How To Prevent Creditors From Collecting Your Money, Or Not

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Sorry to disappoint you, but I’m disquieted there’s no legal way to prevent creditors from collecting your money; you are both legally and morally liable for your debts. But there are legal ways to mitigate your losses such as Bankruptcy protection under Chapter 7, the Wage Earner Plan filed under Bankruptcy, Chapter 13, and other methods. In the previous article,How to Get Credit I discussed how your ability to receive credit is governed by understanding the credit laws that apply to the credit application approval process. In this article, I would like to discuss some of the laws that govern your creditor’s ability to collect money on the debt owed. The last article in the series, How to Cessation Creditors From Reporting Your Credit, or Not at will discuss the laws that apply to your creditor’s ability to report your credit behavior.

Federal laws that govern your creditor’s ability to collect money on the debt include the following:

1.) The Fair Debt Collection Practices Act of 1978 amends The Consumer Credit Protection Act of 1967, under Title VIII. It states detailed provisions of what does and does not constitute harassment, when collecting on a debt. “Harassment” is not in the inspect of the beholder, whether that be the debtor or the creditor. This act doesn’t void the legal agreement of indebtedness, and it does give the creditor a right to secure on the debt. Contact the Federal Trade Commission in Washington D.C., a federal government agency, which regulates this act, for more information.

2.) The Federal Communications Act of 1934 regulates the telephone airwaves. For more information, study my article on The Federal Communications Act of 1934, entitled How to Halt Collection Calls, or Not.

3.) The Bankruptcy Reform Act of 1979 provides debtors with a financial fresh start by discharging debtors of debt liability. Under Chapter 7, the act does not absolve, or release, the debtor completely from the debt. The creditors receive a proportional share of the debtor’s assets distributed by the courts. The court can also dismiss your bankruptcy claim, if the judge finds that you have enough assets and income to pay wait on your creditors in full. Chapter 13 enables you to pay back existing debts under court supervision over an extended time period. Secured interest and property exemptions registered under The Homestead Act of 1862 are usually protected assets, under The Bankruptcy Reform Act of 1979. See your attorney, for more information. The Bankruptcy Reform Act of 1979, as it applies to creditors, means that once a debtor gives the creditor information on how to gather hold of his attorney, by supplying the creditor with his attorney’s name, his attorney’s telephone number, and the attorney’s position, then all collection and legal procedures must stop. This does not mean that the debtor can use this as a stall tactic. Never retaining the attorney by neglecting to pay the retainer fee will not cause the collection procedures to stop.¹

4.) Like The Bankruptcy Reform Act of 1979, the freshly updated Bankruptcy Reform Act signed into law on April 20th, 2005, also provides debtors with a financial original inaugurate by discharging or releasing, debtors of debt liability. Unlike the 1979 act, The Bankruptcy Reform Act of 2005 requires mandatory credit counseling approved by the courts, and establishes a means test. A means test measures your means, such as income, and assets, against your liabilities, which include types and amount of debts, which is considered in the repayment of your total debt. It also requires domestic back payments be given first priority, and extends the range of debts that are non-dischargeable, debts required to be paid off under the law. It also extends the length of time from 7 to 8 years required to wait until another Chapter 7 bankruptcy filing.² This act is a very complicated current share of legislation. Be definite to consult a respectable attorney for more information before proceeding to file bankruptcy.

5.) The Wage Earner Plan is a way of dealing with creditors by filing Chapter 13 bankruptcy. Your creditors appear in court and work out a court sponsored plan of repayment. You must be a wage earner to qualify. Many times creditors fail to appear and the courts wipe out the debt. It is reported as “wiped out,” on the debtor’s credit report under WEP, The Wage Earner View. As in other bankruptcy cases, property such as your home registered under the Homestead Act of 1862 is usually protected. To be protected, you must register your home before you commence any type of bankruptcy or WEP proceedings.

6.) Title III of The Consumer Protection Act places limits on garnishments. Garnishments are legal attachments by the courts that take money directly out of your paycheck in order to pay your creditors. These garnishment limits are designed to leave the debtor enough money to live on. However, these restrictions do not apply to bankruptcy court orders, debts due to Federal and Spot taxes, child support, or alimony payments. This law prohibits an employer from discharging, or firing, an employee subjected to garnishment for any one indebtedness. This refers to a single debt regardless of the number of levies, or number of times the same creditor garnishes your paycheck for that one debt. The employer may be prosecuted criminally, imprisoned, and/or fined for the offense of discharging an employee subjected to garnishment for any one indebtedness. ¹

The enforcement of federal credit laws falls under The Federal Trade Commission, the FTC, which governs finance charge disputes, Truth-In-Lending disputes, and misleading sales statement disputes. The enforcement of federal credit laws also falls under The Federal Communications Commission, which governs collection calls, and the U.S. Department of Labor, Wage and Hour Division, which oversees garnishments.

More information on federal laws can be obtained by contacting The Federal Information Center at 1-800-688-9889. More information on state laws can be obtained by contacting your local state government information center.¹

For the introduction, to this series, see article entitled, How to Understand Credit Laws.

ENDNOTES:

¹ Credit Operations Manual, Jewelers Financial Services, Inc. Zale Corporation.

² “Bankruptcy Reform Act-Brief Summary of Critical Changes,” © 2005 by Compact Library Publishers, website www.ws5.com/bankruptcy.