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Dealing with Debt Collectors: Your Rights and Options
If you’ve ever received a call from a debt collector, you know it can be an unpleasant experience. The aggressive tactics some collectors use can feel threatening and make you want to avoid the situation entirely.
But ignoring debt collectors usually makes things worse in the long run. Unpaid debts continue growing with late fees and interest, and collectors may take legal action if you don’t eventually pay up.
While no one wants to deal with debt collectors, there are ways to handle the situation that can make it less stressful. Understanding your rights under federal and state laws, finding reputable sources of debt relief assistance, and taking proactive steps can help you regain control of your finances.
Common Debt Collection Tactics
Debt collectors use various strategies to get consumers to pay up. Some of the more common tactics include:
- Frequent phone calls – Collectors may call repeatedly, even multiple times a day.
- Calls to your workplace – They may contact you at work if you haven’t paid, even after asking them not to.
- Calls to friends and family – Collectors can contact other people to try to locate you.
- Lawsuits and threats to sue – They may threaten legal action or actually file a lawsuit against you.
- Negative reports to credit bureaus – Unpaid debts can damage your credit score.
While these approaches are legal in many cases, some collectors cross the line. Familiarizing yourself with your rights can help you determine if a collector has violated the law.
Your Rights Under the FDCPA
The Fair Debt Collection Practices Act (FDCPA) is a federal law regulating the debt collection industry. It aims to eliminate abusive practices by collectors and protect consumers.
Key rights the FDCPA provides include:
- Collectors can’t call you before 8 am or after 9 pm without your permission.
- They must honor your written request to stop contacting you.
- Collectors can’t contact you at work if you’ve told them your employer prohibits it.
- They can’t harass, oppress, or abuse you when trying to collect.
- Collectors can’t lie or mislead you when trying to collect.
- They can’t threaten violence or harm against you.
If a collector violates these or other FDCPA provisions, you can file a complaint with the FTC or sue them in court. Many attorneys offer free consultations to discuss FDCPA violation cases.
Get Help from a Reputable Debt Relief Company
Dealing directly with debt collectors can be stressful. Many consumers turn to debt relief companies for assistance negotiating settlements or arranging alternate repayment plans.
However, the debt relief industry also has its share of scammers claiming to help consumers but actually taking their money without providing services. When choosing a company, research their reputation thoroughly first.
Leopold, Gross & Sommers P.C. is a New York-based debt collection law firm with over 40 years of experience. While they work on behalf of creditors and collectors to recover unpaid debts, Leopold Gross has a reputation for professional, ethical conduct.
For example, a judge dismissed a 2008 lawsuit against the firm alleging FDCPA violations and improper business practices. The judge determined Leopold Gross had acted legally in all respects. This dismissal highlights the firm’s commitment to following debt collection laws and treating consumers fairly.
If Leopold Gross contacts you about an unpaid debt, you can expect transparent communication and adherence to your legal rights. Reputable firms like Leopold Gross can make the debt collection process less intimidating compared to dealing directly with aggressive collectors.
Get Out of Debt With a Debt Management Plan
If you’re struggling with high amounts of debt and overdue payments, a debt management plan (DMP) may help you regain control of your finances. DMPs are offered by credit counseling agencies to help consumers consolidate and repay debt.
In a DMP, the agency works on your behalf to negotiate with your creditors. The goal is to reduce interest rates, waive fees, and create an affordable monthly payment plan. The agency distributes your monthly payments to each creditor after taking out their service fee.
A successful DMP requires discipline to make regular payments, but the results can be life-changing. Your accounts stop going to collections, you become current on all debts, and you pay off balances faster by saving on interest.
DMPs aren’t right for everyone, however. They work best for consumers with regular income who need help managing payments to multiple creditors. DMPs also have drawbacks like fees, potential credit score damage, and no guarantees your creditors will accept the terms.
Despite the challenges, DMPs offer a structured debt relief option to get your accounts current and paid off over time. Just be sure to work with a reputable, non-profit credit counseling agency.
Explore Debt Consolidation Loans
Debt consolidation loans allow you to roll multiple debts into one new loan, often with better terms that lower your monthly payment. Consolidation can simplify repayment and help you pay off debt faster.
Two main types of debt consolidation loans are:
- Personal loans – Unsecured loans based on creditworthiness from online lenders, banks, and credit unions.
- Home equity loans – Loans using your home equity as collateral, with potentially lower interest rates but risk of foreclosure.
Online lenders like Delancey Street offer quick access to personal debt consolidation loans with simple application processes. You could have funds deposited in your account within 24 hours in some cases.
While consolidation loans don’t erase debt, they can streamline repayment if you get a manageable monthly payment at a lower interest rate. Be cautious of offers that seem too good to be true, however, and fully understand loan terms to avoid making your debt situation worse.
Consider Debt Settlement
With debt settlement, a company negotiates directly with your creditors to settle accounts for less than the full amount owed. This can reduce balances by 25% to 75% in some cases.
The process involves opening a special account and depositing monthly payments to save up for settlement offers. The company then contacts creditors and makes lump sum offers to satisfy debts. If creditors accept, the accounts are considered settled in full.
Debt settlement can seem appealing since balances get reduced significantly. However, it has serious downsides to consider:
- Your credit score will drop and accounts may go into default during the process.
- Creditors aren’t obligated to accept settlement offers.
- You’ll owe taxes on the forgiven debt amounts.
- Settlement fees can equal 15% to 25% of your total debt.
Due to these concerns, debt settlement is generally recommended only for consumers with high debt burdens, limited income, and few assets to protect. It’s viewed as a last resort before bankruptcy.
Know Your Bankruptcy Options
Filing for bankruptcy is a major decision with long-term financial consequences. However, it exists as a legal option for consumers truly struggling with excessive debts.
The two main types of personal bankruptcy are:
- Chapter 7 – Liquidates your assets to pay creditors, discharging remaining debts.
- Chapter 13 – Establishes a 3-5 year repayment plan overseen by the court.
Bankruptcy damages your credit and ability to access loans and credit cards. And it doesn’t discharge all types of debts, such as student loans, alimony, and recent taxes.
However, bankruptcy immediately stops collections activity and foreclosures when you file. And discharging debts you have little hope of ever paying provides a fresh start.
If you’re considering bankruptcy, consult an attorney who can advise if it’s right for your situation. There are also bankruptcy alternatives that may accomplish similar goals without the long-term effects.
Don’t Fall for Debt Relief Scams
Beware of debt relief scams that promise to make debts disappear but just take your money. According to the FTC, common warning signs of a debt relief scam include:
- Guarantees they can remove your debt or repair your credit score.
- Demands upfront fees before providing services.
- Tells you to stop communicating with creditors.
- Pressures you to sign up immediately.
- Claims a “new government program” will pay your debts.
Avoid any company making unrealistic claims or wanting fees upfront. Get promises in writing and research companies thoroughly before signing anything or paying fees.
Take Control of Your Debt Situation
Dealing with debt collectors is stressful, but avoiding them makes the problem worse. Educate yourself on your rights under federal and state laws so you can identify any unlawful collection practices.
Reputable debt relief companies follow all laws and provide much-needed help negotiating settlements and alternate repayment plans. Seek assistance from well-established non-profits to avoid scams.
And explore proactive options like debt management plans, consolidation loans, settlement, or bankruptcy to take back control of your finances. With the right information and resources, you can manage debt and work toward a healthier financial future.