Hardship Program Information: Advice from a Former Debt Collector

Many consumers are falling further and further into debt in this depressingly sad time for our economy in the United States. When bills start accumulating, the payment most consumers choose to neglect is their credit card bills. Mortgage, auto loan, utilities, and even phone bills are paid before credit cards and understandingly so.

Working in credit card collections for 2 and a half years was not a very fun job, but a very good learning experience. On a daily basis I would have to listen to people's problems and excuses. I had to squeeze blood out of turnips nearly every day. There are many options that cardholders have available to get out of the viscous cycle that begins when you fall behind on a credit card. Here are steps that I urge you to take in helping yourself with delinquent credit cards.

First Step: call the credit card company/Get on Payment Program:
Most likely you receive calls nearly every day (I had to call each cardholder in my file at least once every 3 days). Your debt collectors have experience and work with people like you every day, they know what they are going to say to you and will most likely not treat you like a person, just a duty. If you have a reason why you are behind, make it a good one. When you give an excuse to a debt collector you want to demonstrate a significant reason for your inability to pay the credit card due to a hardship. If you display a legitimate hardship, the debt collector may offer you a program to help cut down the rate of your credit card and lower your monthly payments.

Program Payment Information:
Most payment programs that are available last for twelve months, lock you in at a lower interest rate, block late and over-limit fees as long as you make the new lower minimum payment. Many of the payment programs lock in the payment at around 2% of the balance or less ($40 on a $2,000 balance). You may have to set up the first three payments of the 12 month program electronically for a particular day of the month when the money will be in your bank account. An added benefit of the payment program, is that many of these programs after three months of consistent payments will erase the amount delinquent and you will no longer be in collections.

Worthy Reasons to be Delinquent
When a debt collector enters in information on why a credit card holder is unable to pay, they have options to offer a hardship program. In the macro that is used to submit for a hardship program, there are programmed hardships that are can be selected, and usually come with an automatic approval. Possible selections (ones that were available for me to choose from): Overextended (most commonly chosen, least likely to be approved), divorce, disability, and social security. Saying you simply can't afford it will not work.

Advice When on Hardship Plan
If you miss a hardship plan payment, the deal goes away, your interest rate increases and the fees will start again. I would advise you to send in extra payments via mail during your payment plan whenever possible. Since the interest rate is low, and you are not being charged fees, this is your best chance to lower your accrued balance.

Options After the Year on the Hardship Program
When the program is over, your interest rate will increase once again and the fees will resume if your over-limit or if you fall delinquent again. After the year on the program is coming to an end, either attempt to renew the program if you are still experiencing financial troubles, or transfer your balance to another credit card with a lower interest rate.