Collecting on debts: Options for creditors
Most borrowers repay their debts in a timely manner. But what happens when they don’t? What are the rights of creditors? What rules must creditors follow?
Fair Debt and Collections Practices Act
Before taking action to collect on a debt, creditors must become familiar with the Fair Debt and Collections Practices Act. The FDCPA provides protection to debtors from unreasonable creditor practices. Not abiding by the rules creates an actionable offense that the debtor can collect on in court. The Act does not completely take away the ability of creditors to collect – it simply lays out what creditors cannot do when collecting on a debt.
Tips for collecting
First, never give into the temptation to lose temper with a debtor, no matter how outrageous the excuse may be. Always be firm and polite, while requesting that the debt be repaid. If the debtor claims that he or she is having difficulty paying on a debt, offer to make it as easy as possible for him or her to submit the payment.
When persistence does not work, the next step is to go to work on the credit score. Debtors have to make an effort to get a bad mark off their score, so those who are conscious of their score are more likely to pay a bill when they know their credit score may be affected by nonpayment.
The final method of compulsion is using the court system. Note: Never threaten to take someone to court over a debt, but fail to do so. Such threats are clear violations of the FDCPA.
There are a number of court -based remedies, including:
Relpevin: A creditor may take property from the debtor if the creditor holds title to that property. There are specific notice and hearing requirements for replevin.
Attachment: Through attachment, the court can order the creditor to take the debtor’s property. Attachment is only available when it appears the debtor is going to dispose of the property.
Lawsuits and liens: A creditor can request relief from the court. By suing the debtor, a creditor can receive the right to take the debtor’s property in order to cover the debt.
Courts also have the ability to garnish wages or bank accounts, ensuring repayment.
What about bankruptcy?
Creditors can request an involuntary bankruptcy proceeding to force a debtor to liquidate his or her assets to pay back the creditor. This can be tricky, since the debtor may have multiple creditors and some have priority over others. However, it is one of many options to discuss with a qualified bankruptcy lawyer.
At Orantes Law Firm, P.C., we represent both creditors and debtors in debt collection and bankruptcy cases.