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What to Do if You're Delinquent on Debt

Chloe Meltzer | December 02, 2022

Chloe-Meltzer
Legal Expert
Chloe Meltzer, MA

Chloe Meltzer is an experienced content writer specializing in legal content creation. She holds a degree in English Literature from Arizona State University, complemented by a Master’s in Marketing from California Polytechnic State University-San Luis Obispo.

Edited by Hannah Locklear

Hannah Locklear
Editor at SoloSuit
Hannah Locklear, BA

Hannah Locklear is SoloSuit’s Marketing and Impact Manager. With an educational background in Linguistics, Spanish, and International Development from Brigham Young University, Hannah has also worked as a legal support specialist for several years.

Summary: Are you delinquent on your debt? Find out what you can do about it in this post.

Most creditors will declare your account the moment you miss a payment, you will also most likely get a grace period if you happen to forget or be a few days late. Despite this, you need to act quickly in order to avoid fees as well as damage to your credit score.

There are a few things you need to know about delinquent debt. First off, debt becomes delinquent the day after you first miss a payment. This does not necessarily mean that you are going straight into default, because there is often a grace period. The grace period is a window of time that you have to pay off missed payments and get everything back on track.

Despite this, lenders can begin to charge additional fees or penalties after being delinquent on a loan. This is the time where grace periods are going to be very important if you miss a payment. They vary according to the type of debt you have, so you need to look into the agreement you have with your lender. It is common to have a 30-day grace period for most debt except mortgages which are given 15 days before a late fee. (Mortgages usually have a 5% fee of whatever your monthly payment amount is.)

When it comes to a credit card, your late fee typically occurs very closely to after you miss a payment. Some lenders may give you a grace period up to when your next payment is due. The late fee ranges from $20 to $50, but you may also have an APR that could go as high as 30%.

Having a delinquent debt means that your credit score will most likely be lower as well. This will also make it more difficult and expensive to borrow money in the future. If you have a delinquent bill your score may drop by up to 80 points for a personal loan, 100 points for a student loan, and up to 125 points for a credit card payment.

Finally, a delinquent bill that you do not pay, will go into default. It will depend on the type of bill it is, as well as the lender. This should not be ignored because it will come back to bite you if not and get worse and worse.

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Delinquency vs. default

Default is the end result that occurs after a delinquent debt has been left for a long period of time. It usually refers to missing multiple payments over various months, but the time period depends on what type of account it is.

For example, if you are delinquent on a mortgage or private student loan, it means you are 90 days late. Credit cards are considered delinquent at 180 days, while federal student loans are considered delinquent at 270 days.

What to do if you're delinquent on debt

Check your credit report. You can access all of your different credit reports from the credit bureaus. This will allow you to know which of your accounts is considered late and has been reported.

  • Contact your lender. Before you miss a payment it is best to reach out to the lender or creditor who is in charge of your loan. This will possibly give you a chance to set up a payment plan and keep your account in good standing or get it back to where it was.
  • Find a credit counselor. Credit counselors are financial professionals who are trained to help borrowers in serious debt. These people can help you make a budget, get you into a debt management course, and even sometimes help stop collection calls.
  • Use your savings. Although it should be your last option if you have a retirement account or emergency fund you may want to dip into it. This can help you keep your credit high, and help avoid making the situation a lot worse. It is good to be aware that sometimes there are penalties, but when it comes to a Roth IRA you can withdraw contributions without paying taxes or penalties.
  • Get a debt consolidation loan. If you are struggling to pay off multiple debts, then you may want to look into a debt consolidation loan. It is good to note that this will only work if you have good credit and a steady income. Debt consolidation loans can help you put all of your accounts into one payment with a lower interest rate. In some cases, the origination fees can be extremely high, so it is important that you look out for this before agreeing to it.

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How to remove a delinquent account

Late payment notices and collection notices stay on your credit report for up to seven years. This is always after the original delinquency date. Despite this, as each year passes the impact on your score will change. Removing this delinquency is not easy, so the best thing to do is to avoid it before it happens. If this is not possible, you can ask your creditor for a goodwill adjustment if you have generally been in good standing.

For example, if your missed payment was due to something like a natural disaster or an accident. Another option is to make the repayment terms on a “pay to delete” basis. This would mean that if you pay it, they will take it off of your report. Despite this, the best way to fix your score and remove a delinquent account is to simply pay it off and budget better in the future.

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How it works: SoloSuit is a step-by-step web-app that asks you all the necessary questions to complete your answer. Upon completion, you can either print the completed forms and mail in the hard copies to the courts or you can pay SoloSuit to file it for you and to have an attorney review the document.

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