Know Your Rights When It Comes to Creditor Harassment

The Fair Debt Collection Practices Act (FDCPA) provides specific legal guidelines under which creditors must conduct their business dealings with debtors.  When these guidelines are not met, there is a clause in the FDCPA that provides debtors with the right to sue their creditors for unlawfully threatening, berating, harassing, or intimidating in order to collect a debt.

The FDCPA also sets a standard that collection agencies must operate by if they want to avoid potential lawsuits:

• They cannot contact your family, friends, neighbors, or employer.
• They are not permitted to call before 8 A.M. or after 9 P.M. in your time zone.
• They may not use racial slurs, obscenities, insults, or unreasonable threats are out of the question.
• They may not pretend to be an attorney or court employee, or create any communication that would look like it came from one if they do not hold the legal credentials.
• They cannot have you arrested for your unpaid debt.

If you find stress from your debt coupled with the stress of communication from collectors, it is your right to have them stop contacting you regarding the debt, as long as the collector is a third party and not the original lender of the loan.  There is a stipulation in the Fair Debt Collection Practices Act that if you notify a collection agency in writing that you no longer want to discuss this debt with them, the agency can no longer communicate with you except to either a.) advise you that collection efforts have been stopped or will be stopped or b) to inform you that they intend to take legal action against you to resolve the debt. 

The letter you send stating this request should include the following:

• Your name, address, and account number on the statement you received from them 
• The date
• A statement that you’re exercising your rights under the Fair Debt Collection Practices Act
• A specifically worded statement explaining that you no longer wish to be contacted concerning this debt  

What Bankruptcy Can and Cannot Do

An increasing number of Americans are filing for bankruptcy due to unforeseen circumstances, medical expenses, divorce, or simply poor financial planning.  Because of this, you will hear a lot about bankruptcy from local media sources suggesting that bankruptcy might be a good option for you, as well, if you are struggling to meet your financial responsibilities and to pay your debt. However, there are also several common misconceptions about bankruptcy, and these range from how easy it is to file for bankruptcy to what it will actually do for you. 

First, bankruptcy is one solution for handling your overburden of debt; it is not a guaranteed pass to immediate credit. It is a myth that filing for bankruptcy will always give a consumer a new start with credit right away.  In fact, depending on what type of bankruptcy you file and the circumstances in which you filed it, it could still be 5-7 years before you are able to buy or rent a home without a significant down payment to compensate for your credit history.

Second, bankruptcy is not always a clean slate.  Sometimes, not all debts will be discharged (such as student loans, taxes, etc.) and under Chapter 13, you will still need to pay back some of your debts.  This amount will be determined by the court, which will set you up on a court-ordered payment plan that has been renegotiated to better terms. 

Finally, bankruptcy is a long and tedious process; it is not a quick and easy solution to your financial troubles.  There will be many documents and statements to collect, many forms to fill out, and you will need to spend the money on a lawyer who has expertise in bankruptcy law for your particular state.  Many courts also require that you attend financial planning and budgeting classes as part of your commitment to work toward a more responsible financial future.  

Will My Bankruptcy Hurt My Co-Signer?

The decision to file for bankruptcy isn’t one that most people take lightly, especially if that decision will affect others.  An example of how your bankruptcy could affect others is if there is a co-signer on one or more of your debts.  In cases for which there is a co-signer, the obligation to repay the debt might still fall on your co-signer, even if your bankruptcy is granted.  Whether it does or not is usually dependent on whether you file Chapter 7 or Chapter 13.

In a Chapter 7 bankruptcy, your co-signer will likely be left with the responsibility of paying the debt, and it will likely not be discharged for him/her, even if it is discharged for you.  This means that you will no longer have the responsibility of paying it, but your co-signer will.  This type of situation can cause conflict among people if not carefully discussed, particularly if the co-signer is a close friend or family member with whom you have a lot of contact. 

In a Chapter 13 bankruptcy, your debts will not be completely discharged, but will rather be rearranged and placed on a court-mandated repayment plan.  If you make these payments on time, your co-signer will be under what is called a "co-debtor stay” and will not be held responsible for any of the debt while you pay it off.  They will also not be responsible for any discrepancy in the amount of debt owed before the bankruptcy and the final amount the court orders you to pay for that debt. 

Before you file for bankruptcy, it is important to remember that whatever debt you have in which a co-signer has signed with you, your late payments or missed payments will affect their credit negatively.  Co-signers often have a better credit rating than the primary signer, making their own score more vulnerable to taking hits when they agree to co-sign.  This is why you should be extremely cautious in asking someone to co-sign with you; if you are unable to pay the debt, it might result to a conflict between the two of you.