Debt Collection: Know Your Rights

If you are behind in paying your bills, someone will likely contact you to collect the money you owe. You may owe money on a car loan, credit card bills, medical bills, utility bills, home loans, or other types of loans.

This brochure explains your debt collection rights and

• What to know if a debt collector contacts you?

• Which bills should I pay first?

• What to do if you don't think the debt is legitimate?

They have contacted me about debt. What do I have to know?

You may receive direct communication from a creditor or collection agency.

• A creditor is a business that you owe money to, such as a credit card company.

• A collection agency is a separate company that collects debts.

Both are also called debt collectors.

Your rights may differ depending on whether you owe money to a creditor or to a collection agency. Debt collectors will try to collect money even if you don't have money or think you don't owe anything.

What bills should I pay first?

If you can't pay all your bills on time, you have to decide which bills to pay first. Think about what would happen if you don't pay off certain debts and ask yourself which bills will affect your family the most if you stop paying them.

You may want to pay in this order:

1. Accounts that affect the health of your family: Food, medicine, health insurance.

2. Bills that affect your family's home: Rent, mortgage, condo fees, property taxes, and utilities like heat and electricity.

3. Your family's other bills: Your car payments if the car is essential (for example, if you need a car to go to work); child support, income taxes, and government-guaranteed student loans.

If you have money left after paying these bills, you can decide how much money you can pay each of the other collectors.

What can I do if I believe that this debt is not legitimate?

You shouldn't be charged for something you didn't buy or have already paid for, but mistakes sometimes happen.

What if a creditor tells me that I owe them money?

You have the right to disagree with the charge (or to dispute it). Look on the back of your monthly account statement for instructions on how to file a dispute. It is best to write a letter and include a copy of your monthly account summary (see Letter A). Check the items you are disputing.

What if a collection agency tells me I owe money?

You should immediately write a letter to the collection agency saying that you do not owe what they say. Until they send you a proof of debt, they should stop contacting you. Your letter should look like Letter A below.

What can I do if I have debt but cannot pay it?

Debt collectors will try to pressure you to pay more than you can.

If you cannot pay the full amount, send the amount you can afford each month, even if you are told it is not enough. If you pay something every month, you may be able to avoid being sued for the full amount of the debt.

If you cannot pay anything and want them to stop calling you, you can write a similar letter to Charter B.

Include your account number and a copy of the message. Once they have received your letter, a creditor may continue to contact you, but they will often stop. A collection agency may only contact you to tell you what action they are going to take. For example, that you will be sued in court or that you will no longer be contacted.

What can debt collectors do while they are trying to collect?

Debt collectors can call you to ask for money and send you letters demanding payment, but there are limits on what they can do. You don't need to listen to their demands. You can hang up the phone or send them a letter telling them to stop calling you (see Letter B above).

Things creditors CAN do:

• Talk about your debt with your spouse and your lawyer (if you told them who your lawyer was).

• Call your employer to confirm that you work there or to get their contact information.

• Sue him in court.

What happens if the debt collector sues me?

The debt collector will need to present you with legal documents. You must respond to the lawsuit because if you don't, the debt collector wins the lawsuit.

What can the debt collector do if he wins in court?

If the debt collector sues you and wins the lawsuit, the court will decide that you owe them money and will order you to pay a certain amount of money every week. If you do not pay the amount the court ordered each week, the debt collector can ask for a court order to take your property, or money from your pay or bank account. Some of your money and your payment are protected.