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The Debt Adviser

Dealing with debt collectors

Dear Debt Adviser:
Hi there. I have some debt collectors telling me I have to pay the whole balance in full. I can't do that and I tried sending a monthly payment that I could afford and they sent it back saying my payment was insufficient.

Now that is pretty bad when I send them a payment and they send it back because it was not good enough for them. Can they legally do this to me?
Tina

Dear Tina:
Welcome to the combative world of debt collectors! Unfortunately, once the original agreement with your creditor was not met and the account balance was turned over for collections, all bets were off!

Some collectors demand full payment just to apply pressure for larger monthly payments, and while many agencies will agree to monthly payments, it is not legally required that they do so. This is especially true of delinquent home mortgages that are more than 90 days past due.

I would recommend that you communicate in writing with the original creditor to whom you owe the money. Offer to make regular payments at an amount you can manage and suggest that you be allowed to pay them, not the collector. They may allow it or not, but you can try.

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If they keep your account with the collection agency, write to the collector explaining how much you believe you can afford to pay each month and detail the payment schedule. Send all correspondence certified mail with return receipt and keep copies. The payment you sent might have been refused because you did not establish a payment plan in advance.

If you show that you are committed to paying off the debt, it is likely that you can come to some payment arrangement. If the collector is still asking for more than you can afford, I'd suggest that you contact a reputable credit counseling agency or attorney in your area to see if they can act as an intermediary on your behalf and to get advice on your options. Beware of the 20-minute quick fix places. Expect to spend at least an hour going through options and alternatives.

With that said, a collection agency can demand payment in full and, if you refuse to pay, it can seek a civil judgment in court to collect. You will be notified about the court hearing. Go to it! Show the judge your correspondence, your repayment plan and anything else you can come up with that shows you are willing to repay, but need a realistic repayment plan. Often the judge will side with you and the collector will have to abide by the terms of the court.

If you don't go to court, and an uncontested judgment is granted by the court, the collector becomes a judgment creditor and will attempt to collect again. If that fails, then the collector will get an execution of the judgment and may be empowered by the court to collect the debt in one of the following ways (state laws vary so check with your state attorney general for particulars on civil judgments in your state):

  • Personal property or bank account levy. The collector can have your bank account frozen and the funds removed to satisfy the judgment or seize personal belongings that are not exempt and sell them at auction.
  • Wage garnishment. If you work and meet income requirements, your wages can be garnished for up to 25 percent of disposable income per paycheck until the debt is paid.
  • Home lien. If you are a homeowner, the creditor can place a lien on your home; ownership cannot be transferred until it is paid.

Just in case you were thinking of pulling up stakes and heading for the hills after reading this, know also that the collector can file a petition with the court seeking information about your assets. The court issues an order that you or any person who has information about your assets must answer questions about those assets at a place and time determined by the court. In other words, you can run but you can not hide.

Keep in mind, the above is a worst-case scenario and many collectors will not go through the court expense to seek a civil judgment. However, the option is available to them and you should be aware of the possibilities.

You should also be aware of your rights in the debt collection process. You may request in writing that the collection agency not contact you at work. You may even request they not contact you at all about the debt. The collector is then not allowed to contact you unless it is to let you know of a specific action that is being taken such as filing a civil judgment. If you ask not to be contacted, plan on legal action to follow.

For additional information regarding your rights under the Fair Debt Collections Practices Act, go to the Federal Trade Commission Web site.

Good luck!

The Debt Adviser, Steve Bucci, is the president of Consumer Credit Counseling Service of Southern New England. Visit CCCS for additional debt advice or click here to ask a debt question.

-- Posted: May 2, 2003

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See Also
Why you should check your credit report
Borrowing with lousy credit
Financial advice glossary
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