According to New York Times, “Dead people are the newest frontier in debt collecting, and one of the healthiest parts of the industry.”

How do debt collection agencies collect from the dead? By collecting from their living relatives.

Despite the gloomy financial situation, debt collector calls are still ringing here and there asking payment from survivors of a dead borrower.

To pay or not to pay

Debt collection agencies such as DCM Services in Minneapolis, Minn. have many trained agents who coax relatives to settle the debts of their deceased loved one. Their debt collection agents are specially trained in “empathic active listening,” and providing comfort and understanding to the bereaved, but, at the same time coaxing them to pay off the debt.

While survivors in most cases don’t really have any legal obligation to assume the debt of their deceased family member, they sometimes still handle the debt out of respect for the dead. Some say it’s because they think it’s the proper thing to do, while others were just compelled or coaxed by well-trained collectors from debt collection agencies. Others, unfortunately, aren’t aware at all that obligatory debt collection stops at the time of the debtor’s death.

Aaron Crowe, an unemployed journalist from the San Francisco Bay Area says that “asking widows to pay these debts is a low move.”

Crowe paid for certain necessities such as his mom’s funeral service, but if bills were around or if debt collector calls were received, he says he’d stop that debt collector right then and there.

“…my response would have been to take a hike,” he said.

Are debt collection agencies plaguing your phone day in and day out? Sign up now to know how to stop debt collector calls and possibly find a debt collector lawyer that can handle your situation.

To offer credit card help and check unwarranted, deceptive credit card practices, the Federal Reserve Board proposed regulations on card companies as early as May last year. Countless cardholders desperately needing credit card help supported the recommended policies tremendously.

The credit card policies were only finalized last month and won’t take effect until July 1, 2010.

New Credit Card Settlement Rates

The new credit card rules would be the first time in over 20 years that a government agency has proposed banning certain credit card industry practices. In the past, regulation was left to the card issuers, while the Fed and other banking regulators merely pushed card companies to release terms and conditions clearly to customers.

The rules “would provide the benefit of substantial protection against practices that can harm consumers,” said Federal Reserve Board Governor Randall S. Kroszner.

The rules are under the Federal Trade Commission Act (FTC Act), and include several key aspects for the protection of credit card users:

1. Banks must disclose to the consumer all interest rates that will apply when he/she opens an account.
2. Except under limited circumstances, banks can no longer increase the rate on a pre-existing credit card balance.
3. Banks must allow the consumer to pay off balances over a reasonable period of time and give a longer grace period before they charge penalty fees.
4. Banks will be prohibited from applying payments in excess of the minimum in a manner that maximizes interest charges.
5. They would also be required to give borrowers the full benefit of discounted promotional rates on credit cards by applying payments in excess of the minimum to any higher-rate balances first, or, pro-rate the payments among the balances. The consumer must also be provided a grace period for purchases where he/she is otherwise eligible.
6. Finally, banks can no longer impose interest charges using the “two-cycle” method which computes interest on balances on days in billing cycles preceding the most recent billing cycle.

The above regulations also apply to subprime credit cards with high fees and low credit limits. Banks will be prohibited from charging account-opening fees and membership fees if those charges, assessed for the first 12 months, would surpass 50% of the initial credit limit.

The five biggest credit card issuing banks argued that as much as consumers may enjoy speaking out, they’re likely to regret the final result of the new policies, saying that the rules will hinder their ability to “price for risk.” “All consumers will suffer with higher rates overall and worse teaser rates,” a spokesman for the American Bankers Association said.

Are you one of the many consumers left with an unpaid credit card settlement? Sign up now to receive free information on credit card help and other loans.

Due to what is probably the worst recession in decades, the unthinkable is happening. Debt settlement companies and collectors, who usually see our country’s hard times as their good times for collecting, are now willing to take what they can get just to survive.

What are lenders and their collectors to do? They are now rushing to round up whatever money they can collect before things get even worse. Collectors are doing this, even if it means forgiving fractions of some borrowers’ debts.

This action on debt settlement may seem over the top or desperate to some. However, one should know that lenders are not being charitable or generous. Rather, they are just simply trying to protect themselves from further financial damage.

Lenders such as banks and card companies are bracing for a wave of defaults on credit card debt early this year, and are competing with each other to be paid first. Besides, the quicker people fix their debt and get credit card relief, the sooner they can begin borrowing again.

Bank of America stated that they have waived late fees, lowered interest charges, and in some cases, have reduced loan balances for over 700,000 credit card holders in 2008.

Other companies such as American Express and Chase Card Services say they are doing similar actions, as more customers fall behind on their bills. Every major credit card lender is giving its collectors a bigger margin to give credit card help for their customers.

According to projections from The Nilson Report, credit card lenders expect to write off an unparalleled $395 billion worth of soured loans within the next five years. That is quite high, compared to the total of $275 billion in the previous five years.

In addition to debt forgiveness, debt collectors are allowing many delinquent borrowers to pay debts over the course of a year rather than the standard six months.

Credit card help is now easier for many borrowers in deep debt. However, borrowers should not see this temporary debt settlement situation as full credit card relief. Simple steps such as ceasing to spend for unimportant things, selling unused and seldom-used items, and creating a “rainy day fund” can assist you with your current financial situation. Also, settle your debt as soon as you can and get credit card help from secure companies.

To find out how you can get credit card help, fill up the box above.

1. We have a lot of credit card debt. According to CardWeb.com, the average American home with at least one credit card has about $9,200 in credit card debt. Also, the average interest rate is in the mid to high teens at any given time.

2. Borrowing can sometimes be good. Using credit is beneficial and sensible at times, such as when borrowing for a home or for college. The problem arises when debt arises from too much spending (especially on unimportant expenditures), and borrowing more than you can afford to pay back.

3. Borrowing can also be bad. Often, faulty and irresponsible use of credit cards and loans is the cause of debt. Don’t use credit cards for unimportant stuff, and for paying for things you use up quickly like meals and vacations. Instead, set aside some money for those things, and learn to save up if there’s a very expensive item you’ve got your eye on.

4. Spend wisely and responsibly. Remember shopping lists? Use those whenever you go out and spend. Even if it’s just a mental list, prioritize the things you need over the things you want. Also, if you’re too young, don’t get a credit card if you aren’t taught how to use it responsibly in the first place.

5. Pay off debt, but prioritize those with high interest. Get out of debt efficiently by paying the balances of loans or credit cards that charge the most interest, but also pay at least the minimum due on all the other debts you have.

6. Don’t fall into the minimum trap. Paying the minimum due on credit card bills is actually a trick. Doing this will barely cover the interest you owe. You’ll end up having to pay off your balance for years and years, and you’ll be spending thousands of dollars over the original amount you charged on the card. Consider debt consolidation if you really need help.

7. Watch where you borrow. It may be handy right now to borrow against your home or your 401(k) to pay off debt, but it can also be dangerous. You could end up losing your home or fall short of your investment goals when you retire.

8. Expect the unexpected. Create an emergency fund or cash cushion, worth three to six months of living expenses. You can never be too careful or too sure—at least you’ll have money in case of emergencies such as a broken furnace or damaged vehicle.

9. Don’t pay your mortgage too quickly. You don’t have to pay off your mortgage so fast, especially if you have other debts to handle. Mortgages tend to have lower interest rates than other debt. There is also such a thing as prepayment penalties or fines for paying your home debt too early.

10. Get help ASAP. As soon as you realize that you can’t handle your debts, get credit card help or contact a loan refinance company as soon as you can. It’s better to eat your pride now than fall in a bottomless hole of debt later.

1. You pay less - When a debt is neglected, late fees and over-the-limit charges accumulate into the total debt amount. This means you end up paying higher interest towards the debt. Debt settlement companies can negotiate with your lenders or creditors so they can restructure all your debts. Commonly, 40-60% of the original debt is reduced, which means you get to save thousands of dollars.

2. You avoid rude creditor calls – Many people tend to screen or even ignore their calls because of rude, harassing calls from lenders trying to get paid. With debt settlement, the company you sign with will handle this for you. They will negotiate with your creditors, settle your debts and at the same time eliminate the annoying phone calls.

3. You get one monthly installment for all your debts - You will have to pay one monthly amount to the debt settlement company for them to settle your debts. The money you pay will be put in a trust account and then the company will start negotiating with your creditors. Also, the more you save each month, the less time it will take for you to become debt-free.

4. You get more time to pay – In most cases, debt settlement plans are worked out for a longer time period. Here, you have the condition to extend the period from 2-4 years, or in some cases, even longer. This is especially helpful to those who are unfortunate enough not to be able to pay the whole debt in one sitting.

Often, the reason why one can’t pay off debts is due to unforeseeable circumstances—family emergencies, loss of a loved one (especially if that loved one brings income to the family), or simply job loss. Under these kinds of situations, debt settlement can be your friend.

When done correctly, debt settlement can reduce unsecured debt by 50% or even more. This is because when you apply for a debt settlement program, your disposable income will be saved in a savings or “special purpose” account. When the money you put into it accumulates, your debt settlement company will negotiate with your creditors—one at a time—to agree to let you pay off an amount that is less than your original debt. This is repeated with each of your creditors until all of them have been paid. Pretty easy, right?

But you must be thinking: why would my creditors take only my partial payment? The answer is quite simple: your lenders don’t want you to go bankrupt because they’d rather receive partial payment than nothing at all.

This is done and allowed because creditors would rather get less than they were owed than nothing at all. If a debtor declares bankruptcy, the creditor gets nothing. Creditors, naturally, would want to get as much money back as they can.

Settling your debt will save you from future troubles and give you other advantages. Debt settlement will, first of all, make you pay less. When a debt becomes delinquent, your late fees and over the limit charges are accumulated with your total debt amount. This will result to you paying higher interest towards the debt—but fear not. Debt settlement companies usually negotiate with your creditors to restructure your debts, which will result into debt reduction (about 40-60% of original amount is reduced).

Debt settlement will also rid you of annoying, harassing creditor calls. That’s a huge weight lifted already because these calls add to your stress. If the creditor calls are eliminated, you’ll have more time to focus on figuring out how to pay your debts instead of figuring out how to get rid of your headaches.

Also, you will have a longer time allowed to pay your debts. Most debt settlement plans allow the debtor to pay the amount in a longer period if they cannot pay the debt in one go.

Besides, if you settle your debt now, the faster you will be debt-free. This will clear your financial blemishes and help your credit score as well.

So if you’re in serious debt or even nearing bankruptcy, don’t be afraid. Settle your debts—it is possible and definitely advantageous.

Many lenders would want to agree to negotiate the terms of your debt to help you pay it off. This is called debt settlement, or a negotiation process between you and your creditor to help shrink down your debt.

You may wonder why a creditor would want to reduce a borrower’s debts. Well, if a borrower is in deep financial trouble, a creditor would rather agree to be paid back an even a lower amount just to be able to recover funds rather than recover nothing at all, especially if the borrower is forced to declare bankruptcy.

Keep this in mind: Creditors gain nothing if their clients go bust.