Debt can be both a powerful tool and a horrible demon. While having some debt can be good - it allows you to live la vida loca - having too much debt can be disastrous. The following tips can help you maintain some sanity when the bill collectors come calling. While you will have to deal with the bills, these tips can help you avoid being harassed.
The first step is to try to address the issue before it becomes a problem. While paying the bill is the ideal, we know it is not always possible. It is important, though, that you don't ignore the issue and hope it goes away - it won't. In order to avoid having the debt turned over to a collection agency, you should call your creditor and explain that you are unable to pay the bill (and hiring a collection agency won't help you pay sooner) and tell them when you expect to be able to pay. Hopefully, you will be able to come to a compromise or produce a repayment plan.
If you are unable to work a deal with your creditor, and the debt ends up with a harassing collection agency, write a letter requesting that the collector stop contacting you. Under the Fair Debt Collection Practices Act (FDCPA), debt collection agencies and attorneys must stop contacting you after receiving a letter requesting that they quit. You should also indicate any illegal actions committed by the collector in this letter. Keep a copy of the letter for your records and also send a copy of the letter to the following addressFederal Trade Commission
After you send this letter, collectors may only contact you to acknowledge receipt of the request, to tell you their efforts have ended or to tell you that they are suing you. However, you should note that the FDCPA only applies to collection agencies and attorneys - it does not apply to in-house collection departments. Having said that, though, many creditors will honor the request.
If your letter fails to end the harassment, a letter from a lawyer usually will. Additionally, once you have hired a lawyer, the collection agency or creditor's attorney must only communicate to you through your lawyer. The other benefit of retaining an attorney is that they can help you raise legal claims under the FDCPA. The downside to hiring a lawyer is that it can be expensive and a lot of times you really only need to send a letter requesting that they stop contacting you.
The final solution is to file for bankruptcy. Once you file the initial papers for bankruptcy, you are automatically protected from collection activity. The collector must first obtain permission from the bankruptcy court before it can continue its collection efforts; and the court will not grant permission to those seeking to collect unsecured debts (such as credit card debt). Filing for bankruptcy is a very effective way to stop creditor's from harassing you.
However, bankruptcy should not be entered into lightly and should not be used when your only concern is simply debt harassment. Bankruptcy filings will stay on your credit report for 7 to 9 years. It should only be used when you have grave financial problems. Simple debt harassment can usually be stopped with less drastic measures than bankruptcy.
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Yes, if you file Chapter 13 before the creditor has sold the car.
Yes, if you file Chapter 13 before the home is sold in a foreclosure sale.
When you file Bankruptcy, a stay is automatically put in place which prohibits the commencement or continuation of the foreclosure. However, the sale is not stopped by the bankruptcy filing. It is only suspended.
If your Chapter 13 plan is approved by the court and you successfully complete the plan, the foreclosure will be permanently stopped. If your plan is not approved, or if you are unable to complete the plan, the stay will be terminated. The foreclosure sale can be completed without any notice to you if the stay is terminated.
Chapter 7 also causes the stay to be put in place, and it will temporarily suspend foreclosure sale. The foreclosure can be completed when the stay is lifted at the end of the bankruptcy, or sooner if the creditor requests.