Question: How can I get out of debt when collectors are already hounding me and sending SMS that are short of threatening me?

Answer: We have a free program at the Personal Finance Advisers Philippines Corp. that is called EnRich GOOD, where GOOD stands for getting out of debt. Here are a few pointers from that free program.

Basic strategy

Start with what you can afford to pay. Compute your bare minimum lifestyle expenses and then see what is left. That is the amount you need to allocate to your creditors on a pro rata basis. And if that amount does not meet the minimum payment amounts of your creditors, then it is time to ask for a restructuring with possible discount on interest and penalties, and even condonation (i.e. write off) of part of the principal.

If it is refinancing that you are going for, secure one loan from one creditor to pay off all of your existing debts at a lower rate and longer term that will allow you to pay a monthly loan amortization that is no more than 30 percent of your monthly take-home pay.

READ: Home decisions: Renting vs getting a loan

Documentation

All negotiations need to be documented in a letter that you will snail mail to them or send via courier to help you build evidence that you are indeed not running away from your obligations but are, in fact, trying to resolve them. Using a courier is best because there will be a third party to validate your lenders’ receipt of your letters. If you cannot get the addresses with contact persons of your lenders, then and only then do you resort to emailing them. Typically, however, lenders’ addresses will be available from the Bangko Sentral ng Pilipinas (BSP) or the Securities and Exchange Commission (SEC).

Handling lenders’ follow-ups

Avoid talking to, or texting lenders, or even messaging them on social media messaging services as they can easily deny receipt of such messages. Have a ready text message stating that you have, or are about to send them a proposal on how to settle your debts. Just send that ready text message whenever they try to contact you. But always keep the lines of communication open.

If lenders apply unfair debt collection practices, report them to the appropriate regulator (i.e. BSP for credit cards and SEC for non-BSP supervised (online) lenders.

The long road of restructuring

The strategy to apply for restructuring will take time. So, be prepared for long negotiations. In the meantime, you may be able to hit pause on your payments to allow you to save enough money to serve as a goodwill down payment for the restructuring programs that they may approve.

Your lenders will go for one-time discounted settlements. If you can afford some offers, then go ahead and fully settle them. For those you cannot settle one time, initially give a mother reason for your restructuring request. Expect that lenders will deny your request. Send another restructuring letter request, but this time with a related and deeper reason. Repeat the process until they approve your request. Eventually, you will wear them down.

Also, flip the tables on your lenders by being aggressive in following up on their reply to your restructuring letter requests.

Chance of success

Know that the majority of our EnRich GOOD clients have had success applying the foregoing strategy.

Be confident. All your debts have been paid for a long time ago. Your future is secured. All you need to do is call on Him. You know His name. INQ