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If you're up to your neck in debt and getting harassed daily by at least one debt collector, it's important that you know your rights. You are protected from unscrupulous debt collectors thanks to a bill passed a few years ago called the Fair Debt Collection Practices Act or FDCPA.
What collectors can’t do
The FDCPA spells out a number of things that debt collectors can't do. For example, a collector is not to call you before 8 AM or after 9 PM. He is not to call you multiple times during the day and is not to call you at work unless you give him permission to do so. The collector is not to discuss your debt with friends or family members and is prevented from misrepresenting the status of a debt or claim to be affiliated with some governmental entity.
How to stop those harassing phone calls
The FDCPA includes a way to stop harassing phone calls. It’s by sending the debt collector a cease and desist letter. This letter basically tells the debt collector he is not to contact you anymore. Once the collector receives this letter, the only thing the agency can do is contact you to let you know it won't be contacting you anymore. You need to send your letter registered and return receipt requested so you can prove that it was received by the collection agency.
What a collection agency can do
Unfortunately, the collection agency can continue to harass you and many of then will. If this happens, you can report it to your state's attorney general's office or to your Better Business Bureau. If the harassment continues, you could hire an attorney and sue the collection agency. But many of the really ruthless ones are headquartered offshore and so are “lawsuit proof.”
The worst thing it can do
Let's suppose you owe $5000 to a credit card company that has sold your debt to a collection agency. The agency may have paid less than $100 for the debt but that doesn't change the fact that you still owe the $5000. If you fail to pay it off, the collection agency could file suit. If you were to fail to show up for your court date, the debt collector could get a summary judgment. If you make an appearance, the collector might still get a judgment. Once the agency has a judgment, it can put a lien on your house. If you were to ever sell the house, that $5000 would come off the top. In other words, if you thought you had $10,000 in equity, you would end up getting only $5000 while the collection agency got the other $5000.
Bankruptcy or debt settlement?
Bankruptcy or debt settlement could be a better option than letting a debt collection agency get a judgment and put a lien on your house. A chapter 7 bankruptcy would discharge most of your unsecured debts including personal loans, lines of credit, medical and credit card debts. Many people choose debt settlement instead of filing for bankruptcy as it has less negative an impact on your credit score as would a bankruptcy. A debt settlement firm can negotiate settlements that will reduce the amount of your debts and will also get those creditors and collection agencies off your back.
Legitimate debt settlement companies
A legitimate debt settlement company won’t require any payments upfront. The money you send it will be deposited into an FDIC- insured trust that only you can manage. You will pay nothing until it has successfully settled your debt and provided you with a payment plan that you approve. You will have consolidated your debts in the sense that you would now have only one payment to make a month and it should be very affordable.