Posted Tuesday, February 23, 2010 by
Mark Zuckerberg
Just about everyone who comes to see me to discuss filing individual bankruptcy in Indiana has had experience with debt collectors. In most of those encounters, I’ve found, the debtors didn’t know what their rights were under federal law until it was too late.
Since the purpose of my blog is to provide helpful bankruptcy information in Indiana, I
decided to devote today’s blog post to bill collectors and how to best deal with them. As I’ve explained in many prior blog posts, bankruptcy itself provides instant relief from harassment by bill collectors. But even during the days, months (and sometimes years) that go by until people make the big decision to actually file bankruptcy, knowing how to react to the collection process can make matters a lot less unpleasant.
We talked it over, the Columbus bankruptcy lawyers who work in the Mark Zuckerberg bankruptcy law offices and I, and we agreed: more debtors need to know about the Fair Debt Collection Practices Act. The FCDCP is a federal statute specifically designed to stop unfair and abusive practices by collection agencies. (If debtors don’t recognize practices that aren’t legal, they won’t report the collectors to the proper authorities, meaning the Federal Trade Commission or the Indiana Attorney General.
The first thing you need to know is that a debt collector is anyone other than the creditor who collects debts for that creditor. So we’re not talking about the actual employees of a credit card company, auto company or other business collecting debts on behalf of their employer. Basically, debt collectors are outside contractors hired to do a job for creditors.
Some of the rules debt collectors must follow are detailed in a brochure provided by the Indiana Legal Services, Inc.. These rules include:
- Within 5 days after first contacting you, the collector must send a written notice telling you the amount you owe, the name of the creditor, and what to do if you believe you don’t owe that money, or you believe that the amount is wrong.
- The collector may use mail, telephone, telegram or Fax, but may not contact you at an unreasonable place or time.
- The collector is allowed to contact other people about you – and only once - solely for the purpose of verifying your location, and is not permitted to discuss your debt with anyone but you or your attorney.
It’s unfortunate but true that debt collectors often don’t abide by the rules. One way to stop a collector from contacting you more than once is by writing a letter to that agency.
As a debt consolidation lawyer as well as an Indianapolis bankruptcy lawyer, I’ve often helped clients get relief from the extra stress of dealing with collection agencies by helping them compose exactly this kind of letter, reminding them to send it by certified mail with “return receipt requested”.
Certified Financial Planner Ken Clark, in his book Getting Out of Debt, provides a sample Cease and Desist letter in the book’s appendix. Here’s the general idea:
The letter begins by saying “This serves as legal notice under the provisions of the Fair Debt Collection Practices Act to cease and desist from all communication with me.”
The letter goes on to make two points:
a) If the debt collector fails to comply, the debtor will file a formal complaint with the Federal Trade Commission.
b) The debtor chooses to work directly with the original creditor, not with any collection agency.
Many collection agencies don’t stop their efforts even after the debt has been discharged through bankruptcy in Indiana! Of course, according to law, once a debt has been discharged, collectors have no right to demand payment. But, with debt being “sold” from creditor to creditor, it often happens that a company is unaware that the debt has been paid off or discharged. In fact, paralegals in the Mark Zuckerberg bankruptcy law office need to spend valuable time working on cases where debt collectors are still going after our clients years after they’ve emerged from bankruptcy.
Still, getting your response to bill collectors down in black and white can often make a big difference in terms of “turning down the heat” and the pressure of harassment.