If you borrow money and fail to pay it back, the creditor has the right to demand payment, and take all lawful actions to force payment. However, the Fair Debt Collection Practices Act (FDCPA) applies to all consumer (non-business) debts to limit how creditors (and collection agencies) operate. It’s important to know your rights so you know what to do if someone is unlawfully collecting a debt.
Although the FDCPA provides many protections, the fundamentals of what debt collectors can and cannot do can be summed up in a few bullet points:
Debt collectors can’t harass you. For example, they can’t:
- threaten you with violence or harm
- use obscene or profane language
- repeatedly use the phone to annoy you
They can’t lie to you. For example, they can’t:
- misrepresent the amount you owe
- lie about being attorneys or government representatives
- falsely claim you’ll be arrested, or claim legal action will be taken against you if it’s not true
They can’t engage in unfair practices. For example, they can’t:
- try to collect interest, fees, or other charges on top of the amount you owe, unless the original contract or your state law allows it
- deposit a post-dated check early
- take or threaten to take your property unless it can be done legally
They can’t contact you at inconvenient times or places, for example, the can’t contact you:
- before 8 a.m. or after 9 p.m., unless you agree to it
- at work if they’re told you’re not allowed to get calls there
The Federal Trade Commission has compiled a fact sheet with this, and much more information, which can be found here: https://www.consumer.ftc.gov/articles/debt-collection-faqs
Civil Rights of Action
And I will also emphasize that violations of the FDCPA are violations of federal law with private rights of action. You can sue a debt collector and seek damages like lost wages and medical bills, or you can be awarded the “statutory penalty” of up to $1,000, plus reimbursement for attorney’s fees and court costs. You have the option to bring such a claim in either state or federal court, so long as you file the suit within one year of the date the law was violated.
Document, Document, Document
For this reason, I encourage my clients to take these calls, even though most people prefer to ignore them. Most people have gotten so used to dodging bill collectors, but the worst that can happen is they will ask for a payment (and you can decline, if you choose). However, if you take the call and can document a violation, you could be well on your way to negotiating a wavier or reduction of the debt, by using the leverage crated by the threat of a lawsuit. To properly document the call, you should:
- note the date and time of the call
- the name of the collection agency (and their license number)
- the name of the representative (and their ID/Employee Number, if any), together with their phone number and extension
- finally, take notes during the call as to exactly what was said
Request they Discontinue Communication (Or Hire a Lawyer)
If you send a letter by mail asking for the collector to stop contacting you, they can then only contact you to confirm they will stop contacting you, or to tell you a specific action will be taken, such as filing a lawsuit. If you are represented by an attorney, and inform the collector of this, the collector must communicate with your attorney only (unless the attorney fails to respond within a reasonable period of time to the communication from the debt collector).
If you believe the debt is not yours (or you’re unsure), you can demand “verification” by sending a letter clearly stating that you dispute the debt and specifically requesting verification. You must send this letter within 30 days of getting the first notice. The collector is then required to send you written verification of the debt, like a copy of a bill for the amount you owe, before it can start trying to collect the debt again.
Anytime you send a written communication to the collector, you should keep a copy for your own records, and send the letter by certified mail or using another form of tracking. This will come in handy later if you decide to bring a suit.
Settle or Eliminate the Debt
If you’re at the point where you have several accounts in collection, the calls and letters can quickly become overwhelming (and may feel harassing, even if the law is not being violated). And, resolving these accounts can be tricky because even though you can settle accounts somewhat easily in most cases, the reality is that most people don’t have the financial means to pay 3 or 4 settlements at a time. An additional note of warning, if you settle a debt for less than is owed, the amount that is forgiven or waived is considered “income” and must be reported on your tax returns. This may generate a tax liability, which can later become a collection nightmare all its own (the IRS and the Division of Tax have far-reaching remedies to force you to pay).
And I don’t know about you, but I wouldn’t have the time to handle all the calls and communication, and write letters to every collection agency. Resolving debts through settlement is a bit of an art; it takes time and is not without risks.
However, bankruptcy relief provides a quick and efficient way of resolving all of your debts in one, simple proceeding. When you file, you immediately receive the protection of the “automatic stay:” which means debt collectors and other credits must immediately discontinue all collection activity, and are prohibited from taking legal action, such as lawsuits and wage garnishments.
Eligible bankruptcy filers can eliminate 100% of debt in is little as 4 months. Eligibility is generally determined by income and the total value of assets. After nearly 10 years of doing this, I can usually determine eligibility in less than 15 minutes.
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