To be “in debt” means that a persons owes something, usually money. The person who owes money is usually called the “debtor.” The party that is owed money is called the “creditor” and is usually a lending institution such as a bank. Debt may also involve other assets such as interests in property.
Debt may be categorized into two basic categories: consumer and corporate debts.
Consumer debt is the type that most people are familiar with. It consists of personal debts and debts incurred mostly in meeting living expenses. Some common types of consumer debt are:
Dealing with the consequences of debt begins with determining whether the debt is secured or unsecured debt. Both consumer and corporate debts may be either secured or unsecured.
Unsecured debt does not involve any type of property being used as collateral or security on the loan. In this situation, the creditor is initially prevented from reaching the debtor’s assets as payment for the loan. Therefore, the creditor usually must resort to other means of collection such as hiring an independent collection agency or by filing a lawsuit in court. The most common form of unsecured debt is credit card debt.
There are a variety of state laws in place to ensure that creditors do not treat their debtors unfairly. Under Federal law, the main statute regulating creditor collections is the Fair Debt Collection Practices Act (FDCPA). This act applies to the manner in which bill collectors are allowed to go about making collections. For example, they are prohibited from calling at certain hours and making threats in order to force a payment.
Dealing with creditors can be challenging at times, and it often involves several different documents and deadlines. Hiring a lawyer can be advantageous, especially if you are dealing with unsecured debt that might lead to a lawsuit. Working with a lawyer can help ensure that your debts are dealt with in a manner that is both fair and timely.
Last Modified: 04-24-2014 03:33 PM PDTLaw Library Disclaimer
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