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Getting a Car Loan After Bankruptcy

• Step One: Put Your House in Order
• Step Two: Start Hoarding
• Step Three: Get Secured Credit
• Step Four: Buy A Car
• Step Five: Get More Credit

Collections are the worst — you get a ton of nasty calls and letters, the amount of money that you owe keeps increasing, and they really hurt your credit score. Dealing with a collection notice as soon as you get it is critical, but dealing with a collection doesn’t always mean paying it. Before you start writing checks to your collectors, you might want to read this.

The most common type of collection is a medical collection. In fact I would estimate, based on my personal experience, that more than 50% of all collections are medical or medical related. Medical collections are often a result of confusion — either you’re confused, your doctor’s confused, or your insurer is confused. Here’s an example of what I’m talking about:

1. You get a bill from your doctor’s office, but you ignore it because your insurer is supposed to pay it.
2. You get a second notice from your doctor’s office for the same debt. You call your doctor and explain to them that the insurance company is supposed to pay. They tell you they’ll take care of it.
3. Your insurer sends you some confusing notice about the same bill, but you don’t call and find out what’s going on because you’re busy
4. Boom — two months go by and you get a collection notice.

The key to avoiding a medical collection is to take some initiative and deal with the bill as soon as you get it, but if you’re reading this than it’s probably too late for that. If you haven’t read my tips for working with a collection agency, make sure you do so now. In addition to those tips, it’s not too late to get your insurance company to pay your medical bill. But it will take some quality time and effort on your part if you’re going to get your insurer to take care of it.

The second most common type of collection results from a bounced check. While checks aren’t as common as they used to be, I still see quite a few collections that stem from someone writing a check that their account couldn’t cover. The most important thing to do is to try to settle your bad-check debt with the person that accepted your check as quickly as possible. That usually means bringing them cash (or a money order) to cover the amount of your debt PLUS the customary bad-check fee (usually $20-$30, but sometimes as high as $50). Unfortunately, this isn’t always an option. Many large national companies have a strict policy regarding bounced checks, including immediately filing criminal charges and automatically submitting checks to collection immediately. You can avoid bad check collections by carefully balancing your check book and purchasing overdraft protection from your bank. Because bad check collections are usually for small amounts of money, I suggest you pay them as soon as you get them rather than go thru my suggested collection dispute process.

Finally, the third most common type of collection I see is related to utility bills. Cable companies, power companies, and cell phone service providers can all file a collection to recover any unpaid utility expenses. I see this type of collection most commonly with younger people or divorcees. Younger people tend to end up with this collection because a friend or room-mate was supposed to pay a utility bill, but they never did. After a few months go by, a collection is filed against the person who’s name is on the utility account. The worst part is that often times the young man or woman who receives the collection notice has no idea that their former room-mate didn’t pay that particular utility bill. To add insult to injury, younger people typically have little or no credit history, so this collection is very damaging to their credit score. My advice here is to choose room-mates carefully and collect the money for utility bills personally — don’t just hand your room-mate a bill and expect them to open it, write a check, and then mail it. If you have a bad debt from a room-mate, you can try and sue them for the money, but that’s probably more trouble than it’s worth.

Divorcees suffer similarly — once the end of the relationship is near, the soon to be ex-husband or ex-wife chooses not to pay a particular utility bill because they know the debt isn’t in their name. Any good divorce attorney should help you deal with this BEFORE the divorce is finalized, but if you or your attorney missed this, your best hope is to convince the debtor that the expense is your ex’s responsibility. If your divorce decree names your ex as responsible, you can send the collection agency a copy of your decree to prove you’re not responsible. Because a divorce decree is a legally binding document, they should drop the collection. But if you don’t have a divorce decree, or if it doesn’t say your ex is responsible, then you’re probably stuck with the debt.

As with all collections, the most important thing to do is to respond immediately. Failure to respond to a collection notice is legally considered acceptance of the debt. If you don’t send a letter disputing your responsibility immediately, your ability to fight the collection is gone. It has to be a letter too — a phone call isn’t considered legal notice.

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