Unfortunately, debt is a part of life for many people. Whether you owe money on a credit card, student loan, car loan, or mortgage, at some point, you will likely have to deal with the stress and hassle of trying to pay off your debt. This article will provide you with information about the law surrounding debt collection and what you can do to protect yourself.
Knowing your rights as a debtor
Debt collection laws vary slightly depending on where you live, so it is essential to know your rights as a debtor who owes money. Generally speaking, creditors cannot harass you or threaten you, and they also may not contact you at unreasonable times. For example, if you try to avoid calls from a creditor by only answering your phone during work hours, the creditor is not allowed to call you at work repeatedly.
Some laws protect you from being sued by a creditor. If a creditor does sue you, they must prove that you owe the debt and give you notice of the lawsuit. If you do receive notice of a lawsuit and you do not know if you owe them money, it is crucial to speak with an attorney as soon as possible.
The statute of limitations on debt
Another essential thing to know about debt is the statute of limitations. The statute of limitations is the amount of time a creditor has to sue you for non-payment. It varies depending on the type of debt and where you live, but it is typically between 3 and 6 years.
If the statute of limitations has expired, you will no longer be legally obligated to pay the debt. However, due to the negative impact that a collection account can have on your credit, it is usually best to settle the debt through other means.
Knowing your options when dealing with debt collectors
If a creditor takes legal action against you for non-payment of debt, several options may be available to help you deal with the situation.
1. Bankruptcy
One option is to file for bankruptcy. Filing for bankruptcy will stop the creditor from taking any further legal action against you, and it will also discharge most of your debts.
However, filing for bankruptcy should only be considered a last resort, as it will negatively impact your credit score and make it difficult to obtain new lines of credit in the future. Work with an expert bankruptcy attorney to see if this is the right option for you.
2. Debt Settlement
Another option is to try to settle your debt with the creditor. Debt settlement will involve negotiating with them to reduce the amount you owe and pay it off over time. While this option is less drastic than bankruptcy, it also hurts your credit score. A “settled” status will be placed on your credit report, remaining there for seven years. It is important to note that not all creditors will be willing to settle for less than what you owe.
3. Negotiating a payment plan with the creditor
Of course, you can also negotiate with your creditor to set up a payment plan. Negotiating a payment plan may help you avoid further legal action and protect your credit score, though the creditor may still report late payments to the credit bureaus. You will likely have to pay interest on the outstanding balance, so make sure you can afford the payments before agreeing to anything.
4. Debt consolidation
If you have problems with multiple creditors, you may consider consolidation. Debt consolidation involves taking out a new loan to pay off your debts. This option can help you get a more manageable monthly payment, but it may also increase the total amount of money you owe in the long run. As with any loan, shop around for the best terms and rates before consolidating your debt.
Finding the help you need
If you are struggling to pay off your debts, the best thing you can do is seek professional help to get your finances back on track. Speak with a financial planner or credit counselor to get started. They can help you create a budget, negotiate with creditors, and find other ways to get your debt under control. Some resources may even be available to assist you in managing your debt.
This article is intended to provide general information about the law and not to give legal advice for specific situations. If you are dealing with debt and need help understanding your rights, speak to a qualified attorney who can help guide you through the process. Whether you are dealing with a lawsuit or simply struggling to make payments on time, help is available to get you back on the right track.
