Informal bankruptcy, what is that? Essentially it is stopping the payment of certain debts to strengthen one’s financial position without going through a formal bankruptcy proceeding.
Yes, that means on the surface informal bankruptcy offers no protection from creditors. But, it is important to make the distinction between secured and unsecured creditors. By stopping payments to unsecured credit card banks to eliminate credit card debt, you are strengthening your financial position to pay secured creditors, like home mortgage banks and car loan holders. Those holders of secured loans are the ones who have the best legal recourse to reclaim what you owe them.
The Federal Reserve Bank requires credit card banks to reserve money for bank debts. They operate under the assumption that some people will not be able to repay their debts, and their toothless debt collection efforts reflect that assumption. They threaten credit card debt lawsuits and promise bad marks on credit reports, then pass charged off debts onto outside debt collectors.
After a debt charges off the credit card bank passes it on to a debt collection firm or collection attorney. They work on commission, about 30 percent of the owed balance, according to the Credit Card Debt Survival Guide. They do not expect to collect from every account. They use threats, lies and legal firm letterhead to find predisposed consumers willing to pay.
Junk debt buyers usually buy credit card debts from the credit card banks for less than 10 cents on the dollar within a year of their discharge and after the banks’ debt collectors have been through the accounts for collection opportunities. Debt collectors for junk debt buyers make larger commissions about 50-60 percent. They are more opportunistic and avoid debt savvy consumers who are difficult to collect from, according to the Credit Card Debt Survival Guide.
So the moral of the story is knowledgeable resistance on the part of the consumer is what works in informal bankruptcy. The key is proper written responses to written communications from debt collectors demanding original documentation of the alleged debt, according to the Credit Card Debt Survival Guide. Small mistakes on the part of debtors during their response to collection attempts are what tip off the collection professionals to their weakness and vulnerability.
You are invited to learn about the many strategies to eliminate credit card debt; some for those who can pay, some for those who cannot pay. Read all about them in the 230-page Credit Card Debt Survival Guide www.credit-card-debt-survival.com