Facts About Debt Collection
Authored By: Acadiana Legal Service Corporation
- I have so many debts. Which ones should I pay first?
When you do not have the money to pay all of your debts, you must make hard choices about which debts to pay off first. Use your money to pay for what is most necessary for your family---food, clothing, shelter and utilities. Only you know which debts are most important to you and your family. But generally you should pay debts in this order:
- Mortgage or rent payments, along with whatever is needed to keep your gas, electricity and water on.
- A car loan if you need it for transportation.
- Loans for furniture or other household goods.
- Credit card debts, general unsecured accounts and medical bills can be paid with whatever money is left.
- But should I first pay the people threatening me?
- Not always. Don't let harassment or threats from creditors make you pay low-priority debts before more important debts. Unless a lawsuit has actually been filed, threats to sue you, seize household goods, or garnish wages are not always serious. You may want to talk with creditors to explain why you cannot pay debts now and when you will be able to pay them. But if they are rude, you do not have to talk with them. You can't be put in jail just because you can't pay your debts.
- What can the creditor do if I cannot pay?
If you have used some of your property as collateral (a secured debt), the creditor can try to take possession of it. If the collateral is a house, the creditor can start the foreclosure process. If the collateral is a car, the creditor can ask the court for a writ of seizure and sale of your car. If the collateral is furniture or household goods, the creditor cannot come into your house without your permission. Talk with a lawyer to find out your legal rights if the creditor tries to come into your house.
A creditor can take you to court (sue you) to try to get you to pay the debt. Taking you to court just means asking a judge to say that you owe the debt. You will get court papers and have a chance to answer. If you answer in the time period allowed, the judge will set a trial so both sides can have their say. The court process is often not simple, so it is very important that you contact a lawyer right away if you get court papers.
Generally, a creditor can file papers with the court to try to seize (take) your wages or property only after:
1. The creditor has filed a lawsuit against you;
2. You have had a chance to answer;
3. A trial is held if you answered and there is a dispute;
4. A judgment is entered; and
5. The creditor has waited at least another 30 days.
Even after this, you may be able to protect your wages and property if you do not have very much. Again, it is important to speak with a lawyer to find out your rights.
- What if my bill is turned over to a debt collector?
You have more legal rights if your bill is turned over to a third-party debt collector. Unlike creditors themselves, collection agencies and lawyer debt collectors are subject to a federal law called the Fair Debt Collection Practices Act (FDCPA). The IRS is not covered by this law. Harassment or deception by collection agencies or lawyers is illegal under this law. These are some things that would be illegal under this law:
- Calling you at unreasonable hours,
- Using obscene language,
- Calling over and over to annoy you,
- Lying to you about what they plan to do to you. For example, they cannot threaten to sue you unless they plan on doing it. They can't threaten to garnish your wages unless they have sued you and have a judgment to do it.
- How can I make debt collectors stop harassing me?
Write a letter and ask the debt collectors to stop communicating with you about the debt. (You may find a sample letter on this website in the "Self-Help" channel). Keep a copy of the letter you send. Debt collectors can still sue you, but they can't keep calling you after they get the letter.
If the debt collector violates your rights, you have the right to sue them for any actual damages, as well as additional damages up to $1,000, plus attorneys fees and court costs. You should contact a lawyer if you think you may have the right to sue a debt collector.
- What else can I do?
You may not need to do anything. If you don't have much property and little or no wages, you may be judgment-proof. Social Security, SSI, welfare, and food stamps cannot be taken, except under very limited circumstances.
Louisiana law (Revised Statutes 13:3881) protects your property which has not been used as collateral, by making it illegal to seize:
1. Property needed for a trade, calling, or profession by wich you earn your livelihood;
2. Clothing; bedding; linen; chinaware; non-sterling silverware; glassware; living room, bedroom and dining room furniture; cooking stove; heating and cooling equipment; one non-commercial sewing machine; equipment for required therapy; kitchen utensils; pressing irons; washers; dryers; refrigerators; deep freezers, electric or otherwise; used by you or a member of your family;
3. Family portraits;
4. Arms and military items;
5. Musical instruments played by you or by a member of your family;
6. Any wedding or engagement rings worn by either spouse, provided the value of the ring is not over $5,000; and
7. A $25,000 homestead exemption.
Contact a lawyer to find out if your possessions can be protected. You can also call your creditors to see if they will agree to a reasonable repayment plan. Be realistic; it will not help you to agree to pay amounts you can't afford.
You may want to call a non-profit consumer credit counseling service to see if they can help you work out a repayment plan. In making any plan, keep in mind your priorities and pay off your most important debts first.
As a last resort, you may want to consider filing in bankruptcy. Filing in bankruptcy will instantly stop all debt collection efforts of any kind, at least temporarily. If you are thinking about bankruptcy, talk with a lawyer to find out what your rights and responsibilities are.