Dealing with Creditors

When you don't pay your bills

Every time you miss a payment to a creditor, your creditors will pressure you to pay. You will first receive a letter reminding you that you missed a payment and asking you to pay promptly; you will probably also get a phone call from the creditor asking when you intend to pay your bill. After that, you will receive a more direct letter demanding payment, and an increasing number of phone calls from the creditor.

If you still have not paid your bills, the creditor will likely turn the debt over to an independent collection agency. Collection agencies will exert even more pressure on you to get you to pay, and while this is their job, the law protects you from certain actions. Collection agencies can not use abusive language or threaten you with violence, can not call you at unusual hours or threaten criminal prosecution, and can not discuss your financial situation with others

A secured creditor can repossess the property or collateral that secures the debt. Examples are:

• A landlord can evict you.
• A mortgage holder can take the property that is mortgaged (usually your house.)
• An automobile finance company can repossess a financed vehicle.
• A utility company can cut off service.
• An unsecured creditor can legally do only the following:
• Stop doing business with you.
• Report the default to a credit reporting agency.
• Begin a lawsuit to attempt to collect the debt.

Creditor's Options

Creditors have several options when deciding to take legal action against you, which are often outlined in the written sales contract you signed. If you default on a debt, the creditor’s attorney will notify you by letter of any intended legal action. If you fail to pay your bills, creditors can request:

• Acceleration: the entire debt balance becomes immediately due. A judge can force you to pay debts by seizing your property, selling it, and using the proceeds to pay creditors
• Repossession: the creditor can seize the item you bought or the property you used as collateral to recover debts owed. If the sale of the property or item results in and amount that is less than you owe, you must pay the difference.
• Wage garnishment: a court order that requires your employer to withhold part of your wages to pay your creditor.
• Foreclosure: if you do not make your mortgage payments for at least three months, your lender takes possession of your home and sells it to pay off the loan. You are then liable for the legal fees and difference between the selling price and the amount owed.

These actions are very serious and could endanger your ability to obtain or qualify for credit in the future. Reduce your chances of being harassed by creditors or collection agencies - work out solutions with your creditors early.