Debt can be both a powerful tool and a horrible demon. While having some debt can be good—it allows you to live la vida loca—having too much debt can be disastrous. The following tips can help you maintain some sanity when the bill collectors come calling. While you will have to deal with the bills, these tips can help you avoid being harassed.
The first step is to try to address the issue before it becomes a problem. While paying the bill is the ideal, we know it is not always possible. It is important, though, that you don't ignore the issue and hope it goes away—it won't. In order to avoid having the debt turned over to a collection agency, you should call your creditor and explain that you are unable to pay the bill (and hiring a collection agency won't help you pay sooner) and tell them when you expect to be able to pay. Hopefully, you will be able to come to a compromise or produce a repayment plan.
If you are unable to work a deal with your creditor, and the debt ends up with a harassing collection agency, write a letter requesting that the collector stop contacting you. Under the Fair Debt Collection Practices Act (FDCPA), debt collection agencies and attorneys must stop contacting you after receiving a letter requesting that they quit. You should also indicate any illegal actions committed by the collector in this letter. Keep a copy of the letter for your records and also send a copy of the letter to the following address: Federal Trade Commission, 6th & Pennsylvania Ave. NW, Washington, DC 20850.
After you send this letter, collectors may only contact you to acknowledge receipt of the request, to tell you their efforts have ended, or to tell you that they are suing you. However, you should note that the FDCPA only applies to collection agencies and attorneys—it does not apply to in-house collection departments. Having said that, though, many creditors will honor the request.
If your letter fails to end the harassment, a letter from a lawyer usually will. Additionally, once you have hired a lawyer, the collection agency or creditor's attorney must only communicate to you through your lawyer. The other benefit of retaining an attorney is that they can help you raise legal claims under the FDCPA. The downside to hiring a lawyer is that it can be expensive, and a lot of times you really only need to send a letter requesting that they stop contacting you.
The final solution is to file for bankruptcy. Once you file the initial papers for bankruptcy, you are automatically protected from collection activity. The collector must first obtain permission from the bankruptcy court before it can continue its collection efforts; and the court will not grant permission to those seeking to collect unsecured debts (such as credit card debt). Filing for bankruptcy is a very effective way to stop creditors from harassing you.
However, bankruptcy should not be entered into lightly and should not be used when your only concern is simply debt harassment. Bankruptcy filings will stay on your credit report for 7 to 9 years. It should only be used when you have grave financial problems. Simple debt harassment can usually be stopped with less drastic measures than bankruptcy.
Under the Fair Debt Collections Practices Act, it is illegal for debt collectors to do the following:
- Contact your employer or neighbors about your debt (they may only contact them to locate you, but may not mention the debt)
- Call you late at night or at unreasonable hours
- Call you at work
- Call you repeatedly
- Engage in deceptive conduct
- Calling you without disclosing the collector's identity
- Use obscene, derogatory, or insulting remarks
- Threaten arrest or loss of child custody or welfare benefits
- Publish your name
- Use any communication, language, or symbols on envelopes or postcards that indicate that the sender is in the debt collection business
- Threaten self-help repossession without legal right or present intent to do so
If the collection agency is violating any of these laws, you may be able to sue them for damages, your attorney fees, plus an additional $1,000.
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