First the letters. Now the calls. What should you do?
Overwhelming debt is enough to deal with before the phone starts ringing, over and over and over…
Know that there are options available to you —
We all try hard to pay our bills and not spend more than we have. However, sometimes emergencies arise. We need expensive medications. A utility bill is particularly high. A child needs money for a crisis. Paying for these things can cause one to be unable to pay their regular bills. So, what should you do when the creditors start calling?
Do not panic. You do not have to talk to the creditor when they call, but if you calmly explain the situation and have a plan to catch up the bill over a reasonable period of time, they may be able to help with this plan. They may be able to stop interest from adding to your debt or stop the phone calls until you can make payments under the plan you propose.
Do not make promises you cannot keep. You gain nothing by promising to make a payment you cannot make. Unmet promises make it less likely they will work with you in the future. The financial penalties for writing a check you cannot cover (insufficient funds check) are much higher than on any debt owed.
Know what the collection company can do and what they cannot do. Many collection agents work on an incentive wage that increases based on the payments they bring in. They want to scare you into making a payment. They are governed by the Fair Debt Collection Act, so there are limits on what they can threaten, but experienced agents know how to say just enough to be legal and still motivate payments. They do not care if you skip food or medications. Their only goal is to get you to pay on the debt. They cannot take your car or personal property, unless it is collateral on an unpaid debt. They cannot have you put in jail for owing them money.
Laws to Protect You
The laws governing collection actions prevent any action that takes things from you until there is a Court Judgment. You are notified of a Court suit when you receive a summons and Petition. You can appear in Court and contest the debt, if you do not owe the money. If you do owe the money, this is also a point when you should take action to protect your assets. Your Social Security (or SSI) payment is safe from garnishment by a creditor, either on its way to you or in a bank account. However, if you mix other funds with the Social Security payment in the bank, it loses its protection.
If you are sued, you should be careful to put only Social Security money in the account. Do not cash checks or deposit any other funds in the account. If your account is attached, with only Social Security money in it, you can seek a Court order to release the funds. This will take a few days, so it may be better to protect the account from attachment. You can do this by providing the creditor notice by affidavit of your bank account and that only Social Security funds are in that account. This affidavit must be true, since you must sign it under oath and because the creditor is allowed to look at your bank statements to make sure the statements in your affidavit are true. Other pension money, like KPERS, company retirement pensions or distributions from an IRA are not protected in the same way Social Security funds are protected.
Once a creditor has a Court judgment, they can typically garnish for 25% of the wage . This garnishment continues until the Judgment is fully paid.
Debt Relief Options
When debts increase to a point that you could not pay them off in several years, bankruptcy may be a viable option. A bankruptcy looks at your entire financial situation, rather than particular bills.
A Chapter 7 bankruptcy provides a fresh financial start, wiping out eligible debts.
A Chapter 13 bankruptcy involves creating a plan that pays debts from regular income over a period of years.
You should discuss your particular financial situation with our experienced Kansas City bankruptcy attorneys, if you are considering this option to make the best choice for you moving forward.