Debt Collection
At the Law Office of Susan E. Rizos,
dealing with creditors and collection agencies is an every day occurrence! Consumers' rights are the first priority.
Often, collection agents and creditors use illegal tactics to try to convince you to pay a debt. Many consumers do not
know their rights in such situations. This office provides representation with respect to debt collection matters, litigation
defense, credit report repair and other consumer issues relating to debt collection.
Imagine, you don't
have enough money to pay all of your bills. This happens to many people every month. They must make difficult choices about which debts to pay first. Harassing calls and letters from collection
agencies and creditors may cause you to pay the wrong debts first due to inaccurate information, threats and fear.
This results in serious consequences for your family.
Sometimes, a person just feels overwhelmed
and simply ignores the mail. But, the problem does not disappear.
Below
is a summary of your rights when dealing with collectors and some guidelines for determining what debts should be given
priority in a financial crisis. Even when you do not have the money to pay your bills, you do not have to be subjected to
collector pressure tactics. (Much of this information has been reprinted from the National Consumer Law Center's
pamphlet entitled What You Should Know About Debt Collection. This pamphlet is available free of charge in the waiting
area of our office.)
Which debts do I pay first?
You first should use your money to pay for what is most necessary for your
family - food, clothing, shelter, and continued utility service. Because there is very little a debt collector can actually
do to you, debt collection efforts should have no effect on your decision about which debts to pay first. Threats to bring
suit, to seize household goods or garnish wages should be given little weight unless a lawsuit has actually been filed and
you receive court papers.
Some general rules for setting payment priorities are:
- Mortgage and rent payments should always come first.
- Make whatever payments are necessary
to insure essential utility service
is not disconnected. The utility company may not require payment
in full
even if you are behind.
- A car loan should be paid after critical items
(food, rent, clothing), but before
most other nonessentials.
- Generally, loans with
only household goods as collateral should be paid
after more pressing debts.
-
Debts without property pledged as collateral, such as credit cards, doctor
and hospital bills, and accounts
with merchants, should have low priority.
- The threat of a lawsuit should not raise the priority
of a debt above that of
mortgage, rent, utility payments, and a car loan.
-
Do not pay those debts that you have a good legal reason not to pay, such
as when the car you borrowed the money
for is a lemon. Instead, seek legal
advice as to how to best fight for your rights.
-
When a creditor wins a lawsuit, the consumer’s home and other assets may
be at risk depending on state
law and amount of equity in the property. If
the property is truly at risk, make this a high priority debt.
- Tax liabilities and student loans should be paid ahead of low priority but
after top priority debts.
Dealing with debt collectors
Once you have decided which debts you are able to pay and which will have to wait, the next step is to deal with
the collectors that aren’t being paid first.
How should I deal with debt
collectors?
Don’t let them pressure you into making the
wrong choices about what to pay first. For example, explain to the debt collector, "I have to pay my rent and utility
bills first. I have been recently laid-off; when I get a new job I will do my best to meet my debt."
What can a debt collector really do?
A debt collector collecting a
debt of the creditor can do little more than demand payment. If the creditor has not taken your house, car, or other property
as collateral on a loan, then legally the creditor can only do three things:
1. Stop doing
business with you.
2. Report your default to a credit bureau (which will be unavoidable when you
cannot pay most of your debts on time).
3. Sue you in court. Although the threat to sue may be
very upsetting, it is not nearly as serious as you might think. Many creditors do not follow through on their threats. If
they do sue you, you can represent yourself, and explain why you cannot or should not pay. After a period of time, the creditor
may obtain a court judgment, but this judgement still does don’t force you to pay the debt. It only gives the creditor
the right to try to seize part of your wages or particular property. If you do not own very much or if you do not earn very
much, creditors will not be able to seize any of your property or wages even though they have a court judgment against you.
Only if you are hiding assets can a creditor seize wages or property before a judgment; they cannot send the consumer to jail
or send the consumer’s children to foster care.
How can I stop
being harassed?
Federal law prohibits harassment by collection
agencies or attorneys. For example, they may not contact you at unreasonable hours; before 8 a.m. or after 9 p.m., unless
you give your permission. They also may not use obscene or profane language or call you constantly to annoy you. Some states
also have laws that provide similar protection against creditors.
Consumers being harassed
by debt collectors should follow these eight steps:
1. Head off harassment
before it starts.
When financial setbacks prevent you from paying all
of your bills, call the creditor and explain your situation. Explain that you have to pay the landlord and utilities first,
and that you will pay your other bills when you can. Don’t over promise; it’s better to be realistic about your
prospects for paying. By contacting the creditor first, you may avoid having the debt turned over to a collection agency,
which will usually be less flexible than the creditor in working out a payment plan.
2.
Write a cease letter. If explaining the situation doesn’t stop collection
efforts, the simplest way to stop contacts is to write the collector a cease letter. Federal law requires collection agencies
to stop dunning after they receive a written request to stop. You should also note in the letter any billing errors and/or
abusive tactics debt collectors have used in their contacts with you. Be sure to keep a copy of the letter. Below is a sample
letter.
[date]
[name of collection agency]
[address]
Name and
Account Number
Dear
Agency:
I am writing to request that you stop contacting me about my account number __________
with [name of creditor] as required by the Fair Debt Collection Practices Act 15 U.S.C section 1692c( c ).
This letter is not meant in any way to be an acknowledgment that I owe this money. Your cooperation
will be appreciated.
Very truly yours,
[your name]
[your address]
3. Have a lawyer write a cease letter. You don’t
need a lawyer to write a cease letter, but if your letter does not stop the harassment, a letter from a lawyer usually will.
Also, collection agencies must stop contacting you once they know you are represented by a lawyer.
4.
Work out a payment plan. If you decide to work out a payment plan, you should only agree to a realistic
plan, preferably one that significantly reduces the debt. In making any agreement, keep in mind your priorities: don’t
make even small payments if the payments would prevent you from paying your mortgage or rent, food or utilities.
5. Complain about billing errors. Collection letters are sometimes in error. If a letter
contains a mistake, you should write and request a correction (and keep a copy of your request). If you dispute the debt in
writing within 30 days of your receiving notice of the right to dispute, the collection agency must stop collection efforts
while it investigates. If the account is an open-end account, like a credit card, you can dispute a charge within 60 days
of receiving the bill.
6. Complain to a government agency. Mail any complaint
you have about a collector’s conduct to the Federal Trade Commission, Bureau of Consumer Protection, Washington, DC
20580, to the consumer protection division within your state attorney general’s office, and to any local office of consumer
protection. You should be able to obtain these addresses from your local Better Business Bureau or office of consumer affairs.
Send a copy of the letter to the collector.
7. File Bankruptcy. Filing
bankruptcy can instantly and effectively stop dept collection efforts of any kind. Often simpler and less expensive action
will resolve debt collection harassment, but bankruptcy filing may provide significant other advantages for the debtor. Filing
bankruptcy should not be a casual decision, and a competent professional should be consulted before any bankruptcy case is
initiated. For a list of bankruptcy attorneys visit www.nacba.org. Susan E. Rizos, Esq. is a member of the NACBA, the National Association of Consumer Bankruptcy Attorneys.
Check out the bankruptcy page of this web site for further information.
8. Sue the debt Collector.
It is strongly suggested that you keep a log book which lists each contact with you made by a collector including
the date, time, name of the person, and a note about what was said in the conversation. The federal Fair Debt Collection
Practices Acts allows you to sue debt collectors who violate the Act’s provisions. Statutory damages up to $1,000, actual
damages, costs and attorney’s fees are available to persons who bring successful actions. Please contact our office
to discuss such litigation.
