If a debtor wishes to stop debt collections, they have several options before deciding on filing for bankruptcy. Under the Fair Debt Collection Practices Act (“FDCPA”), a debtor can order a debt collector to stop contacting them. To do this, they must send a cease and desist letter. This letter must be in writing. Once the debt collector receives a cease and desist letter, they cannot contact the debtor except in certain circumstances. Such circumstances include:
- Informing the debtor that the collector will be ending communications; and/or
- To advise the debtor that a lawsuit or other legal remedy is being pursued.
If the debt collector ignores a debtor’s cease and desist letter, the debtor can sue the company for violating the FDCPA. However, it is imperative to note that a cease and desist letter does not erase the debtor’s debt. Because of this, some attorneys believe that cease and desist letters encourage debt collectors to file lawsuits against debtors.
This is due to the fact that the debt collector cannot communicate with the debtor, so they may feel they are forced to file a lawsuit. Notably, the FDCPA applies only to collection agencies and debt collectors. Meaning, the FDCPA does not apply to a debtor’s actual creditors, such as a mortgage company.
Should the debtor not think they are responsible for a debt, they can request verification or validation. Once they dispute a debt and request verification, the debt collector must stop collection attempts until the debt is verified as belonging to the presumed debtor. Verification requests must be made within thirty days of the debt notice, or bill.
Some creditors are willing to negotiate with debtors. A debtor may be able to negotiate smaller monthly payments, or a reduction in their debt in exchange for ongoing and consistent future payments. However, debt settlement may have a negative impact on the debtor’s credit score.
Debt can also be consolidated, in which a debtor combines unsecured debt (such as credit card debt) into a single loan. Generally speaking, the new loan charges fewer fees, as well as a lower interest rate. Consolidation can help improve a debtor’s credit score if they maintain consistent monthly payments.
Another option is to hire a credit counseling service. Credit counselors work with debtors and creditors in order to create debt repayment plans. Many reputable credit counseling services are non-profit organizations, and may charge little or no fees for their services. Generally, a credit counseling service provides financial advice and may create a debt management plan. When entering into a debt management plan, the debtor must make monthly payments to the counseling service. The credit counseling service will then issue payments to the debtor’s creditors.
Finally, a debtor may consider filing for bankruptcy in order to stop the debt collection process. However, bankruptcy should always be a debtor’s last resort. The federal government now requires that debtors undergo credit counseling before filing for bankruptcy. Additionally, bankruptcy does not erase certain types of debt, such as student loans.
Chapter 13 bankruptcy may allow some debtors to keep their home, car, and other assets. The debtors will make payments to their creditors under a court-ordered repayment plan. In general, debtors must have evidence of a consistent income in order to qualify for Chapter 13 bankruptcy.
Chapter 7 bankruptcy involves the debtor selling most of their property and assets in order to pay off their debts. Debtors may be able to keep some exempt property, such as a car, work-related tools, and basic household goods. In order to qualify for Chapter 7 bankruptcy, the debtor’s income cannot exceed a specified threshold; this threshold varies from state to state.
When Does Debt Collection Become Harassment?
Under the Fair Debt Collection Practices Act (“FDCPA”), it is illegal for a collection agency’s debt collectors to call you during specific times. These times are generally before 8 AM, or after 9 PM, in your time zone. The FDCPA also bars collectors from the following unfair debt collection practices:
- Calling a debtor at work;
- Using abusive language;
- Making false or misleading statements;
- Adding unauthorized charges; and/or
- Making threats.
If a debt collector violates the FDCPA, a debtor may sue them for economic, non-economic, or statutory damages. Debtors may also be entitled to an injunction, as well as payment of attorney’s fees.
It is important to note that there may also be State laws regarding the collection of debts. For example, in Texas there is the Texas Fair Debt Collection Practices Act, which offers additional protections for debtors. California has the Rosenthal Fair Debt Collection Practices Act. Thus, it is very important to also research your State’s laws on debt collection, as such laws may offer additional protections.
Is it Possible to File a Complaint Against a Debt Collector?
You should keep copies of all letters and documentation that a debt collector sends you. You should also keep copies of all correspondence you send to the debt collector. Another example of relevant information that you will need to maintain is the dates and times of conversations between you and the debt collector, along with notes detailing what you discussed during the conversations. Such records will support your case if you find yourself having a dispute with a debt collector which will require you to meet with a lawyer, and potentially go to court.
If you believe you are being harassed by a creditor or a debt collection agency, you can submit a complaint with the CFPB. The CFPB, or Consumer Finance Protection Bureau, exists to protect consumers and debtors from unfair, deceptive, and./or abusive practices. They also take action against companies that break consumer protection laws.
As a government agency, the CFPB ensures that banks, lenders, and other financial companies are treating their debtors fairly. One way the bureau accomplishes this is by providing sample letters that a debtor may send to their creditors. These letters are intended to help creditors who:
- Need more information;
- Do not actually owe the debt;
- Wish for the debt collector to cease contacting them while they dispute the debt;
- Wish for the debt collector to only contact them through their attorney; and/or
- Wish to specify how the debt collector may contact them.
The process for filing a complaint through the CFPB is as follows:
- The complaint is submitted through the CFPB website, or by phone;
- The complaint is forwarded to the debt collection company;
- The company reviews the complaint and communicates with the complainant as needed, and reports back to the bureau regarding steps taken to remedy the complaint;
- The complaint is published to the bureau’s Consumer Complaint Database; and
- The bureau informs the debtor of when the collections company responds.
Do I Need a Lawyer to Help Deal with a Debt Collection Agency?
As a debtor, you have debt collection rights that must be respected and protected. If you are facing issues in stopping debt collection, or you are being harassed by a debt collection agency, you should consult with a skilled and knowledgeable financial attorney.
An experienced and local financial attorney can help you understand your rights and obligations, as well as inform you of any potential options you may have. Further, should you need to file a complaint against a debt collection agency, your attorney can help with the process and ensure you have all necessary evidence to support your claim. Finally, a financial attorney can also represent you in court as needed.