What is a debt collector legally allowed to do?
There is a large body of federal law that regulates the conduct of debt collectors. One of the most significant, the Federal Debt Collection Practices Act, (FDCPA) only applies to third-party debt collectors, not original creditors. Thus, if Home Depot calls you to collect a debt that you owe to Home Depot, the FDCPA does not apply to them or their debt collection practices.
Consumer lenders for real estate and motor vehicle purchases as creditors have an advantage over other financial institutions, such as credit card companies, that extend credit to consumers. If a borrower fails to pay pursuant to the terms of a mortgage or motor vehicle loan, this “secured” debt allows home and auto lenders to look to the debt’s underlying collateral for repayment.
In contrast, almost all credit card debt is unsecured, and since these creditors do not have the benefit of any collateral for their debts, they are more limited in how they may collect debts from consumers. The result is that unsecured creditors generally employ more unscrupulous practices to collect their debts.
Most of a consumer’s debts are unsecured since no collateral secures this debt. Unsecured debts include credit cards, medical bills, utility bills, or a deficiency on a repossessed motor vehicle.
*An unsecured creditor may engage in the following conduct to compel payment of a debt:
Creditors may contact consumers from 8 a.m. to 9 p.m. unless a consumer agrees otherwise. Debt collectors may call, send letters, emails, or text messages to collect a debt. They may send written or electronic correspondence to collect a past due amount. Consumers have the right to inform creditors in writing to cease making any contact.
Cancel consumers’ accounts.
It is not a certainty, but some credit card companies will cancel an account if too many payments are missed or too large a balance is past due.
Report past due payments to credit bureaus.
Creditors may report a payment delinquency to a credit agency, which will likely reflect on a credit report at some time in the near future.
File a civil lawsuit and obtain a judgment.
Usually, after some extended period in which collection was attempted or some other resolution was considered, a creditor may file a civil lawsuit for breach of contract or an action on an open account to recover the balance and obtain a judgment.
Garnish wages or a bank account.
Successfully winning a civil lawsuit transforms the creditor-plaintiff into a judgment creditor, which allows the holder to place a lien on property or garnish wages or a bank account. Once a garnishment begins there are only a limited number of options available. One is paying the debt and the other is filing for bankruptcy.
The attorneys at the Morrison Law Group can help any Utah resident deal with judgment creditors, especially by helping them file bankruptcy. A bankruptcy case filing will immediately stop a collection lawsuit. It will discharge the underlying debt of the civil lawsuit while stopping all efforts of a judgment creditor to execute and collect on its judgment. The amount of the judgment may be substantial and it may not be the only unpaid debt subject of a civil lawsuit to enforce collection. Thus, bankruptcy may be an effective, cost-efficient option.
A debt collection defense attorney may bring to light circumstances where a defendant never received an opportunity to be heard or there is no proof that the plaintiff is the rightful owner of the judgment. Documentation establishing proof of ownership of the debt may be missing, inadequate, or simply nonexistent. If it is clear that the plaintiff-creditor is the legal owner of the debt, another option is to negotiate a settlement of the judgment, perhaps even for a lump sum payment of 50% or less.
Talk to the Morrison Law Group about your Chapter 7 or Chapter 13 bankruptcy options. Call 801.456.9933 today to schedule a FREE consultation. We are Utah’s only statewide bankruptcy law firm and have locations in Ogden, Logan, Sandy, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.