Going The Pro Rata Route

Dave has a great way for Sandy to pay off credit card debt with collectors screaming at her.

QUESTION: Sandy was injured and has a disability, and she’s been without pay for a while. She can only work part-time and has trimmed expenses, but can’t keep up with her bills. She has tried to talk to her collectors, but they won’t play ball with her. She makes $40,000 a year and has $25,000 in credit card debt. Dave tells her about the pro rata plan.

ANSWER: Don’t believe the collectors … you can tell if they are lying if their mouth is moving. We do something here that will ding your credit report, but it will keep them at bay until you get this income situation turned around. It’s called the pro rata plan.

Make a list of your $25,000 in debt, and each of them will get their percentage of the total debt. Send them their fair share. They’ll cash the checks if you send them the check. It doesn’t keep them from technically being able to sue you, but since they are receiving money, it messes up their computer model. If they are receiving money, it’s very difficult for their computer to say that you need to be sued. That doesn’t pay off your debts or keep from dinging your credit score. It holds them at bay because you are paying them and it doesn’t know how to react to that.

Pay what you can while you get the income issue fixed. Once that happens, systematically work through and get current with them and then pay them off, or cut deals with them for lump sum settlements at that point because you will be behind.