Dealing with collection agencies

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What you need to know about dealing with debt collectors?

Should I deal with DEBT collectors or try to avoid them?

Collection agencies have been calling me all hours of the day and night. How can I get them to stop contacting me?

The collections department of a local merchant is harassing me. Can I do anything about it?

A bill collector insisted that I wire the money I owe through Western Union. Am I required to do so?

Can a collection agency add interest to my debt?

A collection agency sued me and won. What collection measures can it now take against me?

How is collection agencies regulated?

Who enforces the FDCPA?

What if a collection agency has bought the debt?

What about the relevant time limits?

Can they do anything after the time limits are up?

Can collectors call the debtor’s place of employment?

Is there anyway to make them stop calling?

What happens if a creditor tries to collect a Debt during my bankruptcy?

Can a credito r freeze my bank account?

Can I cash a check that I’ve held for months?

If I receive things in the mail that I never ordered, do I have to pay for them?

Is it legal to bill me using a postcard?

What can I do to collect on a bum check?

Should a deadbeat dad’s non-payments go on his credit report?

Can I collect on a loan to someone who’s died?

Can my car be repossessed without warning?

What percentage of my wages can creditors take?

Am I liable for credit card charges my ex racks up after the divorce?

 

What you need to know about dealing with debt collectors?

When you are not repaying your loans and credit to the lenders, they write it off as a loss and then sell your debt, to debt collection agencies. These are agencies that specialize in recovering the debt. For this reason, they do their utmost to make you pay the debt back. There are several measures that the debt collectors take to make sure that you pay. It is important to know how to deal with them effectively.

Should I deal with debt collectors or try to avoid them?

Unless you’re “judgment-proof” (that is, broke) or you plan to file for bankruptcy, most credit counselors believe that you shouldn’t ignore your debt or try to hide from a debt collector. Generally, the longer you put off resolving the issue, the worse the situation and consequences will become. Whether you negotiate directly with the collector or obtain a lawyer’s assistance, most counselors feel it is almost always best to talk with the collector and try to work out a mutually satisfactory arrangement.

Collection agencies have been calling me all hours of the day and night. How can I get them to stop contacting me?

It’s against federal law for a bill collector who works for a collection agency (as opposed to working in the collections department of the creditor itself) to call you at an unreasonable time. Before 8 a.m. or after 9 p.m. are considered unreasonable times, but other hours may be unreasonable, too, such as daytime hours for a person who works in nights.

The federal Fair Debt Collection Practices Act (FDCPA, 15 U.S.C. § 1692 and following) bars collectors from:

  • ■ Harassing you
  • ■ Using abusive language
  • ■ Using false or misleading statements
  • ■ Adding unauthorized charges, and
  • ■ Many other practices.

Under the FDCPA, you can demand that the collection agency stop contacting you (except to tell you that collection efforts have ended or that the creditor or collection agency will sue you). Make your request in writing.

The collections department of a local merchant is harassing me. Can I do anything about it?

Unfortunately, the federal Fair Debt Collection Practices Act (FDCPA) does not apply to the collection department of a creditor (it only applies to outside collection agencies). However, many states have fair debt collection laws that do cover creditors’ collection departments.Check with your state consumer protection office to see if your state law applies to in-house collectors and to find out what types of collection practices it prohibits.

A bill collector insisted that I wire the money I owe through Western Union. Am I required to do so?

 

No. Many collectors, especially when a debt is more than 90 days past due, will suggest that you make an “urgency payment,” by doing things like:

 

  • ■ Sending money by express or overnight mail, which will add at least $10 to your bill
  • ■ Wiring money through Western Union’s Quick Collect or American Express’s Moneygram, another waste of money, or
  • ■ Putting your payment on a credit card — you’ll never get out of debt if you do this.

 

Mailing your payment with a first-class stamp is fine. Or, pay by debit card or check card — but first ask if the creditor will charge a fee. If you send your payment through the mail, you may receive further phone calls from the collector until the creditor receives and processes your payment.

Can a collection agency add interest to my debt?

Yes. The Fair Debt Collection Practices Act (FDCPA) allows a collector to add interest if your original agreement calls for the addition of interest during collection proceedings, or the addition of such interest is allowed under state law. Every state authorizes the collection of interest, although the maximum amount allowed varies.

A collection agency sued me and won. What collection measures can it now take against me?

Before obtaining a court judgment, a bill collector generally has only one way of getting paid: asking. This is done with calls and letters.However, once the collector (or creditor) sues you and obtains a court judgment, the law allows it to take further steps to collect the debt. The collector can:

  • ■ Garnish up to 25% of your net wages. The amount depends on where you live and how much you earn.
  • ■ Seize bank or other deposit accounts.
  •  Record a lien against real property. This lien will have to be paid when you sell or refinance your property. Technically, the creditor could    also force a sale of your home in order to get the lien paid. However, creditors rarely do this because after the creditor pays the costs incurred  in selling the home, other more senior creditors get paid from the proceeds (like mortgage holders), and the homeowner gets the amount of  the states homestead exemption (most states allow homeowners to protect a certain amount of the equity in their home from creditors, called  the homestead exemption), there is nothing left for the creditor.

Even if you’re not currently working or have no property, the judgment won’t disappear. Depending on the state, court judgments can last up to 20 years. In many states, it can be renewed for years beyond that.

 

How are collection agencies regulated?

They are regulated by the Fair Debt Collection Practices Act(FDCPA), which prohibits and restricts collectors from using threatening, abusive language and other unlawful tactics. While original creditors aren’t necessarily bound by these laws, it’s a good idea to operate within these guidelines to avoid any possible legal actions against them.

Who enforces the FDCPA?

The Federal Trade Commission oversees the collections industry, and has the authority to impose fines or other penalties for violations. However, the FTC does not get involved with individual consumers’ cases. They accept a large number of complaints, and look for patterns of violations, which could then lead to action against a particular collection agency.

What if a collection agency has bought the debt?

The agency then becomes the creditor for most purposes. The debtor will not be able to make any negotiations with the original creditor. The agency might be technically able to file a lawsuit against the debtor, although this is not likely. However, the Federal Trade Commission has issued a Staff Opinion Letter, which indicates that, even if a collection agency has purchased a debt, it is still covered under the Fair Debt Collection Practices Act as a “third-party debt collector”.

What about the relevant time limits?

The debt does not become some kind of “new” debt just because of being sold. For example, the seven-year credit reporting time limit is still based on the original delinquency date with the original creditor. The statute of limitations for filing lawsuits is also based on that same date. These limits cannot be legitimately “reset” by a collection agency that has bought the debt. However, the statute of limitations may possibly be reset if the debtor makes a specific promise to pay, or make a partial payment.

Can they do anything after the time limits are up?

Yes. The statute of limitations only covers the filing of lawsuits, and the credit reporting time limit only covers bureau listings. There is no time limit on letters and phone calls.A collection agency that has purchased a bundle of “out-of-statute” debts (where the SOL has already expired, or “run”) is hoping that, either the debtors will feel guilty, or that they won’t be aware of that “out-of-statute” status. But if a particular debtor makes it clear that s/he understands the legal situation, then the collectors are likely to give up and move on to easier targets.

Can collectors call the debtor’s place of employment?

Yes, but there are limitations. For example, they cannot legally tell your employer about the debt, or try to have you fired.

Is there anyway to make them stop calling?

Yes. According to section 805 of the Fair Debt Collection Practices Act:

“(c) CEASING COMMUNICATION. If a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communication with the consumer, the debt collector shall not communicate further with the consumer with respect to such debt, except –

(1) to advise the consumer that the debt collector’s further efforts are being terminated;

(2) to notify the consumer that the debt collector or creditor may invoke specified remedies which are ordinarily invoked by such debt collector or creditor; or

(3) where applicable, to notify the consumer that the debt collector or creditor intends to invoke a specified remedy.

 

If such notice from the consumer is made by mail, notification shall be complete upon receipt.”

So the consumer can just send a third-party collection agency a written notice (preferably citing the FDCPA), ordering them to stop the collection letters and calls, and the agency is legally obligated to comply. The only permissible contact thereafter is to notify the debtor of specific “remedies,” like legal action.

What happens if a creditor tries to collect a debt during my bankruptcy?

If, after you file for bankruptcy, a creditor continues its collection actions against you, the creditor may be violating bankruptcy’s automatic stay. When you file for bankruptcy, the automatic stay prohibits almost all collection activity, including legal action, garnishment, and even contact by phone or mail in an attempt to collect a debt.

If an exception to the stay does not apply, and the bankruptcy court has not terminated or modified the automatic stay order, then a collector’s attempt to collect a pre-bankruptcy debt is likely a violation of the automatic stay. You have several options if a creditor continues its collection actions against you in violation of the automatic stay.

Tell the creditor about your bankruptcy. Many times the collector is unaware of your case (through error or negligence) and will stop collecting and correct its violation. Notify the bankruptcy court. If the collector does not stop and correct its violation, the next step is to notify the bankruptcy court.

A violation of the automatic stay does not depend upon the collector’s intent to violate the stay order, only that the collector intended to start or continue collecting in violation of the order.Generally, the court can sanction a violation of the automatic stay under its power of contempt (because the creditor violated the court’s order).

Can a creditor freeze my bank account?

Bad news: It is legal for a creditor with a court judgment against you to freeze or “attach” your bank account. Some creditors, like the IRS, can attach your account even without a court judgment.

But there are limits to what the creditor can take from your account. If all or some of the money came from sources such as Social Security or a public assistance program, this money would be protected. To prove that you deserve this protection, however, you’ll have to ask for a hearing.How to request a hearing and how soon you must request it (usually pretty soon) varies from state to state. The best way to start is to ask the bank for copies of all the attachment papers. These papers normally outline the next procedural steps. Or, call your local legal aid office for advice and possibly low-cost legal representation.

Can I cash a check that I’ve held for months?

No law says you have to cash a check within 30 days. Generally, banks and credit unions do not have to honor checks that are more than six months old. But most banks will go ahead and honor old checks anyway.

If I receive things in the mail that I never ordered, do I have to pay for them?

Any time you receive unsolicited items in the mail, you are entitled to consider them to be gifts and you are under no obligation to pay. Write to the sending company and tell them that you don’t want to receive anymore, and intend to treat those you have already received as gifts.If you keep receiving bills, write to the seller again and insist that they send you proof that you ordered the items. If the bills still don’t stop, notify the state consumer protection agency in the state where the sending company is located.

Before you start this process, however, make sure that you didn’t agree to pay for the items. Did you respond to an advertisement that offered you a free gift or a trial membership? If so, check the fine print: you may have accidentally agreed to pay. In this situation, your best bet is to write to the company, tell them that you think their ad was misleading, and offer to send the items back. And make sure to tell them that you want to cancel the deal right away.

Is it legal to bill me using a postcard?

It depends on whether the debt has been assigned to a collection agency. Collection agencies—an agency or person whom the original creditor uses to collect the debt—cannot use a postcard to try and collect a debt. However, no federal law prohibits the original creditor from doing so.

Some state laws might forbid such a practice. For example, creditors in California who regularly engage in debt collection cannot dun by postcard.

If you remain bothered by the practice, stop doing business with the company—and make sure you drop it a line explaining why. (Use a piece of stationery and put it in an envelope!)

What can I do to collect on a bum check?

Friends and money are often uneasy bedfellows. In your situation, you are likely to end up with either your money or your friend, but not both. From a legal standpoint, you have the right to sue and obtain a judgment and force collections—attaching your friend’s wages, seizing his or her bank accounts, or putting a lien on his or her house. (To learn about bringing a lawsuit in small claims court, see Nolo’s Small Claims Court area.) Also, in some states, a judge could award you up to three times the amount of the check to punish your friend for writing a bad check. Check your state laws.

Should a deadbeat dad’s non-payments go on his credit report?

Such a nice, short question—for what must have a nasty, long history. Contact your local district attorney’s child support unit. By law, the folks there must report arrears over a certain amount to the three major credit bureaus: Equifax, TransUnion, and Experian.

 

Can I collect on a loan to someone who’s died?

In New York and other states that follow marital property rules based on common law property systems—as opposed to the community property principles followed in California and nearly two handfuls of other states—only the spouse who racked up the debt in his or her name is responsible for paying it. The only exception is debts for necessities, such as food, clothing, or medical care.

Only if you live in a “community property” state is the deceased debtor’s spouse legally responsible for the debt. (See Nolo’s article Dividing Property and Debt During Divorce FAQ for a list of community property states.)

No matter where you live, however, you have a claim against the deceased debtor’s estate. Find out whether there will be a probate proceeding in which you can request that your debt be paid out of his probate assets.

Can my car be repossessed without warning?

In many states, if you are behind in your car payments, the lender can “repossess” your car without warning or even leaving a calling card. The lender (or, more likely, the repossession company that the lender hires) can hotwire your car or use a duplicate key and drive it away from any location. The only limitation is that they can’t illegally enter your locked home or garage.

First, determine whether your inability to pay your car note is temporary or long-term. If it’s temporary, immediately contact your lender, explain your situation, and try to work out a short-term solution (maybe adding the missed payment to the end of the loan term). Or, borrow money from friends or family to get current on your car loan.

If your situation will be long-term, you should still contact your lender and try to buy some time. Then, sell the car yourself and use the proceeds to pay off your car loan. If you let the lender repossess the car, it will sell the car to cover what you owe on the loan and also charge you fees for repossession, sales costs, and the like. And if the sales price is less than what you owe (including all the extra fees), you will still owe the lender money even though you no longer have a car to show for it.

 

What percentage of my wages can creditors take?

The total amount your creditors can take from your wages is 25% of your net pay. That limit applies whether you have one creditor or many. Remember, however, that each creditor must have a judgment against you to be able to garnish your wages. If more than one creditor has a judgment, the first one would garnish your wages, get the 25% until the judgment is paid, and then cancel the garnishment. Then the second creditor would garnish 25% of your wages until that judgment was paid. And so on. If your income is very low, the creditor may not be allowed to attach the full 25%.

Before you lose a bunch of lawsuits, however, you might want to get some help dealing with your creditors. Although you might not be in that position, these agencies have been examined and approved by the government, which makes it less likely that you’ll run into some of the scam artists that all too often prey on people who are deeply in debt.

Am I liable for credit card charges my ex racks up after the divorce?

Unfortunately, there’s no clear answer to this question—but whether or not you are liable in the end, it will be a hassle dealing with this situation.You have learned the hard way about what happens when divorcing couples fail to close joint accounts. If you have the money and the gumption, and if you didn’t get notice of the bankruptcy, you could file a motion to reopen the bankruptcy and ask the court not to let your ex discharge the debt.

Or, you might be able to file a motion to reopen your divorce case and have the court modify your settlement agreement so you get more money or property to compensate for being liable for the debt. You probably will need to talk to a lawyer to do either of these things. But before you do, make absolutely sure that your name is no longer on any accounts that you ever shared with your ex.