You have unpaid debt, whether it’s credit card debt and/or a loan debt, you stopped paying it (or never started) and now the debt is coming back to haunt you. You have received a letter threatening you with legal action, or you have received a debt collection letter. It may seem like there is no hope, but hang in there. Debt collection is a process, and you have rights and laws on your side. If debt collectors are on your back, and you're thinking of hiring a debt lawyer, read this first. This article applies to residents of New York. If you are in another state, there may be different laws and rights for the collection of debt.
Are you ready?
1. Know the legal debt collection process.
The debt collection process in New York is mostly governed by the federal Fair Debt Collection Practices Act (FDCPA). This Act controls what debt collectors can do and say to consumers during the course of attempting to collect a debt. For example, a debt collector cannot communicate with a person who may owe the debt “…at any unusual time or place or a time or place known or which should be known to be inconvenient to the consumer…” FDCPA §805(a)(1).
This is just part of the Act. Review the full Act here: FDCPA . There may be grounds or reasons that you can find on your own before hiring a debt lawyer, to stop the debt collection efforts that are following you around.
2. Find out if there is any legal action against you.
Next you want to make sure the debt collector hasn’t filed a lawsuit against you already. This is typically a last resort for the debt collector, however sometimes a person who has debt doesn't realize they are being sued in court for it. Often victims of debt receive letters of collection from a debt collection attorney, and simply throw them away without even opening them. One of those letters could have been notification of a lawsuit.
In New York, you can see if there is any legal action taken against you for debt collection. Do this by going to Ecourts and looking up your name under “party search.” Keep in mind sometimes this data base is incomplete or inaccurate, but most of the time it works just fine. If you’re not into computers or the internet call a local debt lawyer and ask them to do it.
3. Get a copy of your credit report.
Everyone in this fine county of the United States of America is entitled to a free credit report once a year. If you haven't yet cashed in on your free, annual report to verify any debts, you should get on that right away.
If there is a debt you owe in collections, it will likely show up on your credit report along with other helpful facts such as contact information for the debt collection attorney, the collection agency, or the credit card to which you owe the debt.
You can find a free report here: www.annualcreditreport.com or by calling (877) 322 8228. Another option is to use Credit Karma. This is an app that I use and it’s great. It constantly monitors your credit report and lets you know if derogatory information or debts are showing up on your report. They will even help you figure out how to get out of debt. The only drawback is they will try and sell you a credit card once in a while.
Even if you know (think) you don't have any debt it’s still a good idea to take a look at your credit report once every so often to ensure that collections and debts don't appear on your report without any notice.
4. Know what income is EXEMPT from debt collectors, and understand the Exempt Income Protection Act (EIPA).
Debt collectors and debt collection attorneys cannot enforce their debt collection actions upon certain types of income. For example, if you owe a debt and you receive money from public funds, as a matter of policy, these funds cannot be seized or garnished for a debt owed. Funds that are considered public funds and are exempt from debt collectors include: social security, supplemental security income, veteran’s benefits, survivor’s benefits, public assistance, unemployment insurance, worker’s compensation benefits, payments from public and private pensions, spousal maintenance, child support, and any other form of public assistance. Further, if you owe a debt and earn your income from a job, any earned income less than 30 times minimum wage per week is exempt from debt collection.
EIPA: Did the debt collection lawyer or agency freeze your bank account? I could write an entire other article oaths topic but for the sake of keeping this interesting, let me just give you the important parts of this (contact me here if you need to talk to a debt lawyer right away):
If the debt collection attorney or collection agency freezes your account, any electronic deposits into the account within 45 days of the freeze under $2,750.00 are exempt.
If the debt collection attorney or collection agency freezes your account and you don't have electronically deposited funds in it, the first $2,160.00 is exempt (this amount may be change as it is based on minimum wage).
Any amounts over the above stated amounts are subject to bank fees, so talk to the bank immediately if your account is frozen.
If your account is frozen you should receive a notice from the bank and an exemption claim form. If you didn't get this, go to the bank and get it right away. You have 20 days to fill it out and mail it back. This will expedite the unfreezing process of your account and allow you to handle the debt or debt collector’s actions without losing access to your money. If necessary, hire a debt lawyer to take this action, as it is a crucial step in unfreezing your bank account.
Finally, if you receive monthly public benefits, you are entitled to access twice the amount you receive per month without the debt collection attorney or collection agency having the right to freeze it. This falls under the 2011 Treasury Rule. You can learn more about debt collection and this rule here: May 2011 Treasury Rule.
5. Know Your Defenses Against Debt Collectors
A good defense to debt collection can wipe away the debt altogether. If you've reached the point where the debt collector is attempting to sue you for the debt, take a look at this list of “affirmative defenses” below. If you feel that one (or many) of the below defenses may be useful against your debt collector, research them further or hire a debt lawyer to help.
No personal jurisdiction - you weren't served properly
Statute of limitations - too much time has passed
Identity theft or mistaken identity
You have no idea who the debt collector is
Debt collector is not licensed by the Department of Consumer Affairs as a Debt Collector
Debt collector doesn't put their license number in the complaint
You can’t afford to pay the debt collector
Your only source of income is exempt
You don't owe the debt
Debt collector performed an unfair business practice
6. Hit ‘em With a Counterclaim
In some cases, the debt collector should be sued too. For example, say the debt collector though his debt collection attorney sues you and you respond by agreeing to make monthly payments. The debt collector then tells you not worry about the court papers you've received. A few moths go by and the debt collector files a default judgement against you. Hello “deceptive business practice” under N.Y. General Business Law §349! Bang! Keep in mind that if you want to sue the debt collector for harassment or another action outside the scope of the debt collection, that is a different suit and not to be included as a counterclaim for the debt collection. Consult with a debt lawyer about this.
7. Negotiate a Settlement With the Debt Collector
This is always a good idea. If you have some money and want the debt to go away, negotiating a debt settlement can be advantageous. This is a great option because: (1) the settlement amount is usually less than the amount owed on the debt; (2) it saves time for you and stops the debt collection actions; (3) you can likely pay the debt collector over time; and (4) you can avoid having a judgment against you, poor credit, garnished wages, or even a frozen bank account. Hiring a debt lawyer in this situation is beneficial because it will dissuade a debt collector from taking advantage of you and your lack of experience in dealing with debt if he/she knows you are protected. Additionally, once you hire a debt lawyer, the debt collector will no longer contact you and your attorney will deal with it.
How to Begin:
Contact the debt collection agency or attorney and establish what stage of the collection process you are in. If you think you should hire a debt lawyer, talk to one that will help you decide if you can handle the debt issue yourself or if a debt lawyer’s assistance is necessary. Beau Taylor Law will do just that. Contact us here for a free consultation to determine if you need our help, or simply to receive guidance on tackling the situation on your own.
On that note and in the spirit of America and the upcoming Fourth of July weekend, get out there and run up some credit cards! It’s the American way!