What to Do When Debt Collectors Come Calling
June 18, 2024
Authored by: Jeff Stephens
This article is made possible by the generous support from Taylor Tobey and Sarah Brodsky at 9Sail.
Jeff Stephens
What to Do When Debt Collectors Come Calling
Poverty is transitory, and defines no one. I regularly say this to our clients and our volunteers. However, it takes work to ensure that it holds true in practice. That work starts with you taking the first step by assessing your circumstances and moving toward a brighter and self-determined future. So, congratulations: you’ve started that journey simply by choosing to read this post and deciding to make a choice on the kind of financial future you want.
Understand Your Rights
When it comes to debt collection, know legal protections exist, including the legal process, the Fair Debt Collection Protections Act, the Consumer Financial Protection Bureau, and federal and state law that require creditors to comply with their legal obligations when seeking to collect any debt. However, the most important part of this process is yours: you must assert your rights when debt collectors infringe upon them, respond to any notices from debt collectors or the courts, not let a case default, and remain aware of your options.
Open the blinds to make sure you are engaged in determining your financial future. Creditors will often take steps in collection actions that violate your rights, including levying exempt bank funds, improperly garnishing or over-garnishing wages, or obtaining money judgments without providing substantiating proof of the debt. In some circumstances, a financial fresh start through bankruptcy may be appropriate.
Meet with an Attorney
At Volunteer Lawyers for Justice (VLJ), we know the importance of having access to legal help, and we also know how expensive attorneys can be, further preventing people from obtaining much-needed legal assistance. VLJ is fighting to create a more equitable system that does not leave those unable to pay for an attorney without legal assistance. If you are able to connect with free legal services, like VLJ, you will have the opportunity to take advantage of legal professionals who can help you plan and strategize. I often tell clients that they have done the hard work already of persisting and starting the process of moving toward their goals, even if that goal is just to get an understanding of their debt situation and their options. Seeking legal help is a great indication that someone is moving in the right direction.
Three Options to Consider When Debt Collectors Come Calling
Option 1: Write a Letter to the Collection Agency
Calls from debt collectors that repeatedly fill your voicemail take a heavy toll and may seem never-ending. BUT, you have a right to stop debt collectors from contacting you. Stopping their harassing calls and mailings can provide just enough breathing room for you to start the process of taking your financial future into your own hands.
Any person can make a written request to a debt collector to stop their harassing contact. Your letter should cite the Fair Debt Collection Practices Act, 15 U.S.C. § 1692c(c). In your letter, you should also specify that you’re not acknowledging that you owe the money; doing so will preserve your ability to dispute the debt at a later time. It is also advisable to send the letter with tracking, either certified letter return receipt or other delivery tracing that can show the letter was delivered and received by the debt collection company.
It is crucial for you to use this newfound breathing space as an opportunity to take control of your situation, rather than “close the blinds” again after the debt collectors stop calling. If you agree the debt is yours, you can then take time to consider whether you have the financial ability to offer a payment plan. Many debt collectors will consider entering into a settlement for less money and with affordable installment payments, but you have to ask. Reaching an agreement with a debt collector—if you agree that you owe the money—may be an opportunity to negotiate the amount down and allow you to take control before a creditor files a lawsuit and before they take garnish wages or levy bank accounts. If you don’t believe the debt is yours, you have the space to consider your options such as pursuing legal advice.
Option 2: Respond to the Lawsuit
If a creditor files a lawsuit to collect against you, the critical part of this process is yours: timely respond to any notices and not let your case default. Most of our clients have lawsuits seeking to collect between $5,000 - $20,000, cases that are filed in the Special Civil (DC) docket in New Jersey. In order to avoid default, you must file an answer to the complaint. The complaint will state the due date for filing your answer. NJ Courts provide a blank form answer that you can access for free here. You can include any defenses to the claim, and even if you think the debt amount is right, you can demand the creditor prove you owe them the debt (many debts are transferred/sold to different parties) and you can demand that debt collector provide substantiating proof the debt amount is accurate. Filing the answer will ensure you are engaged in the process, will avoid the creditor obtaining a judgment against you without having to prove their claim, and can also provide a potential opportunity to settle the case if you are able to propose a possible payment plan.
Even if a debt collector obtains a judgment against you and moves forward with collection actions by obtaining a wage garnishment or a bank levy, you can object to these collection actions if the creditor has levied exempt bank funds or improperly garnished or over-garnished your wages. The court provides the following form objections to bank levies and wage garnishments. It is very common for creditors to levy bank accounts, resulting in account balances dropping below $1,000. In New Jersey, creditors must leave at least $1,000 in your account, and if they don’t, you should file an objection with the court demanding the funds be returned to your account.
Option 3: Chapter 7 Bankruptcy
In some circumstances, a financial fresh start through bankruptcy may be advisable for some. Remember, poverty is transitory and defines no one, and the bankruptcy process may be an option. Bankruptcy is a part of the judicial system and debt relief process in the United States, and determining whether it is the right option for you depends on your circumstances and timing (timing is a major consideration!). If you have filed for bankruptcy before, you may not yet be eligible to file again. Also, if you are expecting to accrue further debt, it may be advisable to wait to file so that your bankruptcy will include all of your debt.
When you are considering bankruptcy, it is important to be aware that not all debts are dischargeable, even if you do file for bankruptcy, such as child support and alimony, student loans (in most cases), and income taxes that are less than three (3) years past due, as well as other limitations. It is also important to note that the bankruptcy trustee (a trustee is appointed to collect payments, monitor activity in the case, and to report to the court on how well a debtor is meeting their obligations) may be able to use available nonexempt assets to pay creditors (if you have significant assets above a certain threshold amount). So, it is important if you do have significant assets to consider whether you have other options. However, if your circumstances are appropriate, you may be a good candidate for the financial fresh start provided through bankruptcy.
Apply for Help from VLJ’s Debt Relief Legal Program
You’re reading this article, so give yourself a pat on the back! You’re taking an important first step looking at your situation, available options, and possible next steps. Knowing your rights, responsibilities, and proceeding accordingly will move you toward a brighter and self-determined future. If you are interested in applying for legal services from Volunteer Lawyers Justice, please click or tap here.
