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Education for Justice |
FACT SHEET C-3 |
Fall
2010 |
YOUR DEBT COLLECTION RIGHTS
Federal and state laws protect you from abuse or harassment
by debt collectors. A person or collection agency collecting a debt for a business must follow the
law. If a lawyer regularly collects
debts, they must also follow these laws.
For legal advice about your debts, call a lawyer or your
legal aid office. For help with your
budget or making a payment plan, call a non-profit debt counseling service,
like Consumer Credit Counseling at 1(800) 388-2227. They will connect you with a local
office. They charge a small fee.
Watch Out for
companies that charge money to “repair” your credit. Many of these are rip-offs! Call the numbers above for good service. They can help you set up payment plans with
your creditors and may get them to take lower payments as part of the plan.
HOW DOES DEBT COLLECTION WORK?
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Written Notice
Within 5 days of its first call or
letter to you, the debt collector must send you a written notice. The notice must state the amount of your
debt, the name of the company that you owe, and that they assume you owe the
debt unless you disagree (dispute) within 30 days.
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Disputing A Debt
If you disagree with their notice,
send a letter to the debt collector within 30 days. Explain why you think the debt is wrong. Do they have the wrong person? Is the amount wrong? Give them enough information to investigate
the dispute. Keep a copy of the
letter. If you send this letter, the
debt collector must stop trying to collect the debt until they send you proof that you owe the debt.
·
Payment Plans
You may be able to set up a
payment plan to pay off the debt. Many
creditors will take a small payment, as long as it comes regularly. Some creditors will freeze or reduce the
interest charges if you start making payments.
If you make any kind of deal, try
to get it in writing. If they won’t sign
an agreement, write down in a letter the terms of the agreement and send it to
the agency or creditor. Keep a copy.
If you want a payment plan, you need to ask for it. Creditors and debt collectors try to get
payment in full. You have to speak up to
get a plan. Get help from a good agency
by calling the numbers listed above.
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Paying On Multiple Debts
Sometimes a debt collector is
collecting on more than one debt that you owe.
When you make a payment, you can choose which debt to pay it on. However, you cannot choose a debt you are
disputing. On the check or money order,
write which debt you are making a payment on.
Keep a copy.
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Post-Dated Checks
Never give anyone a post-dated
check. This is a check that you write on
a certain day, but put a later date on it.
A debt collector can ask for one, as long as they do not cash it before
the due date. It is not a good idea to
give them one. If they cash it before
the due date, you may end up bouncing the check and paying more fees.
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Stopping The Calls And Letters
You can stop the debt collector
from calling or writing you. Just send
them a letter asking them to stop. Date
your letter, sign it and keep a copy.
After getting your letter, they can only call or write you to tell you
what legal action they plan to take. Remember, this doesn’t give you the right
to ignore court papers. For example,
if you get an Order for Disclosure, telling you to state what money and assets
you have, you must tell them or you will face fines or jail time for contempt
of court. See MLSC fact sheet, Can
I Go to Jail if I Do Not Pay my Debts?.
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Garnishment
If you do not pay a bill, a
creditor or debt collector can sue you in court and get a judgment. See our fact sheet C-2
If You Are Sued.
Once they have a judgment, they
can garnish (take money from) your wages or bank account or force the sale of
your property. See our fact sheet C-4
Garnishment and Your Rights.
The law does protect some of your
money and property:
They
cannot take your Social Security, SSI,
If
you work, they cannot take any of your pay if you get SSI,
If
you work and haven’t been on any of these programs, they cannot take more than
25% of your take-home pay.
You
can keep your home, a car worth up to $4,200, and furniture and appliances
worth up to $9,450.
If all your money
is protected, like if your only income is SSI, tell the creditor or debt
collector and they may stop trying to collect.
CAN MY HOUSE OR VEHICLES BE TAKEN TO
PAY A DEBT?
Houses
·
Your house can be taken to pay your mortgage
(foreclosure) but it is protected from most other debts. This is because your house has a Homestead
Exemption. This means it is protected if
it has less than $300,000 in equity.
Equity is the value of your house minus the mortgage you owe.
·
The Homestead Exemption does not stop a
foreclosure of liens that are put on your home (mortgages, tax liens, townhouse or condo association liens, mechanics liens.)
·
If someone has a judgment against you, your
house is safe while you live there. But the judgment will have to be paid when
you sell your house.
·
You can only claim a homestead exemption for the
main house you live in– all other real estate is unprotected.
Vehicles
·
Your vehicle can be repossessed if you do not
make payments on the car loan that you used to buy the vehicle. See our fact
sheet C-5
Your Rights in Repossession.
·
If someone gets a judgment against you they can
only take your car if it is worth a lot of money. You can keep one vehicle that is worth less then $4200 in equity.
Equity is the value of your car minus the amount you owe on the loan.
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If your vehicle is modified for your disability,
then you can keep it if it worth less then $42,000 in
equity.
For more
information on garnishment, see our fact sheet, C-4
Your Rights in Garnishment.
WHAT IS ABUSE AND HARASSMENT?
Debt collectors cannot contact other people to tell them
about your debt, like your employer, co-workers, neighbors, relatives, or
friends. They can call people to get
your home or work address, or phone number, but they cannot say that you owe
money. They cannot say that they are a
debt collector unless they are asked. If
you have a lawyer, they cannot contact you or anyone except your lawyer.
IT IS ILLEGAL FOR DEBT COLLECTORS TO:
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Use obscene or abusive language
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Call before
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Call you at work if they know your employer
doesn’t allow personal or creditor calls
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Take cash without giving you a receipt
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Threaten you with arrest or criminal charges
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Contact you directly if they know you have an
attorney
·
Make a letter look like it’s from the
government, the court, or a lawyer
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Fail to give you the name of their agency
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Threaten to take any legal action that they do
not really plan to take
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Give you legal advice, like: “You have no legal
defense to this debt.”
ENFORCING YOUR RIGHTS
If a debt collector does any of these things, keep a careful
record of it. When they call, write down
the date and time, the name of the caller, and what was said. If you have questions, call your lawyer,
legal aid office, or the Minnesota Department of Commerce at (651)
296-4026. If a debt collector has violated these
rules, you can sue. You need to start
the suit within 1 year.
To make complaints
about debt collectors, write to:
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The Federal
Trade Commission |
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Bureau of
Consumer Protection |
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Give details about the things that you think violated your
rights. Keep a copy of your letter.
You can also file complaints online. Go to www.ftc.gov
and search for Minnesota Department of Commerce. Print out a copy of the complaint to keep for
yourself.
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MN Legal Services Coalition |
Do not
use this fact sheet if it is more than 1 year old. Write us for updates, a fact sheet list, or
alternate formats. Fact Sheets aren’t a complete answer to a
legal problem. See a lawyer for advice. |
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Aid Society materials, including any fact sheets mentioned in this
document, go to www.lawhelpmn.org/LASMfactsheets.