Letters To My Credit Card

 Some of my favorite writing is in response to reader emails.  Sometimes that means a response to a comment on the website but even more fun are the letters from readers asking for my advice.  Granted, I’ve only had this happen a couple times and half of those were cases of mistaken identity, but the idea of offering advice to someone in need is compelling and engaging and rewarding.

Recently a sweet seasoned citizen sent me a message in which she shared her situation and asked for some direction.  It was a busy day in the office but I felt compelled to reply even if my response was somewhat rushed.  This led to string of emails and even my crafting a pair of template letters that may assist as she boldly and faithfully addresses her new financial realities.

Below I’ve excerpted portions from our discussion to share with you.  I’ve also included links to the letters in the event you want to review those as well.  However, it is very important to me that you don’t view those letters outside the context of the story and situational implications.

If you’ve spent much time on this site, you know that I am a strong advocate of personal responsibility.  However, in some instances we are dealt circumstances that cause us not to shirk our responsibilities, but rather to address and honor them in an unconventional manner.  I believe the situation below is an example and my advice and support are geared towards that unconventional solution.

Read along and post your comments below… if you’re reading this via email or facebook, take a minute to click over to the site to add your comment.  I feel strongly about this situation and encourage and invite a “strong showing” in the online comments for today’s edition.

 

Original Message to me from… we’ll call her Ella

I have contacted The Credit Exchange to help settle my debt problem with what they call debt settlement,  Is a good idea to do this,  I am 75 years old and my husband is 63 had to take early retirement due not being able to work due to bad health and our income has gone down drastically and  now there is no way to keep up with our bill load.  All we have now is a social security check which is our only income.  I am afraid this company is out to get my money only and not help settle my bills with the creditors.  I don’t know where to turn.

My Response

Thanks for your message. I appreciate you reaching out to me with a question and I’ll do my best to give you some sound advice.

However, first allow me to clarify that I am not Dave Ramsey.  I am a fan (thus the name of the site) but my name is Dave Ozment.

Now, I can, and will, still offer quality advice, but I want you to know the source.  You can read more about me on my site – DoYouDaveRamsey.com.

OK, on to answering your question…..

NO, NO, NO, NO, NO, and NEVER… please do NOT use a debt settlement company to assist you with your situation.  Now let me explain why I feel so strongly about this.

Debt Settlement companies promise 1 thing – lower payments.  However, they rarely follow through and are NEVER worth the cost.  Let me explain why:

The only reason a creditor would ever accept less than what is owed, is if they think they won’t get paid at all.  Debt Settlement companies, in general, will chase this angle by collecting a monthly payment from you and then NOT sending it to your creditors.  They may then try to negotiate a lower payment but they often fail.  I think they fail for 2 reasons:

1) they are not as personally invested in the negotiations as you would be and,

2) as a creditor, why would I accept less from someone who I know has just been making monthly payments to a debt settlement company?  No thanks, I’d say as the creditor, just send me what you’ve been paying them.

If your situation is dire enough to seek relief outside of simply paying the amounts due (and yours presents that way), there is no reason to pay someone not pay your bills when you can do that on your own.  See the thought process?  Once you’ve saved up some money, and the creditor has not been paid for a while, you can negotiate a settlement with the dollars you’ve saved yourself.

Here are 5 points to keep in mind as you work through your situation:

1 – Pay for food, shelter, and utilities first, even if that’s all you pay!

2 – Mail a certified letter to each of your creditors letting them know that they will not be paid but that you’d consider a settlement figure from them in the future if they are interested – I will volunteer to help you craft this letter if you are interested

3 – Accept settlements only if the terms are received on paper and in writing

4 – Never allow electronic access to your accounts

5 – Be very careful with your checking and savings accounts.  Social Security dollars should not be garnished or pulled from an account due to a legal action or judgment.  However, if your creditors sue and you are unable to reach a settlement, and they win a judgment, they may be allowed to sweep funds from your account.  I don’t say this to frighten you, but to warn you what could happen if the creditors sue.  That is likely a ways off, but worth keeping in mind.

I hope this helps and please feel free to reach back out to me if you want to discuss this further or if I may be of additional assistance.

Thanks and God Bless,

 

Second Message from “Ella”

I would appreciate your drafting up the letter to be sent to my creditors by certified mail. 

….Waiting to hear back from you, Thanks again.

 

At this point I realized I had signed on to provide more than simply an encouragement or word of advice via email.  Now I was somewhat engaged in the process of her situation.  To be honest, I felt a little conflicted and I was not overly disappointed that work kept me from responding for several days as it allowed me time.  On the one hand it was easy to view “Ella” as I would a member of my own family and the advice and direction flowed freely.  On the other hand, I was afraid that I might be venturing onto thin ice.  What if my advice was wrong, what if it exacerbated the situation?  And could there be legal ramifications?  Finally I asked myself the Dave Ramsey standard when it comes to giving advice to another, “What would I do if I woke up in your shoes?” 

Now the answer to this one was easy.  I knew exactly how I’d handle the situation if I, or a member of my family, were involved.  And with a little disclaimer wording, I set forth my response.

 

My Response

As promised, I spent some time this afternoon crafting letters you can use with your creditors.

Before we start, however, it is very important that I share the following disclaimers with you first.  I am not a lawyer or banker or financial planner.  My recommendations or advice only represent my opinions and are not grounded in professional training or education.  The advice I offer to you is exactly the same I would follow myself or provide to family and friends but it should be followed by you only with your full understanding and ownership of the steps taken.

With that said, let me share again my opinions.

You approached me with questions about using a debt settlement organization and I strongly recommended that you don’t follow such a path.  As we have only exchanged a few emails, I am not fully aware as to the types of debt you have.  This is important and something I should have already asked.  As you were thinking of engaging a credit service, I assumed you are dealing primarily with credit card debt.

If you have a car loan or mortgage loan my advice today will not work.  The creditors will simply repossess the car or foreclose on the home.  In these circumstances we’ll need to devise another plan and I’m willing to assist in that as well.

However, for unsecured debt – credit cards for example – this approach and the attached letters are exactly what I would use or offer to a family member if they were in a similar position.

The key principle here is that you respect your debt obligation but have new life circumstances that negatively impact your ability to repay the full balance.  This is not a breakdown of integrity but rather an honest breakdown of ability.  I emphasize this because there are bad people who would avoid a bill even if they could pay.  I don’t believe you are that person and that leads me to want to help.

For that reason, I’ve crafted and attached 2 letters you can take and personalize for your needs.

Both letters need to be customized to your specific creditor.  I have <bracketed> places where you will need to insert your personal information – name, address, account information, etc.

One letter assumes no ability to offer a settlement at this time.  It suggests a willingness to settle in the future but offers no timeframe for settlement.  Based on your last message, this may be the better option at this time.

The second letter allows you the opportunity to propose a settlement and the places for that language and proposal are clearly marked.  If a creditor has not been paid for several months or the prospects of payment are very low, a 50% settlement may be valid.  In extreme cases, perhaps even less.

You may want to start with the first letter and follow-up with the second letter once you’ve been able to save some money.

It is my recommendation that you send this letter to 3 levels within a credit organization; 1 copy to the customer service center, 1 copy directly to the President of Customer Service, and another to the CEO.  For the last 2 you’ll need to do some research on their web site to find these individuals and to collect the mailing address to the headquarters – send these letters to the intended recipient by name rather than just their title.  These 2 will likely have the same address which should be different than the first.

Save a copy of each letter and the return receipts as they come back so you’ll know which letter was sent in each instance.

As for the collections letters – again for credit cards only – I personally would ignore them and the collections calls which are sure to follow.  On the phone, I’d simply state that you are addressing this issue with their executives and that you appreciate their call then offer them a kind “good day”.  Meanwhile, I’d file the letters in the recycle bin, unless it is a settlement offer or a response to your letter.  You’ll want to follow-up with those letters in accordance with your ability to settle at that time.

This is a lot of information so please let me know if you have questions.  In the meantime, good luck and God Bless.

 

Three or four more emails were exchanged and my heart ached when she questioned her strength to power through and leaped with encouragement when, in agreeing to allow me to share this story with you she responded:

“In answer to your question, that will be fine.  I would be happy to be part of helping someone else if at all possible, although I am sure that other people have worse situations that I have.  Thanks again for your help.”

My bet is that “Ella’s” strength will carry the day and she’ll be stronger and wiser for the experience. 

Godspeed “Ella”.

 

Letter 1 – No Settlement Letter

Letter 2 – Settlement Offer Letter

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