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Step one - Deny access to your account!    

If there is no account there is no money to take!  

This is probably one of the most important steps in the entire process. As long as the collectors or crediting agencies have access to your bank account they will continue to take the money from your account. This is a fact and unfortunately putting stop payments on your account will not stop these organizations from taking money. Often time’s organizations will split up your payment into smaller multiple payments totalling the overall amount that you are required to pay back. Sounds illegal doesn’t it? Unfortunately it’s not.  

When you put a stop payment on a cheque or pre-authorised payment you are often required to give the cheque number, exact amount, and exact date. This little trick of multiple smaller payments actually prevents you from putting stop payments on your account; essentially giving them full access to your money.  

In order for this to stop this out right you need to open a new account and close your original account down. You don’t need to change banks, just accounts. Now most people have a lot of pre-authorised payments coming out of their accounts making this a royal pain but it’s not as difficult as one would think. In most cases your financial institution can redirect those pre-authorised payments (i.e. car insurance, car payments) to your new account. 

If you have a credit card or account in collections that is with the same bank as you deal with simply changing the account won’t work. Unfortunately in this case you will have to change banks all together.  

Remember, no access no money! 

Step two - Inform the organizations in writing!  

Never discuss the matter on the phone!  

One of the most common mistakes individuals make when it comes to debt consolidation or dealing with financial organizations is they never get anything in writing. This is simply the worst thing you can do. In the event anything is ever dealt with in court there is no written proof of your dealings. Always resolve these matters in writing!  

What you want to do is write each organization a letter stating that it is your intent to repay the debts with monthly payments and that you are cancelling all pre-authorized payments and cheques to the organization (if any are currently issued). Always give your account number (this is usually your name or a reference number) and the amount of time that you are going to take to pay the debt back (don’t exceed 55 months), as well as the specific amount you are going to pay them each month. Also you will want to write in there that you are paying this back at 0% interest. No doubt this will anger them but be strong.... you will win this fight. 

Hint:  In your letter of repayment make sure you state that no payments will be made until you receive written confirmation of their acceptance which is to be signed by an authorised signatory. Also state in your letter that a verbal acceptance is not a sufficient acceptance.   

Sending the letter... 

This is where the next common mistake is made. Most people will presume that regular snail mail is sufficient enough to handle this. It’s not. Always send these letters registered mail and always require that someone sign for it on the other end (of course keeping a copy of the signature for your records). Once they receive this letter they will no doubt start making phone calls to you demanding payment or else! This is a scare tactic and in most cases there is no bite to their bark. Stand your ground, insist they sign the proposed payment plan. Remember, always get it in writing.  

Note: A sample letter is attached at the end of this document.  

Step three - Sending payment!  

Send post dated cheques!  

Once you have received written acceptance on your offer always send them post dated cheques for the amounts specified in your repayment term. This step will ensure that you do not miss a payment to them. It is very important that you do not miss a payment to these organizations once they have accepted the program. One missed payment and the entire repayment program is out the window giving them full right to send you to collections and or take you to court.  

What do I do if they decline?    

If they decline repeat all steps that you have taken. This will show that you have made an attempt to repay the debt. If they decline again it is up to you to do what you want. You can pay the debt out in one lump sum or you can simply go ahead and make the monthly payments anyways.    

The one thing that collection organizations will threaten to do is to take you to court. The reality of this is it will take them 4-5 months to get a court date. As long as you consistently make an effort to get a repayment proposal in place the courts will look favourably on you. Collection organizations do not want to have to take you to court as it isn’t beneficial to them. Its time, money, and to be frank, not worth it. Keep forcing your hand with the monthly repayment. Eventually they will accept.    

Hint: If they refuse more than once start sending  payment on the debt. Even if the collection organization declines your offer send them the cheques, make the payment. As long as you are making an effort to repay the debt you will be safe in court.

Important: Make sure you keep all records of payments made. This is very important    

Tips 

Please make sure you read all steps before commencing!

1)    Close your current account and open a new account. Always do this before heading to the second step. Make sure that your new account is up and functioning before sending your letters. 

2)    Write your letter of repayment. Always be sure to include your account number, the name and address of the institution, the payment amount you are able to pay (budget may be required), the interest rate that you are willing to pay (always start with 0%), and the time frame in which you are going to pay the debt back. 

3)    Send all documents registered mail and require a signature from someone on the other side. This will prevent anyone from their organization from saying that they didn’t receive the paper work. 

4)    Never discuss information over the phone. Always get everything in writing with an authorised signature. Never accept anything verbally. 

5)    In the event they decline the first attempt try again. Never just leave it at one attempt. 

6)    Always make the payment. Even if they decline your offer. Send them the post dated cheques and allow them to cash the payment but never give them more that what you specified in your repayment letter. 

7)    Keep copies of all correspondence. Never get rid of the documents, at least not until the debt is paid in full. 

8)    Once all payments are made to the organization request a letter stating that the debt is paid in full and that there is no balance remaining. 

Sample Letter 

Note: all areas in red must be changed to your information 

(Today’s Date) 

To whom it may concern:

My name is (enter your name here) and my account reference with you is (enter reference number) you have recently contacted me regarding the outstanding amount on this account. According to your statement I am in debt (enter dollar amount here)

It is my intention to repay this debt on a monthly term and the monthly repayment amount has been determined on my monthly financial budget. Please note that I/we will not be sending payment to your organization until you have accepted this repayment term. Acceptance will require an authorized signatory from your organization to approve the repayment term.

It is my intention to pay (enter dollar amount here) per month over (enter number of months here). I am asking this debt to be paid out at an interest rate of zero percent. At this time I am also advising you (enter the companies name here) that no further correspondence will be permitted over the phone and all correspondence from this day forth is to be in writing. This is to ensure that proper documentation can be presented to the courts in the event this matter is to be heard in a payment hearing.

If you have any questions or concerns please feel free to contact me in writing. If this repayment proposal is acceptable please send me written acceptance and I/we will send post dated cheques within 10 business days of your acceptance.

Sincerely,

_____Your signature here__________________
(your name here)
(your reference number here)