Getting Through Tough Financial Times
Talking with Creditors
If You Don’t Pay Your Bills
If you miss a payment, you will be faced with increasing pressure to pay. First you will receive a letter reminding you that you missed a payment and asking you to pay promptly. After that, you may receive a more direct letter demanding payment, or you may get a phone call.
If the bills are still not paid, they will probably be turned over to an independent collection agency. The Fair Debt Collections Practices Act prohibits collection agency collectors from using abusive or threatening language. They can’t call you at unusual hours or threaten criminal prosecution. And they can’t discuss your financial situation with others.
Here’s what to do if you receive a call from a creditor or a collection agency:
- Ask the name of the caller. Get the name of the creditor and the name, address and telephone number of the collection agency. Get the exact amount of the account that is claimed to be due. Write down the date and time of each call.
- Remain calm. Explain your current financial situation and how much of the bill you are able to pay, according to your repayment plan.
- Dispute debts in writing. If you believe you do not owe the amount claimed or disagree in other ways, make your reasons known promptly in writing to both the creditor and the collection agency. Request a written statement of your account. Always keep copies of your correspondence for future reference.
Creditors’ Options
Creditors can take several kinds of legal action against you. These actions are often written into the sales contract you signed. If you fail to make payments, the creditor or collection agency may decide to initiate a lawsuit by filing a complaint. As the defendant, you will receive a summons or notification that a complaint has been filed against you. The case may be settled in small claims court or civil court, depending on the amount of money involved. If you don’t respond or lose the case, the court will issue a judgment against you for the amount you owe plus fees for court costs and attorney fees.
What a creditor can do if you fail to pay your bills:
- Acceleration: The entire debt is payable at once if you miss a payment. The courts can force you to pay by seizing your property and selling it.
- Repossession: The creditor can seize the item you bought or the property you used as collateral–security–for the loan. If the sale of the property brings less than the amount you owe, you must pay the difference.
- Wage garnishment: A court order requires your employer to withhold part of your wages and pay your creditor.
- Foreclosure: If you fail to make your mortgage payment or fail to pay the taxes or insurance on your house or other property, the lender can force the sale of your home/business to pay off the loan. You are responsible for the legal fees of foreclosure, and the difference between the selling price of the property and the amount owed on the loan.
All of these actions are very serious and could jeopardize your ability to get credit in the future. You can reduce your chances of being harassed by creditors or collection agencies by working out solutions for debt repayment early.