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  • Writer's pictureArun S

What to do if you’re delinquent on debt

Most consumers have debt of some kind, whether it’s credit card debt, a mortgage, clothing account or car payments. To keep your line of credit open, you need to make monthly payments on time, or at the very least meet the minimum payments.


If you fail to make payments by the cut-off time, you’re at risk of becoming delinquent, which impacts your credit score and reduces access to future credit. If your debt is overdue, the creditor will send increasingly frequent reminders, emails or calls to recover that debt according to the stage of the debt collections process you’re in. But if you don’t have the money, you won’t be able to pay back your debt. So, what do you do? These tips will help you figure out how to pay off your debt and start the process of repairing your credit.

1.     Understand the stages of the collections process

For the first 90 days of an overdue account, banks or creditors will work with you to get your account back on track. They can help you with payment programs, freezing your interest rate or stopping late payment payments or delinquent fees from accruing on your account. After 90 days, the collections department will become more aggressive, and they may even turn over the account to a debt collections agency and file a report with the credit bureau, which can prevent you from getting any credit for up to seven years. If your account is 120 days past due, most creditors will charge off the debt to a debt collector, who buys the debt at a cheaper rate and becomes responsible for collecting. The collections agency will try recover the entire debt (often in court), in the hopes of making a profit.

2. Be transparent

When your debt is in the early stages of the collections process, attempts to collect it will be less aggressive. Explain your story and why you can’t pay your debt at present. There’s a very good chance you will be negotiate a more forgiving payment program that will help you pay back your debt.

3. Know your financial status

Before you agree to anything, know your current financial status and prepare a budget accordingly! Figure out exactly what you can afford to pay on every repayment. Paying more than you can afford won’t necessarily get you out of your financial situation, in fact this might drive you more deeply into debt. Decide on a solution that will allow you to avoid further debt and delinquency.

4. Keep emotions at bay

While dealing with the collections department or agency, do your best to keep your emotions in check. Being in debt is stressful and often embarrassing, but remember that the person you are talking to is just trying to do their job. If you get angry, you won’t be able to come to a solution that is best for you. Write down what you want to suggest based on the budget you’ve put together and keep to the facts. Only you know what you can manage to pay in your present situation. Maybe you just need a little time to get some funds together, or an extended payment plan.

5. Be willing to negotiate a debt settlement agreement

Debt settlement becomes an option once your debts have been charged off. This means that the debt collector who purchased your debt for a fraction of the price, may be willing to accept a lump sum to resolve the debt (and save them the effort of the collections process). Start small and be willing to negotiate. You could even offer to make small monthly payments while you get some funds together to make a lump sum offer. Remember to get any agreement in writing!

6. File for bankruptcy

Bankruptcy is often viewed as a last resort, but it’s a perfectly reasonable way of moving past debilitating debt and starting over. However, it’s not free and shouldn’t be considered an easy way out. You’ll still end up making payments to your creditors whether it’s through the liquidation of any remaining assets or a debt adjustment with payments made from your remaining income. Make sure you talk to a credit counseling agency to find out if there are other options before you decide to declare bankruptcy.

Dealing with delinquent debt is one of the hardest things to do when you’re in a tough financial situation. It’s often awkward to talk about why you are currently delinquent or admit that your financial situation is out of hand. However, you won’t be able to move forward unless you face this head on and try to come up with a solution. The sooner you get payments back on track, the sooner you can start rebuilding your credit score.

If your account is in arrears and you’re unsure what options make sense for your situation, SCORE highly recommends getting advice from a qualified credit counsellor.

If you’re in accounts receivables management and you’d like advice on how to maximize your returns, contact us on 647.309.1803 to get the conversation started.

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