March 2008 Archives

March 12, 2008

How to Stop Calls From Debt Collectors Without Filing Bankruptcy

Pretty much every bankruptcy attorney will tell you the same story: When you ask a client why he or she wants to file bankruptcy, the typical answer is, "I can't stand the phone calls." I get story after story from normally gregarious people about how they and their families are living in fear of their telephone. Most people who fall behind on their debts feel guilty, and the debt collectors know it. They prey on that guilt in the expectation that money will somehow be found -- the children will withdraw from college, the daughter will forgo her braces, the mother will take a second job (leaving an empty house for the children to come home to). In the proud tradition of community loan sharks, it makes no difference to the collectors where the money comes from, only that it be paid. My reaction when I hear these stories? My outer self clucks in sympathy while my inner self gets really furious at the fact that these good people have been made to feel like criminals by the real criminals: The credit card companies that charge 30% interest, trap people into over-payments and delinquencies by unfair billing practices, and raise interest rates on the basis of late payments on unrelated debts. I also get frustrated because, of the hundreds of people I've counseled in the past several years, not one person knew that they could use a federal law known as the Fair Debt Collection Practices Act to stop collection agencies from phoning them -- and from engaging in a lot of other harassing conduct. Whether or not they decide to file for bankruptcy, these people come away from my counseling greatly empowered by a bit of information that every citizen should know at least as well as they know the pledge of allegiance. And (drum roll, please) the information is, you can make a bill collector bug off with the following letter, properly addressed to the harassing debt collector:
Attn: [Collector], Re: [Your name], [Account #] Dear [Collector]: For the past three months I have received several phone calls and letters from you concerning an overdue [Creditor's name] account. This is my formal notice to you, under Title 15 United States Code Section 1692c, to cease all further communications with me except for the reasons specifically set forth in the federal law. This letter is not meant in any way to be an acknowledgment that I owe this money. Very truly yours, [Your name]
The Fair Debt Collection Practices Act has some enforcement teeth, including stiff fines payable to the victim, and attorneys' fees. Unfortunately, it's sometimes hard to put together a case. The best approach is to start recording your calls, which is okay as long as you tell them you are doing it. This alone may chase them off, but if they are so brazen as to continue calling you after you have told them not to, and they talk for the benefit of the recorder, you may have a good case to take to a lawyer for follow-up. Unfortunately, the federal Fair Debt Collection Practices Act doesn't apply to the original creditor, and when creditors own their own collection agencies, as some of the big ones do, the line is gray regarding the federal law's applicability. Also, there are some collectors that aggressively push the envelope in their collection activities and frequently violate your rights under the Act. Nevertheless, many states have similar laws that do apply to the original creditor and the almost universal effect of a letter such as the one I've described above is to stop the harassment, regardless of whether it is the creditor or a collector who is making the calls.

To learn more about dealing with creditors, see Solve Your Money Troubles: Debt, Credit & Bankruptcy, by Robin Leonard and Margaret Reiter (Nolo), which includes all-new sample letters to creditors which reflect changing financial times.