When it comes to debts, almost all of them are unsecured. This would be things like your credit cards, medical bills, old utilities, or even a deficiency on a repossessed car. There is no collateral being used to secure this debt to anything. A creditor who has an unsecured debt that (who is not the government, i.e. student loans and taxes) can only do the following things in order to pay their debt:
- Reporting past due payments to credit agencies. You cannot stop a creditor from reporting to a credit agency and the fact that you are behind on payments will probably reflect that on your credit report. While this may be a hit on your credit score, this doesn't mean that it is the most important bill to pay first.
- Cancel their business with you. A lot of times if you stop making payments a credit card will cancel your card. Or a doctor’s office will tell you they won’t schedule anymore appointments till you pay your bill. This is only a minor hiccup and you can usually find another card to work with you or another doctor’s office to visit.
- Contact you. Creditors can contact you during normal hours in order to attempt to collect on a past-due bill. They can also send letters or emails attempting to collect what you are past due. You are allowed to tell them in writing that you would like them to stop contacting you and they have to stop. However; they will most likely respond that they will be taking further action.
- Getting a judgment against you. After attempts to receive payment, a creditor may decide that they want to take further action by getting a judgment against you. A judgment leads to liens on your home or a garnishment on your paycheck. These are the number one priority debts.
- Garnish your paycheck. Once the creditor has a judgment against you they are allowed to garnish up to 25% of your paycheck. Once a garnishment begins there are only a limited amount of options for you. You can pay off the debt or you could file for bankruptcy.
Now we know what creditors are allowed to do, but what are they NOT allowed to do? The Fair Debt Collection Parties Act prohibits:
- Contacting others about your debt without your permission. They can only contact other people in order to locate you.
- Contacting you at inconvenient times. Typically, this is from 8a.m. to 9p.m. however, if you work third shift and they know this, then morning or afternoon may be inconvenient times for you.
- Calling repeatedly in order to harass or annoy.
- Contacting you if you are represented by a lawyer.
- Contacting you at work if they know you are not allowed to take calls at work.
- Using foul language or racial slurs, insulting remarks or even threatening is not allowed.
- Falsely representing or implying that they are a lawyer or with the government.
- Stating that if you fail to pay then you will be arrested, garnished, or property will be seized (unless these actions are lawful, and the collector fully intends to take such action).
- Falsely representing how much is due or the legal status of your debt.
- Collecting fees that the creditor is not allowed to collect.