Don't Create A Zoo

Alan is 28, and he racked up credit card debts and car debt in his late teens. Now, he wants to clean it up. How does he address them one at a time?

QUESTION: Alan in Houston is 28, and he racked up credit card debts and car debt in his late teens. He abandoned all of his bills and joined the military. Now, he wants to clean it up. Debt collectors haven’t been in touch with him, and the bills go to a P.O. box. How does he address them one at a time? Dave gives Alan pointers on how to start the process.

ANSWER: Well, they’re animals. If you wake them all up at once, you’re going to have a zoo. So we wake them up one at a time and kill them.

Your first goal is to make an accurate list of where you stand without calling any of them. You have two sources of information to make that accurate list. One is you can pull a copy of your credit report, which you should do. Two is you need to go get the mail out of the P.O. box and go through it because it’s probably there.

Wake up one at a time and kill it, meaning let’s take the smallest one—that small bill—if you figure out that that’s all there is, you call the small one once you’ve got a little bit of money saved. Start talking to them, and ask them to settle it minus all of the fees and interest. Get the agreed settlement amount in writing, then send them a cashier’s check for the amount you’ve agreed to settle for. You save up a little money, and then that one’s gone. Then, wake up the next one and deal with them. Pay them off.

Offer them lump sums, get these things settled, and get them out of your life. Always get it in writing. Always keep a copy of that document and a copy of the check you used to settle with them—not your personal check—either a cashier’s check or money order. Keep those in a file for the rest of your life because this stuff may come up again. You’ll need to be able to prove that it’s been handled.

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