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Have you gotten a letter or phone call from a debt collector? If you owe the debt, don't owe the debt, or don't know, you have rights and options. Read this article to learn more.
Who Can Contact Me About a Debt?
If you owe money, different groups might contact you or sue you. They could be the creditor, a debt collector, or a debt buyer. A creditor is a person or company you owe money to. This can be something like a credit card company or a hospital.
A debt collector is someone the creditor hires to collect the debt. This can be a collections agency or a collections lawyer.
A debt buyer is a company that buys debt from the creditor and sues people to collect that debt. Examples of debt buyers are Midland Funding, Portfolio Recovery Associates, and LVNV Funding.
Types of Debt and How That Debt Can be Collected
The two most common consumer debts are debts that are attached to belongings (secured debt) and debts that are not attached to belongings (unsecured debt).
Debt Attached to Belongings (Secured Debt)
Certain debt is attached to things, like a house, a car, or furniture. This is call secured debt. Often the things attached to the debt are what was bought with the loan. This includes:
- a mortgage, where the house is attached
- a car loan, where the car is attached
- a loan to buy furniture, where the furniture is attached
The things that are attached to the debt are called collateral.
The contract you signed for these loans will have information on when the creditor can take those belongings. For example, if you miss car payments, the creditor can take (repossess) your car. Some of these things can happen without going to court. The creditor can take the belongings as long as they do not disturb the peace. You do not have to give the creditor permission to come onto your property, but they can't break into your house or garage to take the belongings.
The creditor can then sell the belongings to reduce the debt you owe. They have to give you notice of the sale. If the belongings are sold for less than what you owe, you will owe the creditor the difference. The difference between the amount of the debt you owe and the amount the creditor got from the sale is called a deficiency. The deficiency becomes an unsecured debt (see the next section on unsecured debt to learn more). The creditor can then try to collect the deficiency from you just like any other unsecured debt.
Debt That Is Not Attached to Belongings (Unsecured Debt)
Most debt is not attached to belongings (unsecured debt). This includes credit card debt, medical bills, utility bills, and paycheck advance loans.
If you owe this type of debt, you creditor must sue you in court and win a judgment before they can take any of your paycheck, bank account, or property. Review the resources in the I Have Been Sued to Collect a Debt Resource Page to learn more about your rights and options.
I'm Behind on Payments. What Can I Do?
As soon as you have trouble making payments, you can contact your creditors. Many creditors will work with you if they believe you are trying to pay your debt. Don’t be afraid to negotiate. You can ask creditors to:
- Put you on a different payment schedule
- Stop charging you interest
- Not increase your interest rate
- Not charge you late fees, or
- Take a settlement amount of less than the balance
The Consumer Financial Protection Bureau has resources on how to negotiate a settlement with a debt collector.
Keep records of all your conversations with creditors, both when they call you and when you call them. When you talk to creditors, remember that they can use any information you give them to collect the debt. For example, if a creditor knows who your employer is, it will be much easier for them to garnish your paycheck.
If you have missed one or more payments on a debt or bill, a creditor will probably call or write asking for the money you owe. The first calls and letters are usually friendly reminders that you forgot to pay. If you still do not pay, you will probably start getting calls and letters demanding payment.
The best time to work with your creditors is before they start demanding payment. Look carefully at your budget and see if you can afford to make some payment to each creditor.
If you want help making a budget to try to pay your debts, contact a credit counselor. Look for a non-profit credit counselor that doesn’t charge fees for its services. You might be able to find nonprofit credit counseling programs through your university, military base, credit union, housing authority, or MSU Extension Service. This usa.gov website can help you learn about choosing a credit counseling agency.
If all of your income and property are exempt from collection, you might be uncollectable. Read the article Are You Uncollectable? to learn more.
I Don't Owe This Debt, or I'm Not Sure. What Can I Do?
Within five days of first contacting you, the debt collector must send you a written notice of a debt. The notice must tell you:
- How much you owe
- The creditor’s name
- What to do if you disagree that you owe the debt
If you do not owe the debt, it is a good idea to send a letter as soon as possible. The Consumer Financial Protection Bureau has a resource page on what to do if a debt collector contacts you. If you click and scroll down the page, you can find a "I do not owe this debt" sample letter you can use, along with instructions.
If you are not sure whether you owe the debt and you want more information, you can send a letter asking for more information. The Consumer Financial Protection Bureau has a resource page on what to do if a debt collector contacts you. If you click and scroll down the page, you can find a "I need more information about this debt" sample letter you can use, along with instructions.
If you want to send one of these letters, it is important to send it as soon as possible after the debt collector first contacts you. In some situations, you only have 30 days after you are first contacted to ask for certain information. Even if it has been more than 30 days, you can still try to ask for what you need.
Keep a copy of your letter. You might want to send it by certified mail so you have proof you sent it.
My Identity was Stolen. What Can I Do?
If your identity has been stolen, it is very important to let the creditor or debt collector know that the debt is from identity theft. The easiest way to get any letters you need is to use the Recovery Plan tool from the Federal Trade Commission. The guided tool will create these letters for you, if needed. If you are browsing the recovery steps on your own, there are sample letters you can use to create your own letters.
At the bottom of each letter is a section called "Enclosures." This section tells you what to include with the letter. Make sure you include everything listed under "Enclosures" when you send the letter.
To learn more about what to do after your identity has been stolen, please read After Identity Theft.
I Want the Debt Collectors to Stop Calling Me or Only Contact Me a Certain Way
Creditors and debt collectors have the right to try and collect money you owe them. But you also have rights. The law protects you from harassment by creditors, their lawyers, and debt collectors.
Creditors and debt collectors are not allowed to harass you. They are only allowed to contact you during certain times.
If you want a debt collector to stop contacting you, you can send them a letter asking them to stop contacting you. Debt collectors cannot call you if you write a letter telling them to stop contacting you. Keep in mind, though, that your debt will not go away if the debt collector stops calling you. You will still owe the money and can be sued.
The Consumer Financial Protection Bureau has a resource page on what to do if a debt collector contacts you. If you click and scroll down the page, you can find a "I want the debt collector to stop contacting me" sample letter you can use, along with instructions.
After you send a letter, a debt collector may only call you once to tell you it will no longer contact you or to tell you that the debt collector or the creditor is going to take some specific action.
Keep a copy of your letter. You might want to send it by certified mail so you have proof you sent it.
If you still want to be contacted, you can tell the debt collector how and when you can be contacted. This can include only being contacted at a certain address or phone number, and between certain times. The Consumer Financial Protection Bureau has a resource page on what to do if a debt collector contacts you. If you click and scroll down the page, you can find a "I want to specify how the debt collector can contact me" sample letter you can use, along with instructions.
If you want to send one of these letters, it is important to send it as soon as possible after the debt collector first contacts you.
What Are Debt Collectors Allowed to Do When They Contact You?
The Fair Debt Collection Practices Act (FDCPA) is a federal law with rules about how debt collectors can and cannot collect personal, family and household debts. In Michigan, creditors must follow similar rules.
Creditors and debt collectors CANNOT:
- Send you to jail
- Threaten you, curse at you or lie to you
- Call you at work if you tell them you can’t take personal calls there
- Write or call you if you have a lawyer handling your case
- Call you early in the morning or late at night
- Give you false or misleading information, such as telling you a lawsuit has started when it hasn’t, or
- Talk to your friends or family (other than your spouse) about your debt except for one contact to find out your address and phone number and where you work
You Can Complain About a Debt Collector
You can report any problems you have with a debt collector to the Michigan Attorney General’s Office and the Federal Trade Commission. You can learn more about filing a consumer complaint on the Michigan Attorney General’s website. You can also call the Michigan Attorney General’s office at 877-765-8388 to file a complaint. To report problems to the Federal Trade commission, visit www.ftc.gov or call toll-free, 1-877-382-4357; TTY: 1-866-653-4261.
You can also report complaints about debt collectors to the Consumer Financial Protection Bureau. It will forward your complaint to the company and work to get a response from it.
If you think a debt collector has violated the rules of the Fair Debt Collection Practices Act, you may be able to sue the debt collector and get damages. You may want to contact a lawyer about this. Use the Guide to Legal Help to find lawyers and legal services in your area.