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Cease-Communication Letters – Make Debt Collectors Leave you Alone

Cease-Communication Letters

Debt collectors often try to wear down the resistance of consumers by repeatedly calling and harassing them. If this is happening, you can easily make it stop with a cease communication letter. Here’s how.

They’re Trying to Harass You

Debt collectors know that the people they are calling do not have much money – their purpose in harassing you is to move themselves to the head of the line. The way they do this is by attempting to inflict more pain or annoyance on you than other bill collectors. In other words, debt collectors know you only have so much money to pay your bills – they’re competing with each other. The company that harasses you the most “wins.”

Among other things, this means you should never take what they say personally. But you don’t have to put up with it.

Sometimes individual debt collectors claim not to engage in abusive behavior, but rather to be the victims of it. I leave the reader to decide how much sympathy these debt collectors deserve. My point is that, in general, the debt collectors seek emotional engagement. That is, they want you to take what they’re saying personally and to dispute or argue about it.

In general, the best thing you can do is avoid paying any attention to them. Write them a cease communication letter.

You Can Make them Stop Bugging You

The collectors are not concerned with your priorities or well-being, but you should be. It can be hard to keep a clear head amidst all the noise and all the people trying to use you. Luckily the Fair Debt Collection Practices Act (FDCPA) offers some help. Under the FDCPA, 15 U.S. Code Section 1692(c)c,

“if a consumer notifies a debt collector in writing that the consumer wishes [it] to cease further communication with the consumer, the debt collector shall not communicate further…with respect to such debt.”

However, the collector may inform the consumer that it’s efforts are being terminated, or notify the consumer that it “may or will invoke specified remedies which are ordinarily invoked” (i.e., suing or reporting to the credit agencies). They can tell you that once, but then they have to leave you alone.

Many people fear that by invoking this rule they will cause the debt collectors to sue them. This fear is misplaced. The debt collectors have their own guidelines based on what they expect to collect. That is, they may sue you, if you fit within their guidelines, but making them leave you alone is not one of those guidelines (that I’ve ever observed).

If anything, writing a cease communication letter may reduce your chance of being sued because it keeps the debt collector from gathering more information about you. Lawyers dislike uncertainty. They want to be pretty sure they’re going to make money if they go to the trouble of suing you. Your talking to them is one way they find out what they need in order to decide to sue you. Making them leave you alone leaves them in the dark.

What to Do to Make Debt Collectors Stop Harassing You

Crucially, if the cease communication notification is made by U.S. mail, the communication is complete “upon receipt.” In other words, to make sure the debt collector is forced to leave you alone, it makes sense (although it is not required by the law) to send the letter by certified mail. That way you have proof that the debt collector received the letter and when it received it. Any further communication would be in violation of the FDCPA.

When the phones stop ringing off the hook, you will be freer to make decisions according to your own best interests and priorities.

For More Help

If you would like a product that gives you more information on whether the cease-communication letter or the debt validation letter would work for you and be a good idea, along with sample letters that really work, click here. 

Check out our Guide to Legal Research and Analysis for a guide to researching and laws and cases in the most effective way. But legal research is more about what you do with what you find, and so this is a primer on legal thinking and analysis as well.

Two Hidden “Legal” Risks of Debt Consolidation Loans

Debt consolidation is combining outstanding loans (debt) into a single package (consolidation). The debts therefore become one “new” loan, and instead of making several small payments on the loans you used to have, you make one larger payment on the new loan.

Occasionally people ask whether debt consolidation is a good, economically constructive solution to credit card problems. Usually, the answer is that it is not. Certainly not as a solution all by itself. This article discusses some of the drawbacks of debt consolidation.

Debt Consolidation Loans

Ideally and typically—and what has made debt consolidation loans popular—the new, consolidated, loan is secured by some asset, often your home. This allows you to obtain lower interest rates. Thus consolidation, in the  final analysis, is the conversion of unsecured debt into secured debt in exchange for lower interest rates. It can reduce your monthly payments considerably, and of course that could be very helpful.

It also converts “old” loans into new loans, giving them a new statute of limitations (new life for loans that could be at or near their time of expiring). Consolidating debts you haven’t paid for quite a while is probably a bad idea for this reason.

Consolidation can even turn loans with short statutes of limitations into loans with long ones. This isn’t necessarily bad, but it does increase your general level of legal risk.

Why Doesn’t Debt Consolidation “Work?”

Debt collection is seldom the solution people hope it will be. If you hare having trouble paying your bills, it won’t necessarily make your life any easier. Why?

It’s a question of risk.

Economics

As a pure financial transaction, exchanging a lower interest rate for a security arrangement can be a very reasonable decision. Why then has it been such a disaster for so many people?

Most people entering into complex financing are not able to assess risk and account for it. This is particularly true when they are under economic pressure—which they usually are when they consider debt consolidation loans. Thus people systematically underestimate the risk that they won’t be able to make the payments on the new debt.

Additionally, since most people do not really want to go far into debt in the first place, large credit card debt suggests other problems, either too little money or a tendency to overspend. These issues are more likely to be made worse by the sudden reduction of economic pressure and the sudden, apparently greater amount of money or credit available to be spent. Loan consolidation, like winning the lottery, encourages reckless spending.

The Hidden Legal Risks of Debt Consolidation

In addition to these “systemic” issues, there are two other main hidden costs of consolidation you should consider: loss of flexibility, and the nature of secured debt versus unsecured debt.

Consolidated Loans are Less Flexible

When you have ten loans for different things, from automobiles to credit cards, you have flexibility if hard times strike. If you simply cannot make your payments, you can give up some, but not all, of the things you have purchased. You can let some, but not all of the credit cards go into default.

This is certainly not a happy thing, of course, but it raises the possibility of individualized debt negotiations, debt forgiveness, or even missed statutes of limitation. Again, these are not the choices and hopes of someone in flush economic conditions, but they are real options facing many people right now.

In order for a debt collector to start garnishing your wages, it must find and sue you, must win, and then find your assets. It is an expensive and risky process for the debt collector if you fight. They sometimes drop the ball, and there are limits to how much of your wages they can garnish.

If everything else fails for you, you can declare bankruptcy, where homestead exemptions are likely to allow you to remain in your home.

The Nature of Secured Debt

The risk of debt consolidation loans is the nature of secured, versus unsecured, debt. Remember that what powers the lower payments for consolidation is the existence of security—usually your home. Your home secures the debt, and that means that if you do not make your payments on the new debt, the lender can foreclose on your home and take it away.

Foreclosures are generally “expedited” proceedings, meaning that your defenses are limited and the time for asserting them is restricted. In many states foreclosure is not even a judicial proceeding, although you have some legal rights you could assert in certain circumstances.

And what all that means is that instead of facing the prospect of years of battling over high-risk debts and questionable payoffs that could be trumped by bankruptcy, the banks can waltz into court and emerge in a very short time with your house. Put a little differently, your debt consolidation loan could make you homeless almost before you know it. And bankruptcy often, if not usually, will do nothing to protect you from it.

Anyone considering debt consolidation should think about these risks very carefully.

Garnishment of Assets by Debt Collectors

debt collectors garnish your wages? What about bank accounts? Here are some things you need to know about garnishment.

If you have assets, and this includes either a job or money in the bank, you must be concerned about the possibility of the debt collector finding and garnishing your money. The risk exists if a debt collector (or anybody else) has a judgment against you.

Governments can levy even without a judgment. Our discussion here focuses on private debt collectors, however.

Bank Accounts

Debt collectors can seize and garnish bank accounts and, when they do, it is almost always comes as a surprise to the debtor. What typically happens is collectors obtain money judgments (usually by default) and then use the judgment to freeze the funds in your bank account.

No Notice of Bank Garnishment

State law and banking rules govern how the bank must handle the garnishment process. Collectors always notify the bank first and then notify the debtor. This way your funds are frozen before you can take any action such as withdrawing all your funds.

Their notifying the bank first is perfectly legal. You typically receive the notice (including your rights) a few days after your funds have been frozen. In most states, the garnishment can only freeze funds already in your account at the time of service on the financial institution. During the time the garnishment is in effect, the financial institution cannot honor checks or other orders for the payment of money drawn against your account.

This means any outstanding checks will more than likely bounce or be returned for NSF (non-sufficient funds). In other words, your checks will bounce. The exception to this rule is if your account has more on deposit than the amount of the garnishment. In this case, the bank can honor checks up to the amount that will reduce your funds below the amount of the garnishment. When the amount being garnished is paid, the freeze on your account must be terminated.

Wages

Debt collectors can also garnish your wages. Again, your first notice that they are garnishing you is likely to be when you receive a check that is less than you thought it would be. Federal law limits the maximum amount they can take to 25 percent of your disposable earnings for that week, or the amount by which disposable earnings for that week exceed thirty times the Federal minimum hourly wage, whichever is less. In simple terms, “disposable income” is whatever money you have left after paying all required taxes and national insurances!

Disposable income is after-tax income that is  the difference between personal income and personal tax and nontax payments. In general terms, personal tax and nontax payments are about 15% of personal income. That makes disposable personal income about 85% of personal income. IMPORTANT: In order for wages to be garnished, disposable earnings per week must exceed thirty times the federal minimum hourly wage.  (That’s $154.50 at the time of this writing.)

Put another way, if you make $154.50 or less per week your wages are immune from garnishment – for now and as long as you don’t make any more than that. Also – most debt collectors can never garnish Social Security and some other types of disability or retirement income.

But You Should Not Let them Get a Judgment if Possible

Even if you have nothing for the debt collectors to garnish, you will almost always be much better off it you don’t let them get a judgment against you. Things could get better for you in any number of ways. So they might eventually be able to garnish you when that happens if you let them have a judgment. Remember that just because things may seem bleak now doesn’t mean that the sun won’t eventually shine. When it does, you don’t want debt collectors to take your good luck away from you.

And it isn’t all that hard to keep them from getting a judgment if you know what you’re doing.

 

What if I Really (Think) I Owe the Money?

What If I Really Do Owe the Money?

Or Think I Do?

Think you owe

What if a debt collector sues you for a debt and think you really owe the money? Should you defend yourself from the suit?

Debt collectors often sue the wrong people and usually overcharge. If you don’t defend, you run the risk of having to pay twice. And if you do defend yourself, you probably won’t have to pay at all. If that bothers you, give the money to somebody who really needs it.

Most People Debt Collectors Sue May Actually Owe Someone Some Money

 

If a debt collector is suing you, you probably think you owe them the money. Or think you owe someone the money, although it’s surprising how often people who do NOT owe anybody any money get sued. If that’s you – you still need to fight the case, it won’t go away by itself. But if you actually do owe somebody the money for which you are being sued, you still need to be careful.

And you should still defend yourself as well as you can.

You must make the debt collector prove every part of its case. This includes not only that you owe the money, but that you owe it to them. And exactly how much you supposedly owe. That’s because old debts get sold – often more than once – and if you don’t make the debt collector prove it owns the debt, you may pay the wrong person. And then you might have to pay again if the person that actually owns the debt sues you.

In addition, most people do not owe what the debt collectors are trying to collect. They routinely add fees and interest they should not, and consumer protections agencies and organizations say that almost all debt collection suits include extra charges. Many of them are for far more than is owed.

The Good News

The good news about debt collectors is that they usually CANNOT prove their cases if you make put them to the test. The whole process by which they get these debts is so sloppy and careless that they usually cannot find or obtain the proof that they need to win their case. IF you defend yourself.

Get Help

If you would like us to take a look at your case and give you a sort of roadmap to what you need to do and how, take a look at our Personalized Evaluation product. If a debt collector is suing you and you know you want to defend yourself without spending a lot of money on lawyers, then get out Debt Defense System.

Protect Your Rights

If debt collectors are harassing you, you need to be alert to protect your rights. These calls are often a prelude to their suing you. You might consider membership with our site, which gets you our ecourses for free, plus gives you many other benefits.Check out some of our e-courses. Or consider our prepaid legal plan to protect you from future possible litigation. With that, if they do sue you, you’ll get a lawyer to defend you for free.

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Gold Debt Defense

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Platinum Debt Defense System

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Diamond Debt Defense

Fair Credit Reporting Act: Your Rights under the FCRA

The Fair Credit Reporting Act establishes certain rules for the credit reporting agencies and outlines your rights against them if they fail. You’ve heard about having rights to a fair credit report. Here, in plain English, is a list and explanation of your most important rights under the Fair Credit Reporting Act.

The Importance of Credit Reports

Our country runs on credit and credit information and the credit reporting behind them. Obviously,  people use credit to purchase things, but as more and more people are finding out, credit reports are used for much more than that. They often impact employment decisions, housing decisions and rates. They also affect business equipment lease rates and insurance availability and price, among other things.

Bad credit has a high price in so many ways.

Credit Reporting Network

As important as all the interests affected by it are, the credit reporting network (the businesses which create and publish your credit information) is a vast and largely faceless bureaucracy. Congress intended the federal Fair Credit Reporting Act (FCRA) to create some accountability in this network. The FCRA was designed to safeguard the accuracy, fairness and privacy of information in the files of consumers held by the reporting agencies.

Different Kinds of Credit Reporting Agencies

There are many different kinds of consumer reporting agencies. Almost everybody knows about the credit bureaus, of course, and there are also “specialty agencies” that sell information about check writing histories, medical records and rental history. The FCRA was directed primarily at these agencies, rather than the creditors or companies with which you normally do business.

Here is a partial list of your major rights under the FCRA.

This isn’t a complete, exact replication of your rights under the Fair Credit Reporting Act. As with most important laws, the exact rights and their limits change as courts interpret the laws. But this will give you an accurate overview – a place to start.

Access to Your Credit Report Limited

A consumer reporting agency may provide information about you only to people with a valid need. These include considering an application with a creditor, insurer, employer, landlord, or other business. The FCRA specifies those with a valid need for the information. And in most cases you must give your consent before they get the information.

Rights When Credit Information Used Against You

Anyone who uses a credit report or another type of consumer report to deny an application for credit, insurance, or employment – or to take other adverse actions against you – must tell you. They also must give you the name, address and phone number of the agency that provided the information. You have a right to a free copy of that report.

Right to Find out What Is in Your File.

You can find out all the information about you in the files of a consumer reporting agency. You must be offered a free disclosure if:

  • A person has taken adverse action against you because of information in your credit report;
  • You place a fraud alert in your file as a victim of identity theft;
  • Your file contains inaccurate information as a result of fraud;
  • certain other reasons.

All consumers will be entitled to one free disclosure every 12 months upon request from each nationwide credit bureau and from nationwide specialty consumer reporting agencies.

Right to Dispute and Correct Information

If you identify information in your file that is incomplete or inaccurate and report it to the consumer reporting agency, you have rights. The agency must conduct a “reasonable” investigation, and it must report the information as disputed. If it is unable to verify the information after investigation, the agency must remove or correct the entry.

For practical reasons, this provision may actually provide more important rights against the businesses that report credit events than against the reporting bureaus. Debt collection firms have a hard time providing the required verification.

Time Limits for negative information.

In most cases, a consumer reporting agency may not report negative information that is more than seven years old, or bankruptcies that are more than 10 years old.

Note that is in “most cases.” There are important exceptions to this rule. The exceptions relate to larger transactions. Where a person is seeking a job with a higher salary or insurance with a higher payment amount, the time limit may not apply.

Next Step to Take

Sign up for your free copy of the Fair Credit Reporting Act on this page.

Is Bankruptcy the Best Option when You’re Sued for Debt?

People facing debt lawsuits often panic and look for the quickest, easiest, or least scary way out. And bankruptcy often occurs to them as the solution.

There are often more effective ways to handle old debt, especially credit card or merchant account debt in the hands of a debt collector than bankruptcy. You can defend yourself without hiring a lawyer. Even if that doesn’t work out – which it usually does – you could still file bankruptcy later. But if you can avoid bankruptcy, you will reduce the harm the debt does to you.

Panic is not necessary, and bankruptcy—at least at first–is seldom the best solution in a real-world sense. Here’s why.

 

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Two Types of Debt

Debt is divided into two types: “unsecured,” and “secured.” Secured debt means that the debt has specific assets backing it. If you miss payments, you can have your house foreclosed or your car repossessed. These things “secured” the debt and can be repossessed and sold if you stop making payments.

Unsecured Debt

Unsecured debt is debt that is not secured-it isn’t attached to any specific assets. Just because a debt is “unsecured” does not mean that you cannot be sued for the debt. On the contrary, it means you must be sued in person for the debt collector to collect any money. And it cannot repossess the thing. The creditor then “enforces” the judgment against you by garnishing wages or attaching accounts. But this can be difficult for various reasons.

Secured Debt

Lenders on secured debts are in a much better position than those who are not secured. One of those advantages comes in bankruptcy.

In the bankruptcy law, the item securing a debt is really regarded as belonging to the creditor who lent the money if the payment is not made. Specifically, consider a mortgage on a house. The house “secures” the debt, and if you stop making payments the bank can take the house and sell it to pay the debt.

In the bankruptcy law, it is considered unjust to allow someone not paying for the property to keep it from the rightful owner. So the lender typically asks for the bankruptcy “stay” to be “lifted” so that foreclosure can take place. Although this can sometimes be delayed, the courts usually “relieve” the lenders and allow them to foreclose on the house and kick the debtor out.

How Courts Handle Unsecured Debt

With unsecured debt, on the other hand, the debts are simply added up and paid according to how much money the bankrupt person has. Usually very, very little. And only at the end of the bankruptcy procedure.

Bankruptcy May Not Help When It Applies

What all that means practically is that if you have a large secured debt (mortgage) that you cannot pay, bankruptcy will offer you very little protection. If you have a large unsecured debt, bankruptcy will probably protect you, but it is slow, time-consuming and expensive compared to defending yourself against the debt collector.

Some examples may help make it clearer.

Consider the Smiths. The Smiths have a house and make payments of $2,500 per month. Mr. Smith loses his job and they fall behind in their payments. If the family seeks bankruptcy as their house payments add up, the lender will obtain “relief from the stay” and foreclose on the house. The Smiths are out of luck, and bankruptcy usually does not help.

Now consider the Joneses. If the Joneses have credit card debt of $25,000 and Mrs. Jones loses her job so they can’t make payments, they could seek bankruptcy help. It would probably cost them at least a thousand dollars or more to file, require them to disclose most or all of their finances over the past year or two, and fill out a vast amount of paperwork. At the end of the proceeding, at least a year later, their debts would be wiped out. But so, of course, would their credit reports. The bankruptcy filing will remain a mark against them for ten years.

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An Alternative: Defense

The Jones could, however, simply defend themselves against the lawsuits brought by the debt collectors. For reasons I’ve made clear elsewhere, their chances of winning the suit would be excellent, and if the Jones do it right, they can simply get the debt eliminated. This does not usually mean completely cleaning their credit reports, but it can often mean canceling the debt and removal of the recent credit report damage. And it usually will happen in less than six months from the date the debt collector brings suit. They won’t have the bankruptcy on their credit report. They can do it themselves for almost no money at all, and if by chance it doesn’t work, then they could declare bankruptcy.

In addition, if you are facing debt troubles, chances are good the debt collectors have made some mistakes that violate the Fair Debt Collection Practices Act (FDCPA) and give rise to a counterclaim, which increases your chance of fighting the debt.

Conclusion

Better results, less cost. That’s why it’s often better to defend yourself against credit card debt than to seek bankruptcy protection. It’s also true that if for any reason the Jones lost their case against the debt collectors, they could still file for bankruptcy without having lost its protection.