Expert: Christine Janklow - 6/14/2007

Question
My business had $150,000 in business debt and the market put a squeeze on the accounts receivable.    The business got behind in Federal and State tax liabilities.    Instead of filing bankruptcy, I turned to a Commercial Debt Management firm to take over the debts.   They set me up on monthly payment for the next 4 years and they collect the money until they can settle the account.   They are a "for-profit" organization.   The creditors who are calling me day and night are stating that they will not work with such an organization.   They will not even talk to them about settling the debts.   I told each creditor or collection agency that I had signed over a Power of Attorney to the Debt Counseling center and they will not accept it.   They even have me questioning if I did the right thing.  One creditor said I would have been better off to file bankruptcy.    Will they eventually work with the Debt Management company?   How long will they harass me?   Isn't paying the money back to a Debt Management company better than walking away from the debt in a bankruptcy?

Answer
Sherry:
Thank you for your detailed inquiry. Your situation is regrettable, but one I am particularly familiar with. I am an executive of a Commercial Debt Resolution firm, and your case is classic with the exception of how your situation is being handled. To address your questions, it seems as if you have acted responsibly in turning over your debts to a professional firm, this illustrates to creditors that you are taking action to get your debts resolved. Since I do not know who you are doing business with,how long you have been in their program or their policies I can only comment from the perspective in how the matter should be dealt with. The firm should have explained when you signed on how your "payment" would be utilized i.e. if funds are being held in a trust account to accrue and utilize to settle accounts or if they plan to re-adjust your interest rates and or payment amounts and pay out to your creditors. As for the creditors calling, no one can guarantee they won't call as they have a right to attempt to collect what is owed. We provide specific instructions to our clients not to engage in conversation with creditors as this may affect the outcome of a successful resolution. Please understand the person you are speaking to on the phone is a DEBT COLLECTOR, probably in a call center anywhere on this planet. Their only goal is to get you to part with money you don't have to bring your accounts "current." That person has the incentive of money added to his paycheck for every dollar he collects. Why they tell you they won't work with a debt management firm is that they are not in the settlement department or of the management status to authorize such a transaction. When we settle accounts, we don't call the 800 number on the back of a statement, we deal with individuals who manage the recovery of such accounts and understand the benefits of timely settlement. We have yet to work with a major creditor that won't settle. As for the call frequency, if the firm handling your debts begins to settle accounts incrementally, then the calls should begin to subside once they are settled. Bottom line, is if a collector can speak with you, there is no way they will deal with your assigned agent. If they can't speak to you, they will and likely they will also negotiate. Everyone has a bottom line attached here, your settlement firm, the creditors and the collection agents. Most often the collection of an account comes down to what is most time and cost effective. Bankruptcy is a costly last resort and as of 2005 law changes much more difficult to qualify for.
My last suggestion to you, make your management firm accountable! They should be providing you with all of these answers, honestly and with no additional fees attached. If you found this answer helpful please take a moment to rate it as it may help others find the answers they need as well.

Respectfully,
Christine Janklow