuse, contact a professional attorney to discuss your options. You will be pleasantly surprised to find out there are many ways to attain financial freedom. A professional attorney will help you identify credit reporting errors, renegotiate debt and eliminate collection abuse.

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Debt collector Cavalry Portfolio Services, LLC was examined by the Arizona Department of Financial Institutions in 2007.  Apparently a lot of consumers had complained that Cavalry was trying to collect on debts that were not theirs.

Mistakes happen, of course.  So the consumers told Cavalry that they had the wrong people and to stop calling.

Unfortunately, Cavalry did not conduct an investigation of the claim of misidentification or the dispute and continued to assert that a debt was legitimate and continued to contact various alleged debtors without conducting such investigation.

The Arizona Department of Financial Institutions filed a Cease and Desist Order against Cavalry in September 2008.  And finally playing it smart and deciding that it was best to avoid losing their license to do business in Arizona, Cavalry took its lumps.

The Arizona Department of Financial Institutions ordered that Cavalry immediately stop the violations of the Arizona law . . . and immediately pay to the Department a civil money penalty in the amount of fifteen thousand dollars ($15,000.00).

Good work, Arizona!

The Order can be found here.

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When a debt goes past due, you will often be threatened by the company with a “charge off.”  Most people mistakenly believe that once a debt has been charged off, it goes away.

Not so.  In fact, collection activities often start up when the debt is charged off.

My colleagues over at the Alabama Consumer Law Blog have this post titled Can A Debt Collector Call Me About A “Charged Off” Account?

Take some time to read it - there is some excellent information there!

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As the economy continues to decline, debt collection has become a harsh reality for many Americans. Unpaid bills pile up as frustrated consumers struggle to keep up with rising interest rates, service charges and . . . in the worst-case scenario, abusive collection agencies.

Everyone is looking for greater financial independence in 2009.  Now, new rules have been approved to help you make this a reality.

On December 18, 2008 the Office of Thrift Supervision approved new rules to put restrictions on credit card companies. The rules will help prohibit unfair credit card practices.

According to the rules, lenders cannot raise interest rates charged on credit card balances in the absence of a default - the so-called “universal default” problem. Credit card companies can still raise interest rates for advances and future credit card purchases.

Lenders can no longer allocate all your payments to balances with low interest rates so higher interest rates are charged on outstanding balances. Finally, lenders must give you 45 days notice of changes to the terms of your account rather than the current 15 day notice required by law.

These new rules will come into effect in July 2010 - too late to help you with a debt-free 2009.

So what can you do to get rid of debt and find a financial comfort zone in 2009?

• Review your credit reports from the three major credit reporting agencies. You are entitled to a free report once a year and do not have to join any special services to get it. Review the credit reports carefully to make sure all debts listed are valid and belong to you. Identity theft is a growing problem and quick perusal of your credit reports can help stop trouble in its tracks.

• Avoid getting into more debt in 2009. Even if you simply make minimum payments due on all your credit cards and don’t charge anything else, you are getting ahead slowly.

• Face debt collection head-on. Tally your outstanding bills and figure out your income. Know where you stand.

• If you’re in over your head, talk to a lawyer. There are solutions that will give you new hope for the future.

With a little energy and ambition, you can get rid of stressful bill problems in 2009.

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