There are a lot of opinions, and even some horror stories, about debt collectors. Regardless of whether your opinions are positive or negative, here are six things you should know about debt collection efforts.
1) Where you live can really matter.
In some states, debt collectors file lawsuits much more frequently than in others. That can be good news for companies that are owed money, but it’s definitely bad news for those who are being harassed for payment. You can’t always control where you live, but it’s important to know the what your options are if you are being sued by a debt collection agency.
2) The threat of garnishment can last for years.
Many debt collection laws allow companies to attempt collection for a very long time. In some cases, debt can be renewed, so if the debt still exists after 10 years, may be renewable for another 10. Not only is that hard on a debtor’s credit rating, it keeps them living under the constant threat of garnishment. That can lead to a lot of stress and worry over their financial situation.
3) Lawsuits sometimes increase as the economy gets better.
Many people think that lawsuits go up when the economy is bad, because more people default. While that’s true to some extent, more people tend to have debt collectors after them when the economy has improved after a downturn. Debt collectors assume those who are behind on their bills will be more likely to have money in a good economy.
4) Most debt collection companies have legal representation.
Lawyers work with these companies. If you’re in debt, you should too. Those who do not seek legal counsel could end up agreeing to payment plans and other remedies that might not actually help them get ahead. Having experienced legal counsel to advise you can be crucial to becoming debt free.
5) Debt collectors may try to seize cash from your bank account (garnishment).
In some cases, debt collectors can get the legal right to take your money by garnishing your wages or your bank account. If the legal action is successful, they can take a certain amount of money from each paycheck or from your bank account each month in order to help pay down your debt.
6) Most lawsuits come from high-cost lenders.
Those who have small amounts owed aren’t as likely to be sued. If you owe a large amount for a big purchase or have multiple debts, you’ll have a better chance of seeing debt collectors actively trying to get money from you because of the size of the debt.
What you can do
By understanding the basics about debt collectors and what they really can and can’t do, you can be better prepared to make the right decisions if you are contacted regarding the collection of debt.