If you are drowning in debt and receiving daily phone calls from at least one debt collector, it’s important that you know your rights. Thanks to the Fair Debt Collection Practices Act (FDCPA), there are laws designed to protect you from that unwanted communication.
What collectors can’t do
The FDCPA spells out several things debt collectors are prohibited from doing. For example, they cannot call you before 8 AM or after 9 PM or call you multiple times a day. In addition, they are not to call you at work without your permission. The collector is also not to discuss your debt with friends or family members and is prevented from misrepresenting the status of a debt or claiming to be affiliated with some governmental entity.
How to stop those harassing phone calls
According to the FDCPA, you can stop phone calls by sending the debt collector a cease and desist letter. This letter communicates to the debt collector that he or she is not to contact you anymore. You need to send your letter registered mail and return receipt requested so you can prove that it was received.
What collectors can do
Once the collector receives this letter, they can only reach out to inform you that they will not be contacting you anymore or to notify you that they plan on taking legal action, such as starting a lawsuit against you.
If they contact you for any other reason, you can report it to your state’s attorney general’s office or to the Better Business Bureau. And if the harassment continues, you could hire an attorney and try filing a lawsuit against the collection agency. However, this can be difficult as many agencies are headquartered offshore.
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The worst thing they can do
Let’s suppose you owe $5,000 to a credit card company that has sold your debt to a collection agency. The agency may have paid less than $100 for the debt but that doesn’t change the fact that you still owe $5,000. If you fail to pay it off, the collection agency could file a suit. If you were to fail to show up for your court date, the debt collector could get a summary judgment. If you make an appearance, the collector might still get a judgment.
Once the agency has a judgment, they may be able to put a lien on your home. If you were to ever sell the home, that $5,000 would come off the top. In other words, if you thought you had $10,000 in equity, you would end up getting only $5,000 while the collection agency received the other $5,000. This makes it a lot more challenging to sell your home since you would have to deal with this first.
Bankruptcy or debt settlement?
Bankruptcy or debt settlement could be better options than letting a debt collection agency get a judgment and put a lien on your house. A Chapter 7 bankruptcy would discharge most of your unsecured debts including personal loans, lines of credit, medical and credit card debts.
Many people choose debt settlement instead of filing for bankruptcy as an alternative to bankruptcy. A debt settlement firm can negotiate settlements to reduce the debt amount on your unsecured debts.
Legitimate debt settlement companies
Keep in mind that a legitimate debt settlement company will not require any payments upfront. It is actually illegal! The money you send them should be deposited into an FDIC- insured trust that only you can manage. You will pay nothing until and if the company successfully settles your debt and provides you with a payment plan you approve.
If a debt collector oversteps their bounds, report them immediately. But the best way to make them go away is by resolving your debt.