It is a sure sign that the economic downturn has settled in Texas when my phone begins to ring with complaints about collection agencies and strong arm tactics. These agencies are often the last resort before a debt is written off; as a result, courtesy and compassion are not their hallmarks.
The tactics change somewhat from time to time. The most common now seems to be a phone call from someone who is not particularly pleasant, who demands a large sum of money and threatens criminal action if it isn’t paid. In some instances, the caller indicates that the warrant has been signed, and the debtor will be arrested within hours.
As a general rule, debt collectors come in two varieties. Some are the employees of banks or credit agencies, and are attempting to collect monies owed to them. Others are the employees of companies that purchase bad debts for pennies on the dollar, then attempt to collect them. The difference between the amount collected and the amount paid for the debt is their profit. In most cases, these collectors are brought in when it appears to the creditor that nothing short of extreme measures will lead to the payment of the debt.
Most of the people that I hear from are not individuals who are insensitive to their responsibility to pay their bills. Rather, they are either on fixed incomes and the interest and charges of credit cards got out of hand, or they are young couples trying to make ends meet who have picked up medical bills. While there are, undoubtedly, persons who try to beat the system, these are people who are honestly trying, and are frightened by the rhetoric of bill collectors.
Unpaid bills will reflect badly on your credit rating. As a general rule, bad debts stay on it for seven years, and bankruptcy for ten. As long as there is a blemish on the rating, the chances for getting loans are not particularly good. The actual creditor, that is, the person or business to whom the debt is owed, will often threaten to report the debt to a credit reporting agency if not paid.
When a collection agency takes over the debt, a written notice must be sent to the debtor. This notice explains the amount of the debt, the name of the original creditor or business, and must allow thirty days to contest the claim. Once that thirty days is past, the agency will proceed to attempt to collect the full amount of the debt.
There are specific things that collection agencies cannot do. They may not threaten violence, or the filing of criminal charges. They may not publish a list of debtors, use profanity, nor make anonymous or harassing (defined as causing the phone to ring repeatedly) calls. Their calls must be between 8:00 AM and 9:00 PM. If they call a place of employment and are asked to cease that practice, they must stop. You can notify the agency in writing that you refuse to pay the debt and that they are to cease contacting you, and they must do so. By sending the letter certified, their receipt of it can be proven, if necessary.
It is not uncommon, nor is it illegal, for collection agencies to threaten to file a civil lawsuit. This is a suit in the county of the debtor’s residence for the amount of the debt plus interest and fees. In many cases, the amount of the debt, while staggering to the debtor, is so small to the company that they will decline to actually spend the money for an attorney to file. If the suit is filed, many debtors find that, while they cannot beat the debt, an attorney of their own can help whittle it down, and help with the payment plan.
If there is no reason to believe that the debt was not legally incurred, the collection agency will win the lawsuit. The result is not incarceration for the debtor; that would be debtor’s prison, something that our forefathers determined was not appropriate in the New World. Texas protects many assets for debtors. Creditors cannot take your home, if you are buying it or own it – unless the debt in question carries a lien against the homestead. $30,000 of personal property is absolutely protected for each head of the household, as is your car, furniture, children’s toys, pets, and tools of your trade. The value of these items is not added into the $30,000 but is in addition to it. Wages cannot be garnished for this type of debt, only for child and spousal support. Savings accounts, stocks, bonds and such like, however, are not protected.
At some time or another, many people find themselves facing a bill that they cannot pay, whether as a result of poor planning or a catastrophe. In general, collection agencies are nearly impossible to deal with. If it looks as though your household is careening down the slippery slope, try to accomplish a certain amount of damage control. Work with the creditors to pay a small amount on each bill each month. If they agree to this, be certain that they receive the money! Do not dig a deeper hole by quitting your employment or writing bad checks when the money gets tight. Take a hard look at your lifestyle, and realize that, even though movie rentals aren’t that much, it may be more than you can afford right now.
Arrest warrants are normally generated by cases filed in our local offices – the District Attorney of the County Attorney. Bad checks not paid, forgeries, and intentional fraud can lead to the issuance of a warrant, but most people have received notice or are aware of an investigation prior to the warrant being served. None of us make phone calls in advance threatening to issue a warrant if an amount is not paid, or make “deals” over the phone. Nor do we grant the authority to third parties to use our names in that manner. When the caller makes that threat, feel free to tell them that you plan to check with Mrs. Reed or me.
Above all, don’t panic. Neither the creditor nor the collection agency will be able to take your liberty or freedom, unless you violate a criminal law. Debtors prison is not part of the American landscape!
Lisa Peterson is the County Attorney for Nolan County. Comments about this column may be e-mailed to firstname.lastname@example.org